It has been 10 days since Prime Minister Narendra Modi's announcement that ₹500 and ₹1,000 notes would no longer be considered legal tender, and I am writing this post after spending just ₹150 in cash since then. There are many like me who have relied on cards and, especially, online wallets.
Online wallet companies have been in a celebratory mode since the 8 November announcement. They have seen their traffic soar multi-fold.
India's biggest e-wallet firm, PayTM, saw its traffic jump by 435 percent in the first 24 hours of the announcement. Yesterday, the company also declared that the PayTM app has been downloaded over 50 million times from the Google Play Store.
The company has over 150 million users in India currently and almost 8 lakh touch points. The transaction jump is clearly due to the demonetisation announcement. But it is not clear if there are new users signing up on the platform. It is quite likely that because of the cash crunch, existing users began using the electronic wallet more to avail of services such as cabs, food delivery, and grocery shopping.
Also, these services are mostly confined to the metros and some other big cities where a user can pay through an online wallet.
Mobikwik is another big wallet player with around 35 million users in India. The platform has seen 18x growth in overall transactions and 200 percent jump in app downloads. The company has a unique feature where a person can come to your home to collect the cash and deposit money in your MobiKwik wallet.
But right now, people don't have cash. Most wallets offer peer to peer transaction. In fact, they have reduced the fee for transferring the money from the wallet to bank to 0 percent of the transaction, and even during crunch time such as now there is no limit on the number of online transactions.
PayTM, MobiKwik, Freecharge and other wallet firms are trying to deploy more offline point of sales across India.
Since the Modi government has estimated that normalcy will return in 50 days, online wallets will want to assess the situation after that as well. The real challenge will come after cash is back in people's hands. They have to convince the users to stay on and continue to use their platform. Many e-wallets such as Freecharge have initiated the zero-fee setup for merchants as well, which is a good step.
Another big roadblock for digital wallet companies is the number of smartphone users in India. The last quarter was great for the Indian market with over 30 million smartphones shipped to the country. The phone user base in India is over 250 million but many service level citizens such as vendors and maids use a feature phone. There is a need for wallets to partner with companies or create a service themselves which is tied to a mobile number. In fact, there are small scale start-ups such as Serv'd, that have started such services.
It is encouraging to see the increase in the digital payment space but clearer picture will emerge next year after the currency situation returns to normal.