The Economic Times , November 27, 2016
Demonetisation: Why the challenge to take digital payment to rural India is as huge as the opportunity
Dhaturi, a dusty village in Haryana some 54 kilometres from the national capital, is like any other hamlet in North India: a cluster of half-plastered, concrete buildings housing kirana stores; semi-paved streets, on which buffaloes saunter, flanked by thatched huts; a sleepy market; and huge swathes of agricultural fields that bear black marks of recently burnt stubble.
But unlike many other Indian villages, Dhaturi may be in the midst of a remarkable transformation after the government’s radical demonetisation drive on November 8. A transition to a digital way of life has begun, and Suresh Pal is at the vanguard of this change. In his small photo studio, Pal doubles up as a retailer for Payworld, an electronic transaction processing platform, helping people open an assisted mobile wallet account. “Even those without smartphones can use the wallet,” he says.
The Village Logs In
Payworld, which had over 100 million users and 1 lakh retail touch points across 630 cities and 80,000 villages till the first week of November, has seen a 25% jump in new users — mostly from rural and semi-urban areas — over the last two weeks. “What we couldn’t achieve during the last nine years was facilitated instantly by Narendra Modi,” gushes Payworld chief operating officer Praveen Dhabhai. “Over 93% of people in rural India have not done any ..
Dhabhai is not the only one rushing in to cash in on an opportunity to take digital payments to rural consumers post demonetisation. ItzCash, a digital payments company founded in 2006, too is eyeing a larger share of the rural wallet. While most players, including Chinese ecommerce major Alibaba-backed Paytm and Snapdeal-owned FreeCharge, are catering to the top 10% of India, ItzCash plans to keep its focus on Bharat where roughly 66% of the country resides, says managing director of ItzCash Naveen Surya. The company, with an omni-channel presence through outlets, mobile wallets and cards, is present across 3,000 towns and cities, and claims to have seen a 40% spike in transaction volumes since November 8. “Over the next few quarters, most of our growth would be fuelled by Bharat,” he says.
Ural India, or Bharat, indeed looks like a land of golden opportunity for marketers, including mobile wallet players. Reason: home to about 870 million people, the countryside will be in the thick of action for the rest of the decade, according to a recent report by management consultancy firm BCG. Titled “Rising Connected Consumer in Rural India”, BCG predicts that rural users will constitute about half of all Indian internet users in 2020. While the number of connected rural consumers is expected to increase from about 120 million in 2015 to almost 315 million in 2020 — a compounded growth of almost 30% a year — rural growth will significantly outpace growth in urban centres. And what’s driving the rural growth, adds the report that was published in August, are cheaper mobile handsets, s ..
Now, there’s the demonetisation effect. Sohan Ram, a roadside vendor selling bread pakoras, noodles and tea from his small makeshift shop at Kurar village in Haryana, is getting ready for a cashless future. He says that although the highest priced product he sells is under Rs 50, mobile wallets ensure that users pay up every rupee, which many of them usually skipped citing paucity of loose change. “Now the ones with mobile wallets can’t make an excuse,” he grins
Just a stone’s throw from Ram’s stall is a kirana store. Kishore Chand, the proprietor, dithered for the first few days after demonetization. He thought the government might roll back the move and cash would still continue to be the main medium of payment. But when business dried up as people ran out of cash, 52-year-old Chand quickly installed a cardswiping machine and downloaded MobiKwik, an online payment system. “It’s better late than never,” he says. Although he faced teething problems in the first two days in understanding the technology, he’s now comfortably making transactions. \
It’s users like Ram and Chand who give hope to the mobile wallet industry, which is projected to jump from Rs 154 crore in fiscal year 2016 to Rs 30,000 crore by 2022. This means a corresponding jump in the value of mobile wallet transactions: from Rs 20,600 crore to Rs 55 lakh crore during the same period, according to a recent study by Assocham-RNCOS titled “Indian M-wallet Market: Forecast 2022.
From a local cycle shop owner to a sugarcane juice seller to even a temple priest, all have started using mobile wallets,” contends Bipin Preet Singh, cofounder of MobiKwik.
Founded in 2009, MobiKwik claims to have over 40 million users, and a merchant network of over 2.5 lakh. The company, which was founded in 2009, has seen the most astonishing growth in its user base after November 8: over 5 million in just two weeks.
“Before demonetisation, wallets were an option. Now they are a need,” says Singh, whose company is increasing its ground staff strength from 1,000 to 12,000 to enrol local merchants for wallet payments. But what Singh also plans to do — and he claims to be a game-changer — is reach out to the next wave of internet users in rural India: young homemakers, who are already online but spend a few minutes surfing the net, constitute over 36% of rural internet users. “If the size of the group is massive, the potential it has is gigantic,” says Singh.
