Fintech shifting the goalpost? Wallets are passe as firms enter MFs, retail

'All the big hype and money spent in the last three years to acquire customers have not yielded the desired results,' Oxigen founder says of digital wallets

On November 9, 2016, India woke up to demonetisation and full-page jacket newspaper advertisements of Paytm, Freecharge and a few others thanking the Prime Minister for ushering in the era of digital money. The months that followed the note ban, digital wallet players went to town claiming an astronomical user base as well as transaction numbers. By January 2017, wallet companies claimed that they had more than 500 million users.

Cut to April 2018, most wallet companies are now selling mutual funds, powering digital transactions and loyalty programmes for retail firms, selling point of sale machines…. Essentially, they have moved beyond the wallet tag.

If the Reserve Bank of India’s (RBI) representative data on prepaid payment instruments (PPI)—a chunk of which is made up by mobile wallets—is anything to go by, the game could soon be over for pure play wallet.  

According to RBI data on PPIs, while in January they collectively clocked Rs 38.3 billion in transactions, the numbers fell to Rs 36.5 billion in February. While the March numbers are still not out, the numbers might fall again as many users have stopped using mobile wallets after February 28, the deadline to meet the know your customer (KYC) process.

What changed?

According to Pramod Saxena, Founder & CMD, Oxigen Services, government launching unified payments interface (UPI) changed the game plan for most players. “Nearly 15 months back, we realised wallets would not be our primary business when UPI was launched. If you have a UPI handle, why would you need a wallet? The way regulations moved and were changed by Reserve Bank of India (RBI), standalone wallets had to take a different turn. Wallets positioned only as a payments instrument was not a viable option anymore. All the big hype and money spent in the last three years to acquire customers have not yielded the desired results,” he said. 

The company decided to pivot its wallet solutions to provide enterprise expense management solutions as well as sell point of sale machines (PoS). Also by 2020, it hopes to deploy 200,000 micro-ATMs throughout the country. It launched a prepaid debit card-based expense management solution, in collaboration with RuPay and RBL Bank. It also powers the mobile wallet and loyalty programme for the Future Group which now has five million users.

One97 Communications-run Paytm wallet, the dominant player in the segment, is not just a payment device anymore. The Vijay Shekhar Sharma-led firm, after the launch of Paytm Payments Bank, is planning to come out with a slew of financial services such as mutual funds, insurance, gold bonds and has already started as many as three new companies to bring out these products.
 

“We have been successful in creating the habit of using Paytm in millions of Indians – whether it’s for online transactions or at retail stores. We have evolved from being a mobile wallet to a truly open payment platform that supports various payment methods for hundreds of millions of users across India,” Kiran Vasireddy, COO, Paytm, said.

Wallets still relevant 

Industry experts believe that mobile wallets cannot be completely written off, as they are still the best way to get a user to start transacting digitally. “Last year we realised that wallet is going to be a good use case for customer acquisition, creating momentum in digital payments. I call it a payments network which is valuable, with that you can build on top of it different financial services,” said Bipin Preet Singh, co-founder MobiKwik.

The company is planning to make a big splash in the alternative credit scoring space by providing data to banks, so that a whole new segment could be targeted for loans and other financial services. It is also managing the corporate expenses via its platform for around 100 corporate clients, serving more than 200,000 employees. The company claims to have over two million merchants and more than 100 million consumers now. 

More than just a wallet

Paytm: Payments, banking, lending and insurance, zero balance bank accounts on Paytm Payments Bank

MobiKwik: Digital financial services platform, leading payment gateway, alternative credit scoring

Oxigen: Technology used to provide payment processing services, through its Oxigen Micro ATM, branchless banking services integrated with Aadhaar to facilitate AEPS (Cash In/Cash Out), bank transfers among other things, corporate expense management