A Day After the Demonetization of Rs 500 and Rs 1,000 Notes was Announced by the Prime Minister, Digital Payment Platforms Witnessed a Significant Surge in Number of Transactions and Adoption as Consumers looked for Alternative Ways to Make Payments. Companies like Paytm, PayU, Freecharge, Mobikwik, Among Others, Registered a Huge Spike in Adoption from New Users while Taxi Aggregator Ola Said Recharges through its Ola Money Wallet Went Up 1,500%.
Hi Everyone Today We will Talk About How Demonetization Becomes A Boon for Digital Wallets and E-commerce Industry
Paytm, which typically Sees an Average of Rs 1.5 Crore Being Added Hourly to its Wallets, Witnessed Users Topping Up Rs 15 Crore Every Hour On Wednesday. The Mobile Commerce and Payments Firm Registered a Traffic Increase of 435% Since Tuesday Evening When the Ban On Bank Notes was Made Public. The Paytm App also Got A Big Push with a 200% Increase in Downloads in the Past One Day.
E-Wallet Transactions Surge, Companies Look To Tap Merchants
As Currency Disappears, People are Turning to Online Options, Doubling Downloads of Payment Apps. And Kirana Stores and Investors Alike Now Want to Tie Up with Digital Wallet Startups
“We are Seeing a Massive Adoption for Offline Payments, which will Solve Major Problems in a Situation like this. Offline Payments have Grown 400% Compared to Other Days and it Should Cross a Million Mark by End of the Day,” Vijay Shekhar Sharma, CEO, Paytm, said. The Company has Asked a Part of its Sales Team to Act On the Ground and Add Offline Merchants. It Plans to Hire Temporary Workforce from Third-Party Agencies to Speed Up Merchant On-Boarding Focused On Offline Transactions, Sharma said.
PayU India’s CEO Amrish Rau said that they Registered About 80% Growth in Number of Transactions in the First Few Hours on Wednesday Compared to a Day Before. Other Senior Executives of Digital Wallets and Payment Gateway Firms have Welcomed PM’s Announcement Terming it as a Game Changer.
Upasana Taku, Co-founder of Mobikwik, said the Company Saw 3 Fold Growth in Merchant On-Boarding. “App Installs Increased 40% while the Overall Inbound Interest from Merchants and Users Grew 2 Times.
Digital Wallets Cash In Demonetisation
When the Management at Payment Service Provider PayU Discussed Sales Targets Last Month, the Mood was Somber. The Sales Executives Needed to be More Aggressive, Felt PayU Managing Director Jitendra Gupta, Who had just Joined the Firm Following PayU’s Acquisition of his Venture Citrus Pay. The Latest Sales Meeting, which took Place Last Week, was Very Different though. “We Were All Smiling. I told the Team, look, your Sales Targets have been Completed by the Prime Minister Himself,” Gupta says.
The Mood’s the Same at Gurgaon Based Mobile Wallet Company MobiKwik. Founder and Director Upasana Taku Hasn’t Slept a Wink in the Past 2 Days. “A lot is Happening at the Office. It’s Exciting, But Many Things Need to be Taken Care of Now. My 1 Year Old thinks I have Forgotten Him Completely,” She Says.
The Government’s Move to Withdraw Rs 500 and Rs 1,000 Notes has Come as a Bonanza for the Digital Payment Solutions Startups, which, After a Period of Dramatic Growth, had Begun to See Growth Rates Slow Down. With No Cash to Pay, Millions of People Who Felt Cash was Safer than Digital Transactions, or Who Simply had Not thought that Digital was Worth their While, are Now Downloading Payment Apps and Refilling their Digital Wallets.
Paytm, the Largest Indian Mobile Payment Wallet with More than 100 Million Users and 2 Million Transactions a Day, Saw App Downloads Going Up by 3 Times and Payments for Offline Transactions by 5 Time in the first 2 Days Following the Government’s Move. It Added 1 Million New Saved Credit/Debit Cards in 2 Days, Cards that are Used to Refill the Wallet.
MobiKwik, which has Around 35 Million Customers, Said there was 100% Growth in Customer Numbers Day-On-Day in the Past Few Days. Mobile Payment App Chillr, which has 2 Million Downloads and is Promoted by HDFC, has Seen a Growth of 30% in App Usage and a 50% Increase in Downloads. PayU’s Digital Wallet Business, which has Over 30 Million Consumers, Saw the Amount of Wallet Loads Rise 2 Times in the First 2 Days.
Capitalising On Cash Replacements
Almost Every Digital Payment Solutions Venture is Now Focusing On Getting People to Use their Solutions for Offline Transactions (Cash Replacements) and Not Merely for Purchases Made Online. And that’s Really the Big Opportunity, Given that Online Transactions are Still a Tiny Proportion of the Overall Transactions in India. So, if you Walk into a McDonald’s or Café Coffee Day or Shopper’s Stop Today, You Can Use a Digital Wallet On Your Phone to Pay for Your Purchase.
