Fintech sector gains currency as country goes on less-cash drive

Demonetisation gave the much needed impetus to the fintech sector, paving the way for a cashless economy.

The resulting cash crunch not only helped boost digital transactions but also brought transparency and accountability into financial transactions. Banks too witnessed a surge in their CASA (current and saving accounts) and digital transactions. Chanda Kochhar, MD and CEO of ICICI Bank, said during a conference call that ICICI’s mobile banking witnessed 67 per cent growth y-o-y and debit card usage grew 64 per cent.

Ritesh Pai, Chief Digital Officer, YES Bank, told BusinessLine : “Post demonetisation, the digital journey of India has been fast-tracked by three-four years. YES Bank debit card spends grew 2.5x during demonetisation and now, after a year, stands at 2-2.15x. The growth in overall spends of credit cards in the industry has been 14.x faster compared with pre-demonetisation.”

Navin Surya, Chairman, Payments Council of India, said the growth rate of the digital payments industry, which was earlier 20-50 per cent, accelerated to 40-70 per cent after demonetisation.

According to industry players, the number of point-of-sale machines have doubled in just a year since November 2016, aided by initiatives such as UPI. However, they are also of the view that the government needs to continue with the initiatives and incentivise digital transactions.

Dewang Neralla, MD and CEO of digital payments firm Atom Technologies, said the government has also played a key role in creating awareness among people about the benefits of a cashless society. He said the growth came from not only urban consumers and merchants, because of better chances of adopting to a technology, but rural consumers and merchants were also equally proactive.

Given India’s varied demography, there is a requirement and demand for every possible payment method. The country has witnessed various players catering to different kinds of consumers with options ranging from UPI, Bharat QR, Audio QR and Scan &Pay to mPOS.

Demonetisation has also intensified competition among several tech players, with Google, WhatsApp, Samsung and Apple charting out plans to tap the growing segment.

Bhavik Vasa, Chief Growth Officer, EbixCash (earlier ItzCash), said: “Only round one has been completed... The cashless match has only just begun and it’s gonna be a long one.”

The drive also led to the rise of several fintech players — from wallet players to online lenders — facilitating loans to individuals and small businesses. This has attracted lot of foreign venture capital investments. According to Inc42, a news and research portal, fintech deals have grown 23 per cent in 2017.

“Every player in the industry has made multi-fold investments in the last one year — in infrastructure, brand, marketing, creating awareness,” EbixCash’s Vasa said, adding that last year, his company received ₹800 crore from US-based insurance exchange Ebix.

Post-demonetisation, experts say the top categories to drive momentum are bill payments and travel bookings. Corporate disbursements has also been a critical segment as transactions are rapidly moving to prepaid cards and other digital modes.

Bhavin Turakhia, CEO & co-founder of fintech start-up Zeta, said that as consumers faced cash crunch during the demonetisation drive, individuals and businesses turned towards digital lenders and realised how digital platforms can be a reliable financial support. Lending platforms have witnessed 30-40 per cent increase in their credit growth as against last year, say industry players. Paytm, the country’s most popular digital wallet service, has seen its user base shoot up to 270 million from around 110-115 million during the November 2016 period. It also witnessed a 3.5-4 time surge in transactions, Kiran Vasireddy, COO, Paytm said.

But Paytm’s real success, market sources say, is the jump in merchants who started using the app to overcome cash shortage blues. The company saw its merchant base shoot up nearly 7-8 times over this one year. From 700,000 to 800,000, its merchant-base now stands at a whopping 5.6–5.7 million.

Mobile wallet company, Mobikwik, also saw its average daily transactions double to three million. It currently has 55 million wallet users.

According to Daman Soni, Vice-President for growth, MobiKwik, there have been multiple triggers for companies such as his, to keep growing.

“The government has played a critical role in building trust for digital payments; we have also spent money on user acquisition,” he pointed out.

While companies are bullish about growth, acceptance of digital payments, particularly by small shopkeepers and traders has witnessed a dip.

Some shopkeepers BusinessLine spoke to claimed they are not accepting payments via Paytm. Linking Paytm wallet with a bank account is an arduous which they are not comfortable doing.

Vasireddy of Paytm claims that these could be one-off cases and it will take time to create a digital ecosystem. “We were able to sustain the growth post demonetisation. But it takes time to create a large network and also for people to get used to the processes,” he said.