India’s cash crunch a windfall for digital wallet firms
One of the most visible beneficiaries are the digital wallet players, as many people don’t have a bank account, let alone ATM or credit cards
Despite all the gloom and doom caused by India’s shock demonitization in November, some companies are experiencing a sharp up-tick in business as they cash in on the government’s push for a cashless society.
One of the most visible beneficiaries are the digital wallet players. As nearly 90% of Indian transactions are in cash and many citizens don’t have a bank account, let alone ATM or credit cards, the digital wallet firms see this as a huge opportunity with smartphone penetration on the rise in the country.
For shop owners too, it is far less hassle to install a mobile marketplace app than a card swipe machine.
One of the foremost players is Paytm, promoted by One97 Communications. Recently China’s Alibaba Group and its affiliate Ant Financials injected US$680 million to become the biggest shareholder in the company.
Although Paytm has been around for 10 years, what it has achieved since the November 8 demonetization overhauls all its past achievements.
When digital wallets were introduced in India, they functioned as a platform for prepaid mobile phone bills, but soon morphed into a payment gateway for everything ranging from online food delivery to cab rides.
Since demonetization Paytm has seen a surge in offline transactions, with the company claiming that currently over a million offline merchants across India accept it as their preferred payment mode.
According to financial daily Business Standard the government is in touch with the executives of Paytm and other players such as Freecharge, Mobikwik and Oxigen, to figure out ways to boost cashless payments and link mobile wallets to Jan Dhan accounts, the zero balance bank accounts held by weaker sections of society.
Increased use of checks
Another notable achiever since demonetization is Manipal Technologies, a low profile back office for the country’s banking sector. Set up in 1941, it provides checkbooks and demand drafts for all the banks in the country. The cash crunch caused by demonetization has led to a sharp rise in orders due to increased use of checks.
Its subsidiary MCT Cards and Technology manufactures banking cards for all major banks in India, enjoying a 60% market share. It too has benefited as there has been a surge in demand to open new bank accounts and renewed customer interest in credit cards.
Another beneficiary is Vortex Engineering, a technology start-up that manufactures no-frills ATMs, which require less power. Banks are finding them handy in their outreach towards the country’s hinterlands.
Set up in 2001, the company has already deployed its ATMs in the rural and semi urban areas for the State Bank of India, the country’s largest, and is doing the same for other banks.
According to The Hindu newspaper the company plans to raise between US$3 million and US$5 million from existing investors to finance its expansion program.