PayU Can be Used at Some 15,000 Merchant Locations, and is Now Planning to Target Even Local Kirana Stores. “Out of Our 30 Million Customers, Only About 500,000 Transact Offline. But this is Set to Change,” said Gupta.
Digital Wallet Freecharge has Seen a 10 Times Surge in the Number Of Retail Merchant Signups in the Past Few Days, with Most of the Queries Coming from Grocery Stores, Pharmacies and Food Joints.
Many Small Businesses Have Websites, Those Are Mainly Static, Used To Provide Information, Not For Transactions.
Razorpay, which Provides a Simple Way to Integrate Transaction Websites and Apps with Digital Wallets and Cards, says it is in undated with Requests from Both Offline and Online Merchants. “Many Small Businesses in India have Websites, but these are Mainly Static, Used to Provide Information and Not for Transactions. Many Never Bothered to Introduce Payment Gateways Because it Was Expensive, Until a Few Indian Startups Emerged in the Space,” said Harshil Mathur of Razorpay, a Startup that was Part of the Prestigious Y Combinator Accelerator.
Payment Gateway Instamojo’s Co-founder Sampad Swain is Considering Revising his Merchant Enrolment Targets. “We have 1.5 Lakh Merchants Currently, Mainly Small and Midsized Merchants. The Growth in the Past 2 Days has Been Amazing. I Wanted to Onboard 1 Million Merchants in the Next 18 Months. Looks like I’ll have to Change that Goal,” Swain said. Most of the Physical Stores Said they have Not Seen an Increase yet in People Using Digital Wallets Following the Cash Withdrawal; Increases, if any, are in Usage of Debit and Credit Cards. But Many who have Not Yet Tied Up with a Wallet Player are Proactively Looking to Do So.
Aparna Sharma, Started using Paytm when she Shifted to Hyderabad Early this Year, for Her Post-Graduation. Apart from Using it to Recharge Her Phone and Pay her Bills, She has Started Using it as a Payment Option in Offline Stores. And the Usage has Slightly Increased in the Past 3 Days.
“A Lot of Restaurants and Grocery Shops have Paytm as their Payment Option. Small Kirana Stores and a few Tailor Shops also Accept it. It’s Easy to Use,” Aparna said.
Investors Cashing In
“I Received Calls From Over 18 Investors in the Past 2 Days”
– Sampad Swain (Instamojo’s Co-founder)
Another Way to Drive this Growth is through the Recently Launched Unified Payment Interface (UPI). UPI is a Payment System that Allows Transactions Between 2 Bank Accounts through a Smartphone, Without the Trouble of Entering Credit Card Details, or Net Banking Passwords. Some like Mobikwik have Already Integrated UPI into their Platform.
Sony Joy, CEO of Chillr, Which Plans to Integrate UPI by the End of the Year, said Cost of Transactions Will Come Down with UPI, Increasing the Readiness of Merchants to Go Digital. Yet, Digital is Likely to Remain a Small Part of Overall Transactions in the Foreseeable Future. IT Product Think-Tank iSpirt, Which Recently Did a Survey On Digital Adoption, said India’s Internet Penetration is Still too Low for Digital Wallets to Significantly Replace Cash.
Priyashmita Guha, a Fellow at iSpirt, said Android Phones had Still Not Reached Maids and Drivers. “The Lack of Local Languages or Identifiable Icons to Make Transactions Happen in an Easily Perceivable Way On Smartphones are Still Not in Place. While Demonetization Does Give a Thrust to Digital Payments, It Will be Years Before We See Big Online Payment Adoption,” she said.
Demonetization Gave A Thrust to Digital Payments But It Will Take Years to See Big Online Payment Adoption
But for the Digital Entrepreneurs and Investors, Even the 220 Million or So Who Have Smartphones is a Big Number, Bigger than the Populations of Most Countries. Instamojo’s Swain, Who has Raised Funds from Kalaari Capital and Blume Ventures, has Received Calls from Over 18 Investors in the Past 2 Days Wanting to Connect with Him. “The Narrative has Totally Changed,” He Said. Razorpay’s Mathur Said He has Got Calls from 4 Late stage Investors. MobiKwik’s CEO Bipin Preet Singh Sums It Up with a Laugh: “This is a Very Exciting Time to be An Entrepreneur in this Space.”
Every Digital Payment Venture Now Focusing On Getting People To Use Offline Transactions & Not For Purchases Made Online
Card Fees Set To Fall, May Pass Benefit To Traders
In a Move that Sets the Ground for a Sharp Cut in Charges that Shopkeepers and Online Retailers Pay to Card Companies, the National Payments Corporation of India (NPCI) has Waived the 90 Paise Fee it Charges Banks On Card Transactions. NPCI Owns the RuPay Card Payment Network, and Its Move to Waive Charges will put Pressure On its Bigger Rivals MasterCard and Visa to Bring Down their Fees As Well.