Such growth potential can’t be taken for granted, though. Just a few kilometres from Dhaturi, in the neighbouring village of Lalheri Khurd, lives Rampal Narwal, a 55-year-old agriculturist for whom cash has always been king. And he’s in no mood to transact digitally, despite boasting a Motorola smartphone with a 3G connection. Reason: the fear of technology and the unknown.
My money can vanish. It’s best to keep it at home,” he says. Why then does he have a smartphone if he just wants to use it to make calls? “Ask my son. He bought it,” snaps Narwal, who in turn is interrupted by his teenaged grandson Sohan
“My father has a Facebook account but the internet doesn’t work properly,” he says, adding that the phone doesn’t have any other app. Not even Paytm. “I have seen its advertisement on TV,” he smiles.
Narwal is bemused to see people scrambling to use mobile wallets and debit cards. Ask him about life after demonetisation, and the old man gives a clear-cut reply: “I still use cash, and will always use cash.” Keeping Narwal company is Umesh Dalal, another agriculturist in the adjoining Ramnagar village. Dalal’s biggest argument in persisting with the old way of life is mindset: “Why should I go cashless? How will it change my life?” Sitting next to a huge Jio signboard, Dalal checks his WhatsApp messages on his Micromax Canvas mobile. “There is much merit in transacting only in cash,” he says.
The Cashless Cow
As India takes a step towards building a cashless economy, it’s becoming clear that the biggest challenge to Narendra Modi’s vision for a cashless country will come from Bharat, thanks to erratic internet connectivity, poor smartphone penetration — 30%, says CyberMedia Research — coupled with die-hard habits of relying on cash for transactions
Experts contend that the government’s headlong push for a cashless India may be too much, too soon. While the primary goal should be to ensure that everyone has a bank account, and all banks should make it easy to transact digitally, the reality is that many smaller banks do not offer digital banking, says Jessie Paul, founder of Paul Writer, a marketing advisory firm As far as mobile wallets are concerned, she points out, there are three major issues. First is cost. There is a fee to transfer money to the wallet, and then from wallet to merchant. The second issue is trust. Fear of fraud is high for any digital tool. And there’s reliability; can internet players ensure that there will be 100% uptime of the network?
Compounding matters is another problem: when a person doesn’t consume frequently because of paucity of money for impulse purchases, the existing mode of payment, cash, becomes more convenient. “Currently there is no reason for a person to abandon cash and end up paying additional transaction fees to spend their hardearned money,” says Paul.
Nobody understands the power of cash better than Sridhar Gundaiah, founder of StoreKing, an assisted ecommerce platform. There may still be some time before India is ready to do a large part of its transactions in plastic money, and demonetisation seems to ignore that, he reckons.
“The beauty of cash is that it just works,” says Gundaiah, who follows a unique business model of allowing people to purchase using cash, albeit using ecommerce. The neighbourhood retailer, armed with a tablet and an internet connection, assists customers choose products from StoreKing’s online shopping platform, and the payment is made in cash.
Ask him why people in rural India are not shopping online, and Gundaiah lists out a bunch of irritants: every village does not have a pin code, which makes deliveries difficult, low literacy levels, English language barrier and lack of trust in the internet. “Over 85% of the population has no access to debit and credit cards and half of the population is not reachable by traditional courier services,” he says. So, despite having the money and the intent, people in small towns and villages are unable to shop online.
And even if people in rural areas are using mobile internet, it doesn’t mean they are in a mood to transact online. Gundaiah says that among rural users, the primary reason for accessing the net is entertainment, followed by communication and social networking. “We have tapped the rural population with assisted commerce,” he says, adding that he hopes to reach 500 million people in the next couple of years. “There is no way a Flipkart or an Amazon can reach the interiors like we can.”
Retail analysts maintain that the task to digitise rural India might be challenging, but not impossible. Saloni Nangia, president of retail consultancy firm Technopak Advisors, says for a large majority of rural Indians, both banking and internet are a new experience. So it’s natural for them to fear both. “There is a huge fear of the unknown, especially when it comes to money,” she says.
While conceding that there would be hitches in making the transition, Nangia believes that a start has to be made somewhere. She points to the initial scepticism around Aadhaar when it was introduced way back in 2009. But within seven years the unique identity project has enrolled 1.07 billion people, or about 88% of the country’s population. “The focus should be on educating and spreading awareness,” she says.
Mobile wallet players, for their part, are already on the job. Taking the lead are the likes of Praveen Dhabhai of Payworld, who is training his retailers across 1 lakh retail touch points to spread awareness about the benefits of transacting online.
“The biggest impediment is fear, and removing it from the minds would be a big blow to cash,” he says. A bit of hand-holding, he lets on, would make a world of difference. The way Dhabhai sees it, cash and cashless can complement each other for the time being; in the long run, cash won’t be dead but it may well be cashless that’s king.