Home / Industry / Retail /  Retail chains sign up mobile wallets

Last week, retail chain Shoppers Stop Ltd tied up with mobile wallet FreeCharge, allowing customers to use FreeCharge wallets to make payments across 74 Shoppers Stop outlets, 17 HyperCity stores, 95 Crossword outlets, 19 HomeStop stores, and its online marketplace.

FreeCharge is owned by e-commerce firm Snapdeal and Shoppers Stop by the K. Raheja Group.

“This partnership will give us a strong foothold in the digital payment ecosystem and ease the payment process for customers who are increasingly preferring to go cashless," Govind Shrikhande, managing director and customer care associate at Shoppers Stop Ltd, said.

In recent months, a bunch of bricks-and-mortar retailers, including Future Group’s Big Bazaar, cafes like Café Coffee Day and Costa Coffee, quick service restaurants such as KFC and Pizza Hut, have tied up with mobile wallets such as Paytm, MobiKwik, Oxigen and PayU to expand their consumer base and offer convenience in payment.

Such tie-ups between bricks-and-mortar retailers and mobile wallets offer consumers a convenient payment option, cash-back offers and additional discounts. While retailers get scope for targeted marketing and a chance to reduce operational costs, wallets get more consumers, resulting in more transactions and a higher ticket size, and thus better revenue.

“Wallets make smaller transactions hassle-free, and most of the people are not comfortable using credit or debit cards for every small transactions. For us, the focus is to build the ecosystem, and consumers’ habits. There will be more such tie-ups, and the list is long. Wallets will play an important role in building a cashless economy in a secure way," said Govind Rajan, chief operating officer, FreeCharge, and chief strategy officer, Snapdeal.

Use of mobile wallets started with mobile phone recharges. Then came bill payments, including DTH TV and data plan recharges, utility bill payments, cab payments, train and bus ticket bookings, and e-commerce payments. “With restaurants and cafes, this increased ticket sizes. Now, with apparel retailers coming on board, and even kirana stores, usage of mobile wallets have increased. So has the ticket size. From just around 100 to even 1,500-2,000 at bricks-and-mortar stores," said Ankur Saxena, chief executive officer, Oxigen.

Mobile wallets came into existence just five years ago, and the pace of adoption has been faster than any other digital payment mode—probably because of the simple registration process and simpler way of using wallets which are more secure.

At present, there are about 140-150 million mobile wallet users in India—about seven times the number of credit cards issued in India. According to data available with the Reserve Bank of India (RBI), there are about 21 million credit cards (till March) in the country.

“Still, about 95% of transactions for Paytm are offline. So, associations with physical merchants is important," said Amit Lakhotia, vice-president (payments), Paytm, explaining why it has tied up with about 80,000 merchants. Paytm has about 100 million wallet users who carry out about 75 million transactions every month.

With digital payments, retailers need to manage less cash and operational costs come down. Also, the processing fee is lower (about 1.5%) as compared with credit cards (about 2%).

However, wallets have limitations. The monthly limit, as specified by RBI, is just 10,000 (with a know your customer (KYC) declaration, it is 1 lakh). “For customers in semi-urban and rural areas, it’s not a small amount. The limit will increase over time, as more banks get into mobile wallet services. Also, mobile wallets are pre-loaded, unlike credit cards where recovery is required," said Harish H.V., partner, Grant Thornton, a consultancy .

According to Bipin Preet Singh, chief executive officer of mobile wallet MobiKwik, which has tied up with about 50,000 retailers, mobile wallets plug the gaps between cash transactions and credit and debit card payments. “We are eager to fill the gaps and enable easier access to digital payments for everyone. In future, we see smartphones replacing the traditional point-of-sale machines. For retailers, mobile wallets eliminate the hassle and cost involved in managing cash payments. We also drive new customers for these retailers when they become visible to MobiKwik’s 25 million users," said Singh.

“Wallets get fresh consumers, mainly from smaller cities. Penetration is much deeper in rural areas, which will essentially help bricks-and-mortar retailers. For consumers, it is convenience. Wallets want everything under their roof, more retailers equals more transactions, thus more business. For retailers, it is about less cash management... What credit cards started a few years back, mobile wallets are taking that forward," said Harish.

Even banks realize this. ICICI Bank has recently introduced its mobile wallet service Pockets, enabling payments through mobile phones at merchants and online transactions. Axis Bank has Lime, State Bank of India SBI Buddy. HDFC Bank has also introduced a mobile wallet called PayZapp.

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