Fears of a sharp decline in wallet usage are coming true, with a near halving of transactions through mobile wallets in the first week after the deadline to become KYC-compliant expired.
Fears of a sharp decline in wallet usage are coming true, with a near halving of transactions through mobile wallets in the first week after the deadline to become KYC-compliant expired. According to players in the payments business, the first week of March saw wallet transactions drop by 40-45%. According to data from eight non-banks released by the Reserve Bank of India (RBI), the volume of transactions made through prepaid payment instruments, over 80% of which are wallets, was 113.14 million in February, while all mobile wallets together recorded 288.37 million transactions in December 2017, the last month for which such data is available. Harshil Mathur, co-founder at payment solutions provider Razorpay, told FE that the fall has been quite pronounced compared to the last week of February.
“We have seen a significant drop after the KYC guidelines kicked in — about a 40-45% drop in wallet volumes. We expect that to go down even further,” he said. So far, people have been using their existing wallet balances to make purchases but once those balances dry up, there will be even fewer instances of people making wallet transactions. The RBI had earlier permitted wallet customers to transact using existing balances in wallets, even without completing KYC-compliance, but had barred non-compliant customers from adding any more money to their wallets. Mathur said, “Once this money is used up, you cannot load fresh money till you get your KYC done.” And not many existing customers may want to undertake a cumbersome KYC compliance when they already have other options to remit money.
The new KYC norms put wallets on par on compliance with bank accounts, which are anyway mostly enabled for digital transactions, thus taking away the key draw for wallets so far, convenience. Pallav Jain, consumer business head, PayU India, agreed that volumes have dropped 40-45%, but he was more cautious on the road ahead for wallet transactions. “It’s anybody’s guess. It may go up a bit further and then it might just stabilise,” he said. Wallet players had anticipated a fall in usage and had sought an extension of the deadline for completing KYC formalities from the central bank. The RBI declined to do that but allowed customers to utilise existing balances for making payments. Alternatively, consumers have been given the option to transfer balances to a bank account on a one-time basis and on the condition that they close the wallet account.