Is remonetisation a serious challenge for mobile wallets as tough competition too gets underway?

As the cash flow gets restored with remonetisation, digital wallet companies are hopeful that the trend of online payments will continue to witness growth despite the cash availability and fresh competition from global player, Samsung

by Ruhail Amin
Published - Feb 20, 2017 7:59 AM Updated: Feb 20, 2017 7:59 AM
Is remonetisation a serious challenge for mobile wallets as tough competition too gets underway?

While several sectors might have been hit hard due to demonetisation, digital wallet companies such as Paytm, MobiKwik, FreeCharge and others literally laughed all the way to the bank, riding high on the back of demonetisation. But this growth story witnessed a surprise twist in January 2017, with remonetisation underway, when transactions via mobile banking, mobile wallets, real-time gross settlement (RTGS) and national electronic funds transfer (NEFT) declined when compared to December numbers.

In the month of January and February, Paytm witnessed 8.5 million transactions per day with a whopping Rs 200 crore being added to Paytm wallets per day. In January alone, transactions on Paytm crossed Rs 5000 crore while its user base reached almost 180 million. Same is the case with MobiKwik with its user base touching 45 million with 3 million transactions a day. FreeCharge touched 40 million customers with 1 million transactions a day. These numbers clearly show how digital transactions have grown at a phenomenal pace in the last few months.

But as per the data released by the Reserve Bank of India, in January, RTGS, NEFT and mobile wallet transactions declined by 27%, 28% and 29%, respectively, compared to December. Transactions fell to 6.5 million from 8.8 million for RTGS, from 166.3 million to 119.14 million for NEFT and from 70.2 million to 47.4 million on mobile wallets.

If this was not enough surprise, entry of new players has added a fresh dose of intrigue to the already burgeoning growth story of digital wallet players, with global giant Samsung announcing its entry into the digital payment ecosystem.

According to a recent report by Mashable India, to bring Samsung Pay in India, Samsung has partnered with American Express and is mulling over "exploring opportunities with giants such as Visa and MasterCard as well." 

The data released by marketing research firm Counterpoint states that Samsung has over 2.5 million Galaxy S6, Galaxy S6 Edge, Galaxy S6 Edge Plus, Galaxy S7, Galaxy S7 Edge, and Galaxy Note5 customers in India. These numbers can help the company get a strong foothold in the digital payment business in India and can pose a tough competition for other established players.

With the odd dip in digital payments in January 2017 and the coming onboard of new players and restoration of cash flow, the big question is: Will the digital wallet space continue to witness big growth?

Speaking about the growing relevance of the Fintech companies like digital wallets and their role in a remonetised environment, Vijay Shekhar Sharma, Founder and CEO, Paytm, said, “If the last five years have been the years of ecommerce and selling anything and everything, the next five years will be all about the fintechs in this country. The way the telecom sector totally transformed and evolved in the last 10 years, a similar, if not the same kind of transformation, is going to happen in the financial sector too in the next 10 years.”

 “Lot of new players may be coming into the digital wallet space but at the same time there is space for everyone. The only thing is that some will survive, some will revive and some will consolidate and that is the natural cycle for any business,” commented Dilraj Singh Gandhi, Director, Management Consulting, KPMG.

Commenting on how the digital wallet players can keep their game up in the coming time too, Bipin Preet Singh, CEO, MobiKwik, added, “I think secure digital transactions are the only way to sustain India's habit of cashless payments. Also, upgrading digital infrastructure to support cashless transactions in rural and semi urban areas will encourage more merchants and consumers to transact on non-cash and online platforms.  Digital payments will be the new game changer in 2017 and this space will witness intense competition from global players too.”

Explaining how increasing the merchant base and inclusion of rural markets will hold key to success for the digital wallet players in the long run, Praveen Dhabhai, COO, Payworld India, said,   “As the government is pushing digitisation, we have increased our people on field to increase merchants accepting digital payments, especially in smaller cities and rural areas. Moreover, all the new entrants are catering to the consumer side alone, but to make digitisation successful, we also need to focus on increasing merchant bases by many folds. Currently, Payworld is focusing to increase the merchant base to 200,000 in the next six months.”

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