Discretionary spending down, jewellery sales climb

Innoviti, a payment solutions company, says card users have cut spending by 30% on discretionary items such as mobiles and consumer durables

Innoviti, a payment solutions company backed by Catamaran Ventures, says card users have cut spending by 30% on discretionary items such as mobiles and consumer durables since demonetisation, even as the country sees an increase in the use of digital payment options to transact funds.

Interestingly, spending for jewellery is continuing to increase, up to 10% from the first to the fifth week of demonetisation. “This is surprising as after Diwali jewellery sales are usually in a lean period, suggesting that consumers may be diverting money into jewellery for savings,” said Rajeev Aggarwal, chief executive officer, Innoviti. “This correlates with the reduced high-value spending,” he added.

 

Innoviti is a payments firm backed by N R Narayana Murthy’s Catamaran Ventures and powers the payment backbone of companies such as Titan, Reliance Retail and Indigo Airlines. The company says it processes 20% of India’s card payments.

On the other hand, as the cash flow is improving, cash transactions are slowly coming back to retail shops. This has resulted in a slight decline of 10% in card usage at retail stores during the current week. The share of debit and credit card transactions in the unorganised sector is about 30%, as opposed to 10-12% before demonetisation. This was around 65% during the initial phase of demonetisation, the firm said.

Pine Labs, a payment processor for businesses, recently said it had seen transactions from existing customers fall in value for discretionary spending, even as it has seen higher growth in new credit and debit card users across India. The processor, which conducts around Rs 6,500 crore of transactions a month for companies like Arrow, Bajaj and Airtel, says old users seem to be spending less than earlier, but the situation was improving.

The company attributed the initial decrease in transaction value to cutting down on discretionary spending. This also explains the drop in monthly instalment transactions, the company says.

However, after demonetisation an average of 320,000 new card users are coming into the system every day. “This growth is unheard of and shows the scenario is changing fast. After the initial days of inconvenience, people are increasingly adapting and finding a way out through digital payments,” said Vikas Bhasin, chief financial officer, PineLabs.

In fact, the new users have pushed the average transaction value up. The company added 1.9 million new users in the first six days of demonetisation.