A bane for the general public who aren’t well-versed in the world of online payments, demonetisation has been a boon for mobile wallet companies who’ve upped their resources considerably in a short span of time to capture as much market as possible.
The Indian economy has been highly reliant on cash transactions till date and things aren’t going to take a sharp turn towards net banking and online transactions all of a sudden — well, certainly not for the majority of citizens.
The PM Modi-led government’s decision to demonetise the Rs.500 and Rs. 1000 currency is aimed at curbing the shadow economy and improve tax collection — moving towards a cashless economy.
The Rural Connect
While most of us sipping on our card-paid coffee discuss how demonetisation hasn’t affected our lives a lot — thanks to cashless payment methods such as credit/debit cards, net banking and mobile wallets — a majority of Indian citizenry won’t share our feelings.
Demonetisation is killing many small businesses, as not all merchants and customers are geared for online payments.
Many might argue that the case in point is mostly prevalent in rural landscapes of the country, but that accounts for 2/3rd of the Indian population — more than 800 million people.
First of all, rural areas don’t have the required internet penetration to go cashless. Although the government plans to provide the internet to all of the rural populace by 2018, the dream is still a long shot with the infrastructure in place.
Secondly, the rural population aren’t well-versed with the nitty-gritty of technology and remain sceptic about online transactions since cash still is the prevalent means to procure utilities.
Due to lack of financial literacy, millions of people don’t even have a bank account and millions of others who do, use their bank account cards to withdraw cash from an ATM.
Getting online wallet service to the rural populace is as big a challenge as is getting them to use the services in their daily lives — replacing the traditional cash economy — is a long shot.
Is a Cashless Future Viable?
Although there has been a boom in the online payment ecosystem, mobile wallet companies like Paytm and MobiKwik are running on losses, partly due to the various cash back offers.
The Alibaba Group-backed Paytm has already added 700 sales representatives to their fold since the government’s announcement on November 8, and plan to double their current employee strength from 4,500 to north of 10,000 in the coming months.
The Noida-based mobile wallet company has already doubled up its affiliated merchant strength to 1.5 million in the past few weeks and has seen a considerable increase in its number of users.
Sequoia Capital-backed MobiKwik has also increased its agent base from 1,000 to 10,000, the number of affiliated merchants have also shot up from 150,000 to 250,000 and has seen a significant increase in its user base, which is now a total of 40 million.
The companies can only turn profitable in the long run once they start levying service charges on their transactions or bill payments, but that again might be a problem for the user.
An average consumer wants to receive as much in as little as possible and once you start charging them over what they owe — they’re bound to leave your service.
As soon as the cash flow comes back to normal, chances are that people will revert back to traditional cash transactions and the mobile wallet industry will see a swift decline in numbers.
Service charges on payment of utility bills such as telephone, water or electricity isn’t going to sit well with a majority of users as they’ll be able to skip the additional charges via net banking or cash payments in the future.
Concerns have also arisen as to whether the structure of mobile wallets in India is viable or not since there is no wallet-to-wallet transfer available yet.