THERE HAS been a revolution of sorts in the digital payments and transaction space in the country. The Union Cabinet recently gave a big boost to the sector by approving withdrawal of surcharge, service charge and convenience fee on card and digital payments—in a bid to bring digital payments on a par with offline transactions. But that is just the proverbial tip of the iceberg.
On April 1, Flipkart announced the acquisition of PhonePe, a Bengaluru-based mobile payments company that is building India’s “first product” based on Unified Payments Interface (UPI), a payment solution that has been implemented by the National Payments Corporation of India (NPCI). UPI—once it goes live—has the potential to completely transform the digital payments scenario in the country, say experts.
UPI will allow users to transact using their unique identification and mobile phone number or virtual payments address without sharing any other bank details. In contrast to the present payments process, which involves entering numerous account/card details and multi-level interventions, UPI will provide a highly secure hassle-free digital payments experience.
Commenting on this new development, Binny Bansal, CEO, Flipkart, says, “Payments have been one of the biggest hurdles for mass adoption of online shopping in India. UPI has the potential of transforming the entire payments ecosystem in the country.”
This is not the first time Flipkart has made a foray into digital payments in an attempt to take on the likes of Paytm and Snapdeal-owned Freecharge. In 2013, the e-commerce major launched PayZippy—Flipkart’s answer to the digital payment leaders—only to shut it down a year later as it reportedly failed to get any significant customers. PayZippy was merged with NGPay, a mobile payment gateway, in which Flipkart has made a strategic investment.
In September last year, the Flipkart bought FX Mart so as to add a payment service on its platform and on that of its unit, Myntra. FX Mart owns a prepaid licence issued by RBI that would allow Flipkart to offer a digital wallet on its app and avoid paying a cut to third-party wallet services. The company subsequently launched a mobile wallet called Flipkart Money earlier in March.
Flipkart’s rival Amazon India, too, is reportedly firming up plans to launch a digital wallet as part of its efforts to build an online payments business. In February, the US-based e-commerce major had acquired Noida-based payments services provider Emvantage, its first acquisition in India. Amazon previously launched a digital wallet in the US, its home turf, in 2014 but shut it within six months.
As part of the latest deal, Emvantage’s employees would join Amazon’s India unit that will use the company’s technology on its e-commerce website, Amazon said in a statement.
Beside e-commerce majors, transportation start-ups like Ola and Uber are also in the fray to get a share of the digital payment business. In March, Ola Money, the mobile wallet vertical of the home-grown taxi aggregator, acquired Qarth—a start-up and the developer of the X-Pay app that allows users to make payment through Immediate Payment Service (IMPS).
Ola’s rival Uber, too, plans to launch its own digital wallet in India, the first market where the San Francisco-based company is making such a move. The closed wallet—to allow payments only for rides hailed on Uber—will mark a departure from Uber’s worldwide practice of accepting payments on credit cards. This will extend options available to Indian commuters, who currently can pay by card, with cash or through Paytm and Airtel Money digital wallets.
A cashless economy
India is considered among the most cash-intensive economies in the world with a cash-to-GDP ratio of 12%, almost four times as much as other markets such as Brazil (3.93%), Mexico (5.3%) and South Africa (3.73%), as per a report commissioned by MasterCard and brought out by the Institute For Business In The Global Context, a US-based educational organisation, in January last year. The RBI and commercial banks annually spend around R21,000 crore in currency operations costs while citizens of Delhi alone spend R9.1 crore and 60 lakh hours in collecting cash, the report noted.
“With this strong signal, we are on our way to weaning the country away from its expensive and inefficient addiction to cash. Going digital will not only save the country crores of rupees, it will also provide consumers and merchants a more secure and frictionless way of transacting,” says Govind Rajan, COO of Snapdeal-owned digital payments platform Freecharge.
Understanding that “payments are often social”, Freecharge recently launched ‘Chat and Pay’, a first-of-its-kind service on its app for consumers and merchants. “Chat and Pay brings the human emotion to payments, making them deeply engaging. It allows customers to pay and chat simultaneously with family, friends and merchants. The service enables merchants, small or large, to accept digital payments in less than a minute after registering on the Freecharge app,” explains Rajan.
With over 25 million active users for its wallet and a user base of over 100 million with Snapdeal put together, Freecharge was voted as the second most preferred wallet after Paytm, as per a recent Nielsen report.
