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Photo: Bloomberg
Photo: Bloomberg

Digital gold gains currency in small cities

  • During festive sales led by Dhanteras and Diwali, payment firms saw a substantial increase in the volumes of digital gold from the previous year

BENGALURU : The ongoing pandemic and rise in gold prices have prompted consumers to look at the relatively new digital gold category with a fresh lens. With digital payment firms lapping on to the opportunity, new shoots of demand are coming from smaller towns and cities.

During festive sales led by Dhanteras and Diwali, payment firms saw a substantial increase in the volumes of digital gold from the previous year.

Flipkart-owned PhonePe saw an over six-fold jump in the volume of digital gold sold on its platform in the past month in the run-up to Diwali compared to last year’s festive sales. Rival Paytm said that during the week of Diwali celebrations, it saw sale volumes jump by 86% compared to the year-ago period.

For PhonePe, 60% of the gold customers came from smaller towns and cities, during the Dussehra to Diwali festive period, while Paytm said that it also saw customers from smaller cities including Deoghar, Moradabad, Jabalpur, buying digital gold. For Axis Bank-owned Freecharge, 75-80% of digital gold users come from non-metros including certain Tier 2 and 3 cities.

“We have witnessed the highest sales on Akshaya Tritya and Diwali this year. While metropolitans across the country witnessed record high sales, smaller cities such as Deoghar, Moradabad, Jabalpur participated in buying digital gold," said Varun Sridhar, CEO, Paytm Money, the wealth management arm of One97 Communications Ltd. which owns Paytm.

Paytm also claimed to have seen a 90% jump in first time gold buyers, on its platform this year. In spite of this push, digital gold continues to be roughly 1.4% of the overall gold market in India, according to multiple payment executives.

“We launched the Gold category on PhonePe in December 2017. Over the last 3 years, we have seen the rapid penetration of digital gold and managed to attract customers from 18,500+ pin codes across India," said Terence Lucien, Head of Mutual Funds & Gold, PhonePe.

According to gold and silver products provider MMTC-PAMP, the penetration of smaller cities have increased, with almost 30% transactions coming in from Tier 2 and 3 cities, and the average demographic of digital gold buyers lying between 30-45 years.

The value of total digital gold is also inclining towards smaller towns and cities.

"Since the lockdown digital gold sales have grown by 2.5x.This is owing to - prices of gold increasing, after the lockdown; consumer shift towards digital, and individuals buying digital gold as long-term investments. During early days, top 50 cities contributed to almost 80% of the total value of digital gold sold in India. After two year this trend has steadily moved to smaller towns and cities, where 50% of total industry value of digital gold is coming from small towns," said Gaurav Mathur, managing director, Safegold, a platform which liaisons with online players to sell digital gold.

For Safegold, the average ticket size of this category has risen from 300 in 2018 to 900, at present, across its platform and 35 partners. Now the growth of digital gold is expected to double year-on-year for the next few years, according to Mathur.

He added that monthly systematic-investment plans (SIPs) investment is also on the rise, which contributes to almost 9% of overall digital gold buying behaviour and attracts average ticket sizes of 1800. This was less than 5% in 2018.

Digital gold is a fairly new category with players like Paytm and PhonePe entering the space in 2017. Post their entry, several other prominent payment firms including MobiKwik, and Google Pay entered the gold rush.

Recent entrants include Amazon Pay, smartphone manufacturer Xiaomi and merchant payment network BharatPe, which entered the space this year.

“We have enabled the buying and selling of close to 3.4 kgs of gold in close to 3 weeks since the launch of the category on our app. BharatPe’s merchant network is across 35+ cities and we have seen a great response from both Tier 1 and 2 markets during the festive season," said Suhail Sameer, group president, BharatPe.

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