E-wallets have to break free from wallets
For years, transactions at wholesale markets such as Crawford Market in Mumbai, which sells products ranging from home décor to beauty, have been predominantly in cash. However, today there are a handful of shops that accept transactions using e-wallets. Cards, however, are still not accepted in most places. For instance, Asif Khan, who runs National Toys and Party World—a cramped shop in Crawford Market that sells toys and festival decorations—accepts payments on his e-wallet. This is set to change. Besides payment transactions, Khan will soon be able to buy other financial products thanks to changes in the business plans of major e-wallet companies.
Fintech firms that focused on e-wallets are now changing their direction to include other businesses. To get a sense of the changing trends, let’s take a look at the major e-wallet companies in India. According to Tracxn Technology Pvt. Ltd, a company that tracks venture capital, private equity and corporate development: Paytm, Mobikwik, MoneyOnMobile, Transerv and The Mobile Wallet are the top companies based on total funding received so far.
Paytm, which is now a payments bank too, has over the last 4-5 years expanded into e-commerce, ticketing, and distribution of financial products. As a payments bank, its focus is also on building a banking customer base and to sell other financial products.
On the other hand, Mobikwik, which competes with Paytm in the e-wallet business, has a different vision. “The large vision... is that we want to become a consumer fintech brand from (being) a consumer payments brand. I believe there is latent demand for disruption in terms of lending, investment and insurance,” said Upasana Taku, co-founder, MobiKwik. However, she doesn’t believe the e-wallet story is over. “If we don’t have the e-wallet business, we don’t have the scale of consumers and merchants. The fact that we are adding new services doesn’t mean the e-wallet opportunity is no longer there. E-wallet is bread and butter for us and all the other financial services are jam and chocolate syrup on it,” said Taku.
But not everyone in the e-wallet business has the same view. Vinay Kalantri, founder and managing director, The Mobile Wallet, said, “When I started learning about consumer business... I realised that only making an e-wallet doesn’t make a difference. It is a waste of my time and everyone’s time to only do e-wallets. I need to give freedom and flexibility to the customer to actually exit the money that the consumer has in the wallet. I can’t tell her where to spend the money. I realized that only being a wallet doesn’t make sense and that is when I approached the bank and we got the prepaid card.” Kalantri is in the process of rebranding the company from The Mobile Wallet to TMW, which he says denotes the word ‘tomorrow’.
Why the change
To understand the shift in business plans, let us take a step back. Most e-wallet fintechs came in after 2008 and took off as prepaid instrument providers. Between 2011 and 2015, most e-wallet companies ramped up their customer acquisition processes. During 2013-14, customers were wooed through cashback offers and reward points. During the same period, Uber entered India and changed the payment landscape. E-wallets started becoming the de facto option for low-ticket or high-frequency payments such as for: food and grocery deliveries, cabs, and movie tickets. In 2015, when funding tightened, majority of the e-wallet companies also struggled due to limited traction. In August 2016, National Payments Corp. of India (NPCI) launched Unified Payments Interface (UPI) and in November 2016 demonetization took place. “In 2017, the importance of wallet started reducing. There was no more need for money to move to a separate container thanks to UPI,” said Jitendra Gupta, managing director, PayU India. Today, e-wallet companies have either integrated UPI or are in the process of doing so. Recently, Paytm joined the bandwagon and has integrated UPI. Last month, the Reserve Bank of India came out with e-wallet guidelines, based on which e-wallets will have to face higher compliance requirements. This takes away some of the convenience e-wallets provided to consumers (read more about these here: bitly/2zwOYtH).
Hence, fintech companies that focused on e-wallets had to look at other opportunities. Broadly, they have spread their wings into five segments: payment gateway, lending, mutual fund distribution, selling insurance products and bill payments. Currently, the payment gateway business is dominated by BillDesk and PayU. “There is no depth in the payment gateway business. There are 25 companies, which contribute 90% of the volume. Currently, e-retailing market is limited to Flipkart, Amazon, Myntra, Jabong, Pepperfry and Urban Ladder. Also, there is no volume for schools and colleges. We have 5,000 schools and colleges today and they don’t even contribute 5% to our revenue,” said Gupta.
The next option is selling financial instruments and providing loans, considering that the penetration of financial products and lending is still low in India. If you are an e-wallet user, going forward you are likely to get loan and investment products from your e-wallet company.