Digital Payments in India eat into Banks POS Business

paytm-digital-payments-in-indiaThe Indian RBI has bucked the overall Economic Trends and given wide scope for Digital Payment Platform. In this backdrop it is very important to note that PayTM Digital Payment Platform [Wallet using Pre-Paid Cash or Money Added via Debit / Credit Card, has now acquired over 600,000 merchants (compared to 300,000 for SBI, the largest among bank acquirers) within 9 months of launch. PayTM is already conducting ~ 10mn transactions a month (plans to double it over the next few months) with these merchants, compared to 40mn a month at SBI & HDFC Bank.

With much lower onboarding costs relative to POS and Zero MDR [Merchant Discount Rate] charge, PayTM is on boarding even small merchants on its network. PayTM plans to offer customers onboarding facility through its business correspondent network of more than 10,000 outlets. The payment bank would tie up with multiple service providers to offer most of the facilities being provided by a universal bank. For customers with balance more than Rs100k (not allowed with a payment bank), the amount would be automatically swept to a partner bank.

PayTM targets to rapidly on board its wallet customers to the bank through the e-KYC facility. Reliance JIO recently onboarded 16mn customers in a month using e-KYC.

PayTM is likely to launch its payment bank next month. Meanwhile, it already has a wallet customer base of 150mn (similar to the total no. of SBI deposit customers), processes 85m transactions monthly and already merchant transaction volume is exceeding the mobile recharge volumes.

Digital is going to be the core guiding principal going forward and all these new platforms will give Banks a serious run for their money and profits if they fail to innovate and retain customers.

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