Fintech firms want more push to expand reach

The government’s sudden decision to demonetise ₹500 and ₹1,000 notes without proper infrastructure being put in place has hit hard the common man. Though the main idea behind demonetisation was to curb black money, it has resulted in a revolution of another kind — the growth of the digital (or cashless) economy. But with key challenges such as non-availability of strong Internet connectivity and cheap smartphones, can this revolution percolate down to the last Indian?

BusinessLine spoke to over a dozen mobile wallet players to find out if the one-billion strong Indian population can go financially digital in the next five years. Many said the transformation might happen earlier than expected, partly because of the heightened focus as well as the steps taken by the government to encourage digital payments.

Rajeev Arora, COO, Fino Paytech, said for an economy where more than 90 per cent of transactions were done in cash, a complete turnaround to digital is a transformational change. “It will be a gradual process starting with more people joining formal banking, followed by acceptance of new modes of transactions and merchant establishments facilitating these transactions. We expect a conservative estimate of around 500 million to join the digital/ less-cash bandwagon that will lead to exponential growth in electronic payments across industry sectors.”

Low penetration of non-cash instruments, lack of confidence of the public in digital payments, poor Internet connectivity and usage of smartphones are the major challenges for the government. However, many fintech start-ups have already come up with innovative solutions to help people get online and pay online. Many of the solutions do not require a smartphone or even Internet. Besides, global companies like Google are already working on providing free Wi-Fi at railway stations. Already, 100 stations in India have been Wi-Fi-enabled. Recently, the Telecom Regulatory Authority of India suggested the government provide limited free data to subscribers in rural areas, as well as eliminate convenience charges by banks to boost digital payments.

“Indians were reluctant to adopt to a cashless economy, but now the way of thinking is changing and people are adapting the digital transaction system. We have seen a massive spike in our user base post-demonetisation,” said Bipin Preet Singh, founder of MobiKwik, the country’s second-largest wallet player. MobiKwik has been conducting road-shows and rallies in several States to educate people and merchants on the use of mobile wallets.

Dewang Neralla, MD & CEO, Atom Technologies, an omni-channel payment service provider, said, “On an optimistic scale, one billion people can definitely go cashless since a large part of our population already has bank accounts.”

Vodafone India’s Managing Director Sunil Sood, while launching the Vodafone m-Pesa app for merchants recently, told mediapersons that India has leapfrogged in sectors like telecom and retail and it would do the same in banking as well.

According to Bhavik Vasa, Chief Growth Officer, mobile wallet ItzCash, the opportunity for cashless mode is estimated at over $2 trillion in retail payments, of which only 10-12 per cent is digital, and the aim is to try and grow that to 40-50 per cent in the next three-four years, thus striving to achieve the first goal of a less-cash society.

However, Arora of Fino feels that there are huge challenges around the availability of payments infrastructure, such as POS terminals, viability of the business because of the cost involved, availability of Internet connectivity and financial literacy.

Vasa said India is actually two countries — India and Bharat (the rural part) — and it is not a market of ‘one-shoe-fits-all’. “A country as large and diverse as India needs multi-fold solutions for each segment and section,” he added.

According to experts tracking the fintech segment, every new industry needs an inflection point for mass adoption and this is already happening in India where various stakeholders (government, regulator, industry players and consumers) are aligned to a common goal. They feel that cash would still be required for smaller transactions, and in such as scenario a “Phygital” approach is needed.

Another major challenge before companies and the government is putting in place stringent security measures for online transactions. Recently, Paytm, the country’s largest wallet player, suffered an outage for nearly three day, thus making life more miserable for many users who depended solely on the wallet during the period of cash deficiency. Paytm admitted to having been attacked by a virus that led to the technical glitch. Users fear losing their money in such scenarios. In fact, none of the wallets ensure safety of the wallet balance in such events or if a user has accidentally sent money to some unknown bank account or wallet-holder.

Meanwhile, fintech players have urged the government to incentivise online transactions by making cash withdrawals expensive at ATMs, creating an incentive structure for merchants to accept card payments, and providing tax incentives to customers paying through cards among others.

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