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Payment wallets make the most of Modi move

By Sharath Chowdary & Anita Babu
Last updated on: November 28, 2016 17:03 IST
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With a surge in users and transactions in two weeks, payment wallets step up cashbacks to get more users online.

Since the demonetisation drive on November 8, mobile wallet providers such as Paytm, Mobikwik and FreeCharge have increased cash-back offers to as much as 80 per cent to users, as they encourage subscribers to transact more for buying goods and paying bills, and make it a habit to use their platforms.

The move, aimed at engaging users and to retain them, is helping existing users such as R Praveen, who got Rs 150 cash-back on his mobile wallet for the Rs 400 he paid to buy four movie tickets at a theatre in Hyderabad.

On Tuesday, Paytm, which has launched an advertising blitzkrieg to get more users on its platform, offered cash-back of as much as 80 per cent over three days to users on purchase of smartphones, kitchen appliances and apparel.

FreeCharge, owned by e-commerce player Snapdeal, has offers on ticketing site Bookmyshow. MobiKwik offers incentives to load cash on its platform.

None of the three would comment on cash-backs but claimed an exponential growth in user base and transactions on their platforms in the two weeks since Prime Minister Narendra Modi announced scrapping of Rs 500 and Rs 1,000 currency notes.

Analysts say mobile wallets and payment firms can afford to offer cash-backs and earn back the spent money by ensuring 'stickiness' among customers to make their platform a preferred option for transactions.

"When it comes to financial transactions, you might have two or three options but one will be the primary mode. Apart from convenience, there's a psychological reasoning behind picking one payments provider and reliability is one of the big factors," says Devangshu Datta, chief executive of Third Eyesight, a retail consultancy.

He adds: "As far as a financial entity is concerned, payments may come in smaller factions but it comes over a longer period of time and is more stable and, hence, more predictable. Therefore, the acquisition cost can be earned back sooner by a payments company than an e-commerce company."

Platforms such as Bookmyshow are also offering incentives for customers to use their channel to pay.

"We want to incentivise non-digital people to come online and experience our services. We offer our own discounts, as well as discounts through our various partners, thereby making of booking tickets through our platform cheaper than going to the box office," said Marzdi Kalianiwala, their vice-president, business intelligence and marketing.

"Once the new user has had a successful and seamless experience of booking tickets online, hopefully, they will continue to do so in the future. Offers and promotions are also put into action in line with the content. This is the time we can acquire the largest number of users, grow our base and hit new highs."

MobiKwik claims a five-fold growth in downloads of its smartphone app and a 20-time growth in usage of its platform this month, pushing the company to add more resources on the ground.

At present, digital payments account for 15 per cent of the $1.5 trillion worth of consumer spending in this country. This could rise to 60-70 per cent of overall consumer spending in the next two years, said Mrinal Sinha, operations head at MobiKwik.

FreeCharge has seen wallet load transactions grow eight times and a nine-fold growth in consumer transactions.

"We were amused to see a transaction increase of 10x in the organised sector of online merchants, giving us the indication that mobile wallets are ready to chase plastic currency," said FreeCharge chief executive Govind Rajan. Paytm declined to comment.

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The Indian m-wallet market is expected to grow at a compounded annual rate (CAGR) of 141 per cent, to touch Rs 30,000 crore by the end of 2021-22, from Rs 154 crore in 2015-16. The market value of m-wallet transactions will grow at a CAGR of 154 per cent and reach Rs 55 lakh crore from Rs 20,600 crore during the same period, says a study by the Associated Chambers of Commerce and Industry of India.

An Amazon India spokesperson said the e-commerce major had seen a 10-fold growth in electronic payments at the doorstep after the currency change announcement. Also, there was a good response to the Amazon Gift Card balance with which customers can avail an instant incentive of 15 per cent up to Rs 300 cash-back at checkout.

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Sharath Chowdary & Anita Babu
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