India clings to cash, even as tech companies push digital cash


by Vindu Goel and Suhasini Raj

ALIGARH, India – Signs and banners for Paytm, India’s largest digital payment service, festoon the Pooran Singh cell phone store, where people spend all day adding data or talk time to their prepaid phones.

Yet few of those people actually use Paytm at the store, which straddles two dusty streets of this sleepy northern Indian town where tractors jostle cows for space on narrow roads.

“People top up with cash,” Singh said, after a young man handed him 20 rupees (about 32 cents) to top up his mother’s phone.

The scene in Singh’s shop underscores a lingering reality of the Indian economy: People prefer cash for most routine transactions, despite intensive efforts by government and global tech companies to lure them to digital platforms.

India’s reluctance to ditch paper money poses challenges for companies trying to offer electronic payments, including local players like Paytm, which has received funding from Chinese e-commerce giant Alibaba, and businesses American technology, such as Facebook, Google and PayPal. .

“Cash is convenient,” said Caesar Sengupta, who oversees Google’s products for emerging markets. “It’s anonymous. You can use it everywhere.

Despite this, tech companies see the low rate of digital payments in India as an opportunity. They all cite China, where in just a few short years mobile payments have become so popular that it’s hard to get through the day with cash alone.

“In India, we’re going to see a similar increase,” Sengupta said in November, shortly after Google introduced Tez, a payments app for India.

One of the reasons for optimism among tech companies is that digital payments in India have increased over the past year. The value of transactions using digital wallets, the business on which Paytm was built, increased 64% from December 2016 to December 2017. Transactions made with the Unified Payment Interface, a technology backed by the government and used by Tez, and many other mobile apps, have gone from virtually nothing a year ago to $ 2.1 billion last month.

Paytm and its Managing Director, Vijay Shekhar Sharma, are leading the emerging payments shift in India.

Sharma founded the company seven years ago to allow cell phone users to pay their bills online. It is now the largest consumer payment app in India, with 302 million account holders and 90 million active users.

Customers can use it to buy products in physical stores, book movie or plane tickets, send money to each other, or order items from Paytm’s online mall. A transaction requires a quick scan of a merchant’s barcode or a few taps on a smartphone, rivaling Apple Pay or Venmo in simplicity.

Sharma aspires to put his business at the center of Indian financial life, and he has pledged to spend $ 1.9 billion over the next two years to achieve that goal.

“Our real ambition is for Paytm to be known as the bank of this new digital and mobile world,” he said in an interview at the company’s headquarters in Noida, just outside Delhi.

Merchants like Singh are essential to Paytm’s plans.

The company pays Singh a bonus of Rs 20 for each of the approximately eight customers he signs up each month, with additional payments if a newcomer continues to use the service. He earns an additional 18 rupees every time he verifies the identity of an existing Paytm user with his fingerprint reader, a new requirement imposed by the government on all digital wallet companies.

Singh’s phone shop has also become a virtual ATM for the fledgling banking division of Paytm, which plans to turn 100,000 stores across India into mini-branches where customers can deposit and withdraw money, get a loan and buy insurance policies.

“We really want to reach the underserved and underbanked customer,” said Renu Satti, who heads Paytm bank.

Paytm’s strategy is aligned with the objectives of the Indian central government. Narendra Modi, who became Prime Minister in 2014, has sought to recast his country as “digital India” and his government has strongly encouraged cashless transactions.

In November 2016, Modi suddenly banned most Indian currencies. The edict forced people to exchange their rupees for new banknotes, triggering a short-term cash shortage and prompting many Indians to consider digital options.

Yet the country’s cash economy has endured.

Only a third of India’s 1.3 billion people have access to the Internet. Of those who can get online, only 14% make mobile payments at least once a week, according to Kantar TNS, a London-based research firm.

Consumer confidence is a big issue. Ghani Khan, who was finishing a snack with his wife at McDonald’s in Aligarh, said someone had already stolen 3,300 rupees, which would be around $ 52 now, from his Paytm account.

“People are afraid to use these apps,” Khan said. Although he got his money back, he now avoids payment apps, preferring to use cash or his debit card. (Paytm says most of these issues relate to thieves calling users and persuading them to hand over sensitive account data.)

Traders are also concerned that authorities will promote digital transactions as a way to better track trade and collect more taxes.

Anusheel Shrivastava, a senior executive at Kantar in India, said his company found that 6% of cellphone users made at least one digital transaction per day in 2017, up from 2% in 2016.

That number is expected to rise further when WhatsApp, the Facebook-owned messaging service, adds payments to its service in the coming months.

Part of what sets Paytm apart is the 10,000 employees it has on the ground to help new businesses use the service, educate existing businesses about new features, and troubleshoot issues. There are around 6 million merchants in its network, from giant multinationals like Uber to small neighborhood candy stores.

“We have to train them, we have to retrain them, we have to visit them,” said Yashwin Gupta, who oversees a team of 65 Paytm representatives in the region that includes Aligarh. “It’s our daily job.

The job is getting easier now that Paytm is better known.

Last month, Mukesh Gupta enlisted Paytm’s help in setting up the service for his toy store here after 10-20% of his customers requested to pay with Paytm. “People like to spend money on more than needs,” he said.

Aligarh, with 1.2 million inhabitants, is a barometer of Paytm’s progress because it is a medium-sized town and because Sharma, the company’s general manager, grew up nearby.

While visiting his home, he said, he met a Hindi speaking trader who did not know how to withdraw money from Paytm and deposit it in his bank.

The problem? Paytm’s app for merchants was in English and the icons weren’t clear enough for those who didn’t speak the language. Paytm quickly developed a Hindi version.

In recent months, skeptics have questioned whether Paytm can maintain its growth. New regulations requiring customer verification could discourage some customers. The company also spends a lot on incentives, such as refunds for certain purchases and free credit card processing for merchants.

Sharma said such expenses were necessary investments.

“The only way to grow digital transactions is to make them free,” he said. “It’s a culturally different country being built. “