On November 8, 2016, Prime Minister of India, Narendra Modi announced the demonetization of high currency denomination notes of Rs. 500 and Rs.1000. The move was aimed at curbing corruption, black money and eliminating counterfeit currency. While demonetization comes with its share of challenges, studies have shown that the demonetization phenomenon has spurred India’s epayments market tremendously, but also boosted the global digital payments by one percentage point more than expected.
Velocity MR, a market research company that studies the growth of the E-wallet in the past two years, especially in the metro and big cities states that as the Indian economy is racing towards the ‘digital’ era, a majority of the population have begun using E-wallets/Mobile wallets for their day to day monetary transactions. The study shows that there is a tremendous increase in the usership of E-wallets particularly since the past 12 months.
“With an estimated 230 million smartphone users in India, improved internet speed and declining handset prices, mobiles have become the primary device shaping our daily lives by changing how customers search, purchase and pay for goods and services. Riding the smartphone growth wave and the favorable regulatory environment from RBI, online payments have gone up significantly pushing the economy into a less-cash and transparent state,” said Jasal Shah, Managing Director & CEO of Velocity MR.
The study shows that nine out of every 10 individuals hold an E-wallet account. The biggest attraction is Paytm, as almost all of the respondents (97%) are aware of Paytm. A lower but similar level of awareness 6 in every 10 respondents is witnessed for Airtel money, Freecharge, and Mobikwik.
While e-wallets still haven’t completely replaced the alternative methods of carrying out monetary transactions. Many people still prefer using Debit/Credit cards, internet banking, etc. as their preferred mode of payment. The usage of Credit Cards, 3 out of every 4 (75%) is observed to be the highest among the people who have monthly personal income between INR 1.5 to 2 lacs whereas people having a monthly personal income around INR 75,000 mostly prefer to use Debit Cards, 9 in every 10 (91%) over other modes of payments.
Almost 90% of the people make their monetary transactions through the ‘cashless’ mode. Almost 9 out of every 10 E-wallet transactions are used to do mobile recharges, followed by paying the utility bills (8 out of 10) and 60% of individuals have a very good experience in using E-wallets.
In the past 3 months, approximately 85% of the people have made around 50% of their monetary transactions in the ‘cashless’ mode. E-wallets are mostly used for mobile recharges (9 out of 10), followed by paying the utility bills (8 out of 10). The study found that the source of awareness of E-wallets through social media is seen more in the youth (69%) as compared to that of the adults.
“Mobile digital payments have increased rapidly post demonetization, and mobile wallets have contributed immensely by taking mobile payments right into the hands of end customers. Significant investments in the form of cashback and innovations, like one-click payments, pay anytime anywhere have helped merchants and customers to adopt mobile wallets to save costs as compared to other digital payment methods. With the push from government and innovations, mobile wallets are expected to grow further in near to mid-term,” said Shah.
Another study by joint report of Capgemini and BNP Paribas showed that technology majors from the US and China have gained significant share in e-wallet transactions globally including in India. Also, India’s high growth rate in e-payments is expected to result in the country overtaking Australia and Canada in electronic payments in the next two years, making it the ninth-largest in the world.
According to the study, the global e-wallet market is growing even faster, with transaction estimated to total 41.8 billion, which is about 8.6 per cent of global non-cash transactions. Alibaba, Tencent, Google, Apple, Facebook and Amazon have captured a significant share of this market,” the World Payment Report 2018 said.
Globally, non-cash transaction volumes grew in double digits during 2015-16 with total volume reaching 482.6 billion. Tech majors such as Alibaba, Tencent, Google, Apple, Facebook and Amazon) accounted for about 71 per cent of the global e-wallet market share in 2016,” the report said.
Emerging Asia at 25.2 per cent and Central Europe, Middle East and Africa (CEMEA) at 17.1 were the chief drivers of this growth. Notable growth rates were recorded in Russia (36.5 per cent), India (33.2 per cent), China (25.8 per cent) and South Africa (15.1 per cent, according to the report. Although, Australia and Canada are the fastest growing markets among the top 10 markets worldwide, India is still expected to grow faster than these two countries. The report forecasts that non-cash transactions will post a compounded annual growth rate (CAGR) of 12.7% through to 2021.
One area where India is defying global trends is in the use of cheques. While the use of cheques continued to decline with Apac, China, South Korea and Australia seeing a drop of more than 20%, use of cheques in India grew by 10%. “Overall, cheques are becoming a US-only phenomenon, with that country alone contributing to about 73.5% of the global cheque volume” the report said.
The report attributed rise in non-cash transaction to government’s demonetization program announced in November 2016. In India debit card transaction registered the highest growth of 76.2 per cent, credit card volume grew 38.1 per cent compared to transactions in 2015. The number of payments made via mobile wallets in India increased by 75.5 per cent in 2016,” the report said.
While cautioning the banks on control over customers, the report said that companies such as Alipay and WeChat pay from China and Alibaba-backed Paytm in India have started capturing payments market share from incumbents.
“As demand for digital payments is strong, especially in developing markets, some banks may want to revisit their choice to not seek an anchor role in the new emerging payments ecosystem,” said Anirban Bose, CEO of Capgemini’s Financial Services and member of the group executive board.
According to the report, the broader financial services community — including public-sector organisations, regulators and third parties — must determine their new roles and work together with large payment users to ensure a smooth, balanced, and robust payments ecosystem development.