In such a scenario, the Union government’s ambitious plan to bring digital payments on a par with offline payments and also to incentivise them is timely, feel industry observers. “Measures such as allowing only electronic payment for transactions above a certain value, payment for all government services online, etc, would enable multiple cash-based transactions to move online. Once more and more people experience the ease and benefits of electronics payments, the adoption should be quicker. This is an important intervention for India to move towards a less-cash and eventually to a cash-less society. The government seems to be receptive of the suggestions made by the industry,” says Rahul Kothari, business head of Gurgaon-headquartered global payment gateway provider PayUBiz.
PayU India, which was launched by e-commerce firm Ibibo in 2011 but was subsequently sold off to South Africa-based media and Internet services firm Naspers in 2014, has two business verticals: PayUbiz and PayUmoney.
While PayUbiz is an enterprise grade payment solution, PayUmoney addresses the problems faced by small merchants and enables them to go online at a very minimal cost and time. “The product has received amazing adoption and more than 1,50,000 merchants use PayUmoney today, whereas the entire enterprise market is not more than 20,000 merchants,” adds Kothari.
Leave alone digital payments, even basic banking facilities are still out of reach for over 200 million Indians, says Bipin Preet Singh, CEO of mobile wallet and online payment platform MobiKwik. “Hence the government’s decision to bring digital payments on a par with offline payments is a welcome step. It will encourage tax compliances helping contain flow of black money, a key mandate of the current government. The cost of currency will also come down. For users, it’s a revolutionary move as now it will be cheaper and easier for them to transact online. It will also do away with the need to carry physical currency or the right change,” adds Singh.
The way ahead
Of late, digital payment service providers are competing fiercely, offering attractive offers and unrealistic discounts. Is this the making of another bubble?
As per Anish Williams, CEO and co-founder of TranServ, while offers and discounts are good for short-term consumer aggregation, they cannot be a part of the long-term vision of a digital payments provider. “The focus, instead, should be on better end-user experience; this helps in better consumer retention and improves the brand value in the longer run. At TranServ, we are already working towards ensuring that our swift, seamless and secure payments infrastructure adds great value to the consumer’s wallet usage. Constant innovations and better features are all a part of what we’re trying to build here, and as the offers and discounts model of driving consumer adoption peters out, we will see more and more wallet players consolidating their consumer-facing service delivery,” he adds.
Incepted in 2010 by a bunch of senior banking professionals, Mumbai-based TranServ is a leading digital payment enterprise. Its key offerings cover both consumers and businesses. With the recently launched ‘social multi-purpose wallet’, TranServ has simplified the process of sending or requesting money and gifts. “Keeping in mind the growing demands of our customers, we decided to add bonus features like SplitzBill, group payments, social gifting, recharges and other bill payment facilities as well,” adds Williams.
As per Rohit Chadda, managing director of mobile payment start-up Ruplee, mobile wallets have gained a lot of traction in the past couple of years but most of that has been due to large discounts on offer. “Once these discounts start to subside, which seem to have started already, we can expect to see some moderation in their use. Most of the players started with semi-closed wallets but have moved to open wallets where one can load and withdraw cash from the wallets at retail points. In terms of new technologies, QR codes seem to be a popular choice among players and some are also experimenting with ultrasonic waves, but neither has picked up steam yet,” he adds.
Founded in October 2014 by Natasha Jain, Ruplee was recently acquired by Foodpanda’s former MD Rohit Chadda-led multi-channel offline payment platform Paylo.
Having established a strong presence in bill payments, recharges, and online and offline payments, Gurgaon-based MobiKwik is now ready to unlock more value for its users by introducing financial products such as micro-credit.
“With more than 30 million users paying with MobiKwik across a retailer base of 50,000, we are now ready to tap into this huge payments network and introduce financial products and services that would benefit both retailer and users,” adds Singh of MobiKwik.
On April 11, the National Payments Corporation of India (NPCI) launched its audacious Unified Payments Interface (UPI), which experts say has the potential to revolutionise mobile payment system in the country. Some highlights of the new initiative…
* In contrast to the present payments process, which involves entering numerous account/card details and multi-level interventions, UPI will provide a highly secure hassle-free digital payment experience.
* The biggest benefit of UPI is that it will be a single app for accessing different bank accounts.
* Through UPI, a customer with a bank account is identified with an email-like virtual address. The new platform also allows a customer to have multiple virtual addresses for multiple accounts in various banks.
* If you want to receive or make payment through a particular bank account, you just have to give your virtual financial address (eg, XYZ@sbi) to the other party. For making payment, once you authenticate the transaction through a secure PIN, the transaction will be complete. You don’t have to share your bank details.
* The other benefits of this mobile payment mechanism include its round-the-clock availability and faster checkout.
* So far, 29 banks have agreed to join the platform, as per NPCI.