The recent surge in digital wallet transactions is also a result of tailwinds in digital payments as customers opted for online methods to pay instead of cash
Digital payment firms such as PhonePe, Paytm, Amazon Pay and others have seen a nearly 50% spike in transactions through their digital wallets since the start of the covid-19 crisis. This has led them to focus on the payment instrument, which was disrupted by challenges due to know-your-customer (KYC) norms and the growth of Unified Payments Interface (UPI) in the country.
The recent surge in digital wallet transactions is also a result of tailwinds in digital payments as customers opted for online methods to pay instead of cash.
Last December, Reserve Bank of India (RBI) introduced semi-closed Prepaid Payment Instrument (PPI) norms that allowed wallets to be used for retail payments, with a monthly rechargeable limit of ₹10,000, without any KYC.
“During covid, PhonePe has seen a surge in new-to-digital users as well as wallet activations and usage. We have seen more than 50% growth in wallet usage and strong surge in new customers activating the wallet. There are multiple factors driving this surge including reluctance to handle cash, customers feeling safer with contactless commerce and convenience," said Hemant Gala, vice president, financial services and payments, PhonePe.
“User growth has accelerated from 2 million per month to 3 million per month. Use cases like online grocery, e-pharmacy and bill payments have grown 50% in the last four months. Currently, we are adding 3 million users per month," said Bipin Preet Singh, co-founder and CEO, MobiKwik.
According to Singh, owing to the covid-19 crisis, average transaction value on MobiKwik’s digital wallet has increased to ₹700, with users maintaining balances of ₹5000 in their digital wallet accounts.
Digital wallet has always been our primary business though we have endorsed UPI and enabled almost 20 million users to use the latter via MobiKwik, but both wallet and UPI is the long-term focus for us, he said.
A Paytm Payments Bank spokesperson said that they have always remained focused on wallets and it continues to be a highly popular payment method contributing a significant share of its overall monthly transactions.
“…Since March, we have witnessed a significant growth in wallet transactions with an average transaction up to ₹1000. Paytm Wallet is used for varied payments such as recharges & utility payments, kirana stores, money transfers, third party online platforms among others," the spokesperson said.
"With Amazon Pay, balance customers can go cashless and enjoy fast and easy checkouts, quicker refunds coupled with a secured shopping experience on Amazon.in. Customers use Amazon Pay balance for a variety of payments including shopping, paying utility bills and paying for services from third party merchants. Amazon Pay balance transactions have grown by 1.4X from March to July," said an Amazon Pay spokesperson.
A key reason for payment firms to leverage their digital wallet offerings continues to be customer retention, as they look to give cashbacks and refunds into a customer’s wallet, nudging them to use the balance for more transactions on their platform.
PhonePe along with parent Flipkart provides cashbacks into customer’s wallets which can be used across the Flipkart ecosystem, and in turn leads to more spends on their platform. Gurugram-based MobiKwik gives credit to customers in their digital wallets to increase commerce and transactions on its platform.
“Digital wallets are still not a sustainable stand alone revenue model, but can work as a good enabler to commerce. Hence, used cases are important to build around digital wallets, since refunds can entice customers to make further purchases. The wallet strategy definitely reduces the cost of customer acquisition and is a good way to get customers to transact rather than throwing large discounts," said Bhavik Hathi, managing director, Alvarez and Marsal (India), a management consultancy.
Even food delivery player Swiggy launched its digital wallet in association with ICICI Bank in June and e-commerce companies like Lenskart also have wallets for sending rewards and enticing customers to buy on their platforms.
Total digital wallet transactions in the country almost doubled from 124.3 crore in February to 253.2 crore in May this year, according to data from Reserve Bank of India. Subsequently, even total value transacted from digital wallets in the country grew from in ₹2,836 crore in February to ₹11,080 crore in May.
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