The War of the Wallets

A recent hoarding at Metro Station in Delhi took commuters by surprise. The eye popping 50% cashback offer on mobile prepaid recharge was not from a usual suspect Paytm but from American online retail Amazon. Amazon Pay the digital arm of Amazon aims to make the digital payment experience seamless for customers. By launching mobile recharges, it is extending the same convenience to everyday uses for the customer.

Though Amazon might offer a simplistic view of venturing into a segment where Paytm overwhelmingly dominates, the fight for share of Indian wallets will get bloody and dirty as incumbents fire fresh salvos. The rules of the game are changing; it won’t be just survival of the fattest. As big boys flex their bulging financial muscle, the winner would be one who offers the best deal both in terms of money and experience.

The online payment landscape in India is set for exciting times. There will be a combination of innovation and offers like never before. Though Paytm has a head start, there is a long road ahead for the leader as well as other players. With less than 5% of retail payments being digital and a massive government push towards and incentives to adopt digitization, the field is wide open.

Launched in September last year, Tez – Google UPI based digital payments app claims to have 13.5 Million active users, and has processed 250 Million transactions. Tez is a made for India product, designed specifically for Indian users and is available in seven Indian languages. Amazon has also enabled cash customers to pay for their recharges online by offering a cash load service at their doorsteps. Once a customer loads cash, they can enjoy the convenience of recharging their phone online.

It’s not only Amazon and Google who are stepping on the gas. India’s biggest smartphone maker, Samsung, too has been doing its bit to push its mobile payment service – Samsung Pay. It is the only payment platform that can be used at retail outlets by tapping the phone at existing point of sale terminals. It eliminates the need to carry physical plastic in the form of credit and debit cards. As big players penetrate deeper into the market to expand their play, the fight will get intense.

The players have their work cut for them, while discounts and freebie grab early users. The last men standing will be the wallet that customers gravitate to, even after the dust raised by freebies settles. It boils down to providing not just the best experience, but answering questions about security and conflict resolution.  

Disadvantages of Cashless Payments

In continuation of last article, here are the disadvantages of Cashless Payments:-

Higher Risk of Identity Theft – Since we are culturally not attuned to digital transactions, even well educated people run the risk of falling into phishing traps. With the rising incidence of online fraud, the risk of hacking will only grow as more people hop on to the digital platform. Besides, the latest move by the government to remove the two-factor authentication process for online transactions up to 2,000 will not help.

Losing Phone – Since one will be dependent on phone for all transactions on the move, losing it can prove to be a double whammy. It can not only make susceptible to identify theft, but one could also be rendered helpless in the absence of physical cash or any other payment option. This can be especially problematic if you are travelling abroad or in smaller towns or villages with lack of banking infrastructure or other payment options.

Another drawback is that you need to keep your phone constantly charged. If the phone dies on you, you will be stranded, particularly if you are in the middle of an important purchase or dealing with an emergency.

Difficult for Tech Unsavvy – India has a low Internet penetration of 34.8%, and only 26.3% of all mobile phone users have a smartphone. The digital medium may prove a challenge for the tech unfriendly people, who will need more time to adapt or the availability of other options to conduct transactions.

Overspending – While there is no denying the convenience of card or mobile wallet transactions, it could open a spending trap for an unsuspecting population. Using cash instead of cards or mobile wallets acts as a natural bulwark for people who find it difficult to control their spending.

Besides, a high penetration of the digital payment system is contingent on the fact that the same amount of cash does not come back into circulation. If it does, people are more likely to switch back to the former ease of using cash as it is a habit that they may find difficult to break.

Advantages of Cashless Payments

As the country moves towards a cashless environment after demonetization, the initial awe and confusion have given way to a flurry of concerns. To incentivize the move towards a cashless economy, the government has come up with a rash of discounts and freebies on digital transactions. There are certain advantages of Cashless Payments.

Convenience – The ease of conducting financial transactions is probably the biggest motivator to go digital. You will no longer need to carry wads of cash, plastic cards, or even queue up to ATM withdrawals. It’s also a safer and easier spending option when you are travelling. It will be especially useful in case of emergencies. One have the freedom of transact whenever and wherever one want.

Discounts – The recent waiver of service tax on card transactions up to Rs 2,000 is one of the incentives provided by the government to promote digital transactions. This has been followed by a series of cuts and freebies. It’s a good time to increase your savings if you take advantage of these. For instance, 0.75% discount on digital purchase of fuel means that the petrol price in Delhi at Rs 63.47/l can be brought down to Rs 62.99/l with digital payment.

Similarly, saving on rail tickets, highway toll or purchase of insurance can help cut your costs. Add to these the cashback offers and discounts offered by mobile wallets like Paytm, as well as the Reward points and loyalty benefits on existing credit and store cards, and it could help improve your cash flow marginally.

Tracking Spends – If all transactions are on record, it will be very easy for people to keep track of their spending. It will also help while filing income tax returns and in case of a scrutiny, people will find it easy to explain their spends. Besides the tax, it will have a good impact on budgeting.

Budget Discipline – Various apps and tools will help people analyze their spending patterns and throw up good insights over a couple of years. Controlled spending could also result in higher investing. If the same amount of cash does not flow back into circulation and people continue to use mobile wallets and cards, it is likely to bring down the latte factor. There is a lesser chance of budgetary leaks and unaccounted for spends sneaking into your budget at the end of the month.

Lower Risk – If stolen, it is easy to block a credit card or mobile wallet remotely, but it is impossible to get your cash back. This is especially true while travelling, especially abroad, where loss of cash can cause great inconvenience. Besides, the futuristic cards evolve to use Biometric ID, it can be extremely difficult to copy, making it a very safe option.

Small Gains – It may not seem like much of an advantage, but being cashless makes it easy to ward off borrowers. Another plus is that you can pay the exact amount without worrying about not having change or getting it back from shopkeepers.