Ramesh Pathania/Mint
Ramesh Pathania/Mint

Pay with e-wallets at physical stores too

Lack of supporting infrastructure means e-wallet usage is still at early stages and options are limited

The end to restricted usage of e-wallets and in-app wallets has finally begun. When e-wallets first hit the market, they had limited scope. Mobile wallet companies usually had exclusive tie-ups with only one merchant, and often consumers could use the e-wallet only here. For instance, if you loaded money in your Paytm wallet to use taxi service Uber, you could not use that money elsewhere. That has changed. Slowly, restrictions on e-wallets are starting to fade. Now you can also use e-wallet for payment at some big brick-and-mortar retailers.

Mint Money takes a look at the evolving e-wallet and in-app market to understand what the changing trend means for you.

Going offline

Mobile wallet companies such as MobiKwik, Paytm and Citrus have started offering e-wallet transactions at physical outlets as well. There are two ways of doing this—either the mobile wallets tie up individually with multiple physical brands or they tie up other financial technology companies that have access to a set number of merchants.

For instance, MobiKwik has exclusive tie-ups with Big Bazaar, Café Coffee Day (CCD), Archies, Mobiliti World and others. “These types of tie-ups allow us to access offline customers. For example, the Big Bazaar tie-up will allow our e-wallet users to transact at 240 of their stores. Similarly, the Café Coffee Day tie-up gives them access to 1,400 outlets," said Bipin Preet Singh, chief executive officer, MobiKwik.

Since last month, Paytm has allowed its e-wallet users to transact at Pizza Hut, KFC and Costa Coffee outlets. “By the end of the year, we will allow our e-wallet users to transact at restaurant chains, petrol pumps, supermarkets and mass rapid transit systems. This will be through direct integration with the PoS (point of sale) terminals," said Nitin Misra, vice-president-products, Paytm.

Mobile wallet companies also have tie-ups with other financial technology companies such as ePaisa and ezetap. These allow their brick-and-mortar store merchants to accept payments from multiple e-wallets. “In the next one month, another 8-10 mobile wallet companies will be able to use their wallets offline," said Siddharth Arora, founder, ePaisa, a Delhi-based fintech company, which has 1,000 retail merchants that can accept money from Citrus, Paytm, and MobiKwik and Money on Mobile e-wallets.

Ezetap Mobile Solutions has a tie-up with Paytm, MobiKwik, Novopay and Freecharge and allows e-wallets of these companies to transact at PoS (point of sale). “In the next couple of months, we will be adding more wallets on our merchant side," said Abhijit Bose, founder, Ezetap, which has access to 70,000 merchants.

Transaction transition

The main reason to cross the border to offline stores is greater reach. “In India, 95% of the transactions are offline. Only 5% take place through the digital channel," said Jitendra Gupta, founder and managing director, Citrus Payment Solutions Pvt. Ltd. Companies are realising that e-wallets need to have universal acceptance. “We want to control and provide acceptance in the 95% of the transaction space too. We are looking at further offline tie-ups. Our idea is to make wallets completely universal. Right now, there are 1 million retailers that accept wallet," said Gupta of Citrus, which has tie-ups with CCD, Woohoo Gift Cards, Epaisa, PineLabs, Ezetap, Mosambee and Capillary—both fintech and physical stores—for offline transactions.

How does it work?

There are three kinds of wallets—closed, semi-closed and open. These can be used only for one service, a few services and all services as well as cash withdrawal, respectively. Here we are looking at semi-closed wallets because companies are looking to allow these wallets to be used at brick-and-mortar stores. According to the Reserve Bank of India, a semi-closed wallet can be used to buy goods and services, including financial services, at clearly identified merchant locations or establishments, which have a specific contract with the issuer to accept the payment instruments. Semi-closed wallets don’t permit cash withdrawals, and holders of this wallet can’t redeem cash.

If you want to use your e-wallet at a store, it will need to have the infrastructure to accept payments in this way. Broadly there are three ways of accepting money from e-wallets at an offline store—pull method, push method and tap-and-go method. At present, the pull method is widely used. In a pull method, the merchant ‘pulls’ money from your e-wallet. For instance, if you make a 500 purchase at a medical store that accepts e-wallet payments, the merchant will take your mobile phone number, enter it on her payment terminal, after which you will get a one-time password (OTP) on your mobile phone. You share the OTP with the merchant, and she pulls the money from your e-wallet.

In the push method, you can send money to the merchant by scanning a quick response (QR) code. The merchant may soon send you a QR code with the bill. QR code is a bar code that has details of the merchant’s establishment, bill details and other things. Scan the code, and the money will get deducted from your e-wallet and credited to the merchant’s account. Tap-and-go is similar to near field communication transactions in which you can tap your mobile phone on a merchant terminal to pay.

Mint Money take

Currently, the e-wallet sector is building up infrastructure that allows acceptance at as many merchants as possible. Since e-wallet usage is still in early stages, usage options are limited.

Also, all these services are free for customers and you don’t have to pay any extra fee for these transactions. But the merchant pays a transaction fee to the wallet provider; normally 1-2% of the amount. If you are an e-wallet user, you may want to try out at your nearby outlets just for the experience. This is a fast evolving space. Early users will surely experiment with all the options, but the more conservative users may like to wait and let the industry settle down with this burst of innovation to change the way they use money.