RBI Promoted NPCI has Issued Over 30 Crore of the Total 69 Crore Debit Cards in the Country, Including the Ones Under the PM’s Jan-Dhan Yojana. The Charges Before the Waive-Off Stood at Rs 0.60 to the Card-Issuing Bank (Issuer) and Rs 0.30 to the Card Accepting Bank (Acquirer) for the Point of Sales as Well As E-commerce Transactions.
In Markets like Australia and EU, they are Almost a 4th of the Charges in India.
NPCI’s Move Does Not Impact Shopkeepers Directly. However, Since it has Now Made It Much Cheaper for Banks to Process Card Transactions, Some Banks Feel that the RBI Will Now Direct them to Cut Fees. “The Objective is to Support Banks in the Activation of Existing RuPay Cards, Issuance of New Cards to Un-Carded Customers and to Widen the Acceptance Points. The Government’s Move On Demonetisation of High Denomination Currency Notes is the Trigger Point for Pressing the Fast Forward Button for Digital Payments,” said A P Hota, MD & CEO, NPCI. “We Want 20 Crore Customers, Who are Already Using the RuPay Cards at ATMs, to Make Payments Online and at PoS Machines,” Hota said.
Amrish Rau, MD, PayU India, said, “The Biggest Component of Fees that a Merchant Pays is the Bank Charges. This is Almost 5 Times the Network Fees. If this Comes Down, it is Possible that Cost of Digital Payments Can Fall to 0.25%.
Boom Time For Swipe-Machine Makers
The Festive Season has Just Begun for Companies Selling Card Swipe Machines. As Consumers Across the Country Struggle to Get Hold of Low Value Currency, they are Opting to Pay through Debit and Credit Cards for their Daily Needs, which have Resulted in Many Small Retailers Placing Orders for Card Swipe Machines.
Pine Labs, One of the Largest Providers of EDC Machines (Electronic Draft Capture Machine or Card Swipe Machine) in India, Saw the Demand for Its Products Double, said its CEO Lokvir Kapoor. “There was a Growth of 24% Year On Year,” Said Kapoor. “With the New Ruling, We are Anticipating a 60% Growth this Year, with Card Payments Becoming a Preferred Mode of Transaction.”
A Day After PM Narendra Modi Declared the Old Rs 500 and Rs 1,000 Notes as Invalid, Debit Card Transactions Across the Country Soared by 108%, While Credit Card Spends Went Up by 60%, According to Data from Pine Labs.
Card Swipe Machine Providers are Getting Requests for EDCs from New Categories of Merchants Such as College Canteens, Small Time Merchants and Wholesellers Among Others.
However,the Average Ticket Size of Card Transaction, which was Rs 2,504 On Tuesday Fell by 35% to Rs 1,623 on Wednesday. “There is a Huge Surge in the Number of People, Who are Swiping their Cards for Sums as Low as Rs 100-200,” said Kapoor.
E-commerce Giants are Looking to Tap Payments Goldmine
India’s largest E-commerce Player Flipkart Launched Digital Wallet, Flipkart Money, while its Arch-Rival Amazon Applied for a Wallet Licence with the Country’s Central Bank.
Away from their Core Commerce Business of Selling Products Online, Domestic E-tailers are Keenly Looking to Identify and Capture Areas like Payments in an Effort to Shore Up Revenues.
The First Bold Move was Made by Snapdeal, Last Year, When it Bought Freecharge with the Intent of Creating a Separate Payments Business.
OLA & UBER ARE ALSO IN THE FRAY TO GET A SHARE OF THE WALLET BUSINESS.
“The Ola Money App is Being Used Widely for Mobile Recharges Across a Range of Operators.
The Frenetic Activity Around Payments Among Indian Internet Companies is Starting to Look Similar to What Happened in the Chinese Market with the likes of Alibaba’s Alipay, Tencent’s Tenpay and Baidu’s Wallet Leveraging their Large User Base to Expand Into Payments and Financial Services.
Demonetisation Gave Digital Wallets A Fair Amount of Push. As A Result E-commerce Companies are Looking Forward to Cash-In the Present Economic Condition of the Country.
While India’s E-commerce Companies are, for Now, Looking at Wallets Only to Help their Shoppers Get Quick Refunds and Push Cashless Payments, it’s Clear they are Betting On Customer Adoption for Other Uses in the Long Run.
Today in China, Alipay and Tenpay Jointly Own Almost 70% of the Third Party Internet Payment Market.
E-commerce Players in India are Trying to Learn from the Experiences of Alipay in China. Most of the E-tailers here are Looking to Get a Hold of the Huge Payments Market by Going through the Mobile Wallet Route.