With demonetization being the hottest topic of debate in the country, the digital payment market has finally managed to disrupt traditional banking in India. Or has it?
Reliance Jio becomes the latest player to join the digital payment bandwagon with JioMoney and is currently building a digital retail ecosystem named as JioMoney Merchant Solutions to enable supplier payments, money transfers, and digital cash usage for merchants, big and small.
A week before Narendra Modi announced the demonetization of currency notes of denominations 500 and 1000, most of us would not have thought of buying groceries by using PayTM or the likes. Post November 8, however, after Modi declared notes of 500 and 1000 to be no longer valid resulting in widespread panic, payment solutions company ItzCash reported a 30-40 percent growth in volume overnight.
A week later, online payment platform Razorpay introduced eCOD, a way to not pay cash even on cash-on-delivery orders using UPI and other online modes without internet access. Mobile wallet company, Mobikwik reported a 75-time surge in transactions in less than a week. Needless to say, the Indian economy poses as a utopian space for digital payment companies.
Additionally, the Indian government announced yesterday that it’s looking to standardize digital payments and asked RuPay, MasterCard and Visa to adopt a standard QR code to enable seamless offline digital payments.
Speaking on the spike of online payments and a rise in mobile wallet transactions, DD Mishra, Research Director at Gartner says, “As the cash supply is limited, digital payment is the only option left but India will have to go a long way in terms of enablement, education and empowerment to drive more digital payments to get full benefits.”
He adds that while the online purchases using debit and credit cards have gone up it is yet to see how far the loss of COD will be covered. “Cash on delivery (COD) orders have been significantly impacted by shortage of cash, an impact that cannot be overlooked,” says Mishra.
JioMoney has already been in the market and the company is currently aiming to build Aadhar-based micro-ATMs. The JioMoney Merchant App aims to empower merchants, especially the smaller ones with digital transactions of all kinds targeting small shops, restaurants, railway ticket counters, bus tickets and even person-to-person transfers.
How far will it help? “For smaller merchants it is relatively easy and convenient. They work on small margins but at the moment high transaction fees is becoming a constraint,” says Mishra. He adds that Jio’s partnership with SBI Bank is highly significant as it can help in tapping the rural sector because of its enormous presence in India.
Also, let’s not forget that the Jio garnered 52 million customers in 83 days and has over 2 lakh eKYC outlets, equal to the number of ATMs in the country. This solves the issue of connectivity, which one of the biggest roadblocks when it comes to enabling digital payments in rural India.
With the JioMoney app, the company aims to get 10 million merchant retailers on board, across 17,000 and 4 lakh villages. However, while Mishra believes that smaller merchants will find it relatively easy and convenient to get their businesses on digital payments as they work on small margins but at the moment high transaction fees is becoming a constraint.
According to Mishra, trust is also a major factor in this market for smaller merchants. “Now that transaction charges have been revised for USSD payments, it could take off. But awareness, literacy and the unbanked population can become major bottlenecks,” he adds.
As for the other players, Mishra believes that the market will remain hypercompetitive as most digital wallet providers are innovating and introducing new models. “We will continue to see new disruptive innovations penetrating the untapped market and maximizing transactions. In addition, the government will come out with incentives to drive the growth of digital payments from time to time,” he says.
Here’s hoping for a thriving cashless economy.