New Delhi: India’s currency clampdown has driven up digital transaction volumes across the board, but the average transaction value of prepaid cards have declined, say industry experts.
In the last few weeks, prepaid cards have recorded a rise in small value transactions such as on grocery, personal care, daily essentials and hospitality whereas luxury spending has reduced drastically.
“There has been a 30-40% surge in overall transaction volume which is increasing steadily but the value of per transaction has decreased. Luxury spending has reduced and people have started using the cards for very small transactions such as purchasing grocery, daily essentials and fuel across the top 8 metro cities," said Bhavik Vasa, chief growth officer, ItzCash Card Ltd.
With prevailing cash crunch in the financial system, the companies are also finding innovative ways to make cashless payments to its employees.
“In the last three-four weeks we have signed up more than 100 new corporate, small staffing companies, large transporters, jewellers’ associates and quick service restaurants like Burger King. Prominent foreign exchange companies like Centrum and Essel finance VKC Forex Limited have also partnered will us recently," he said.
Last week, the government had decided to bring in an ordinance to amend the Payment of Wages Act to allow business and industrial establishments to pay salaries through cheques or electronically.
“After demonetisation, we have noticed a sharp rise in the demand for these cards by staffing companies to pay temporary staff, contract labourers or workers who are given salary in terms of physical money. Most of these are migrant workers who do not have a residence proof and cannot open a bank account. Large corporate are also now opting to pay incentives, gifts, reimbursements and rewards to all their employees through prepaid cards," Vasa added.
“We have seen close to 3x rise on our volumes and transactions on prepaid cards as well as corporate card products. We are experiencing strong demand as well as uptake across the board (sectors and geographies) as far as electronic payments are concerned following demonetization," said an official from Yes Bank who did not wish to be named.
Kumar Sudarsan, founder and director of Qwikcilver, a technology company delivering gift card and stored-value card solutions to retail customers, said, “over the last 45 days, the prepaid segment has witnessed increased visibility in stores and portals—wherein, grocery, electronics, fashion, and travel and hospitality category related merchants have seen a 75-300% rise in daily transactions via prepaid cards."
“Over the next 90 days, the initiatives are slated to reach an additional 10-15 million consumers who would be shifting and adopting the prepaid card mode of transactions across 300 towns and cities. The growth rate of tier 2 and tier 3 towns have been very positively encouraging," he added.
According to a recent report by State Bank of India (SBI), banks must also focus on prepaid instruments, particularly mobile wallets. Prepaid transactions need to increase from the current level of Rs34 billion to around Rs100 billion. This means that value per transaction increasing significantly from current level of mere Rs475 to around Rs1,000.