In the development of mobile payments in India, even beggars receive QR codes

Raju Prasad has started accepting donations via mobile payment apps a few months ago. The 42-year-old said his take was almost double to 300 rupees a day – that’s about $ 4, plus more than the average daily wage of a farm worker in Bihar, India’s poorest province. Many travelers now spend more than 5 or 10 rupees on a few tapes on their smartphones instead of digging into their wallets.

“People would kick me out and say they had no money,” he said. Prasad, who makes a lot of money with passengers arriving at Bettiah station from major cities such as New Delhi and Mumbai. “Now, they scan my QR codes. and gladly give whatever money they want. ”

The fact that beggars and donors are all part of India’s digital currency revolution helps explain the strong growth of mobile payments — as well as challenging companies such as Alphabet Inc.’s Google LLC, Flipkart of Walmart Inc. and local competitors Paytm to make the business profitable.

Indians have been moving to digital financial services for a long time. That is partly because of growing wealth, better internet and more affordable technology — and because Prime Minister Narendra Modi has put digital transformation at the heart of government policy.

Launched in 2015, “Digital India” aims for faster and more inclusive economic growth by pushing government services and online banking and bringing the masses of the poor, especially in rural areas, into a legitimate economy through technological investment.

But it was the epidemic that made the difference. The closure of Lockdowns has forced millions of people to buy groceries and medicines through mobile applications because they cannot get out of their homes. ATMs run out of money — which, however, many people avoid for fear of catching the virus by handling cash.

By the second quarter of 2020, mobile payments had exceeded ATM withdrawals to pay for 30% of Indian private use, according to S&P Global Market Intelligence. Mobile payments more than doubled to nearly $ 1 trillion by 2021 from last year.

“The only silver lining of the epidemic was that everyone started using digital payments more efficiently,” said Karthik Raghupathy, head of strategy and investor relations for PhonePe, Flipkart’s payment unit. As Covid-19 reaches India, registered iPhonePe users have jumped 50 percent. , he said.

The Bangalore-based PhonePe now has an estimated 165 million active users and 48% of India’s mobile payments per value, S&P Global said. Google share is 40%, and Paytm is almost 9%.

India’s 48.6 billion digital payments last year were more than double that of China’s next-generation fundraiser, according to an April report by payment planner company ACI Worldwide, which estimated more than $ 200 billion by 2026. annual payments, compared to $ 2,300 in China and about $ 8,000 in the U.S., and the government’s average tariff, India’s attraction has the potential to protect its market share of nearly 1.4 billion people with a nearby profit.

At the moment, digital payment providers in India are likely to lose money — and more, analysts say.

That is partly because of the way India’s payment system evolved.

Countries such as China and the U.S. — the two largest digital payment markets in the world — rely on private companies to develop a technology backbone to support telecommunications sales. In India, that job was assigned to the National Payments Corporation of India, a nonprofit organization that oversees the country’s retail payments. It had the mandate “to facilitate an accessible payment system for the benefit of ordinary people across the country and to encourage investment.”

The Indian government views digital payment systems as a public good, like a power grid, said Dilip Asbe, NPCI’s managing director and chief executive officer.

“Efficiency in the payment system is the backbone of the economy,” he said, as it improves transparency, tax collection and cash flow in the formal economy.

NPCI launched Unified Payments Interface in 2016. Companies were then invited to develop applications over the platform, better known as UPI.

India also had three UPI ingredients needed for success, Mr Asbe said: identity cards, bank accounts and smartphones. The government of Mr. Modi has pressured people to obtain biometric ID cards and for every household to have at least one bank account.

About 80% of adults had bank accounts in 2017, up from 35% six years earlier, the most recently published central bank data show. The number of smartphone users, on the other hand, has risen to 750 million, Deloitte said in a February report.

The UPI field is also interactive. Purchases are made by scanning a QR code linked to a person or business, or by looking at someone’s phone number or virtual address. All QR codes apply to any applications hosted by the UPI. That is in contrast to the U.S., where a Walmart customer, for example, can scan a QR code for payment using PayPal’s Venmo app.

Driven by the epidemic, UPI users increased by 85 percent to 250 million in the two years to March, with more than 300 banks and twelve payment systems now on the podium.

The collaboration that facilitated the acceptance of mobile payments, however, made it easier to switch between applications, forcing companies to offer cash discounts and other customer retention incentives. They also spend a lot of money on advertising and educating sellers and consumers about how mobile payments work.

“It’s a chicken and egg problem,” said Madhur Deora, Paytm’s chief financial officer: “If there are not enough registered sellers, customers will have little reason to do so.

About 90% of India’s nearly $ 900 billion market a year is managed by small, family-owned stores that rarely accept credit cards because of the 3% to 4% charge they charge. The government’s ban on UPI-based payments in 2020 attracted many small retailers to register — and their customers.

Prohibition is also one of the biggest barriers to making a profit for paying companies. In January, their team called on the government to repeal the law, which they estimate would cost the entire industry more than $ 700 million.

Analysts say it will take at least a few years before any mobile phone payment company can make a profit in India. At the same time, local startups are competing with giants like Google and Walmart that can heat up cash as they build market share.

Over time, digital payment companies want to sell financial services and other products, says Sampath Sharma Nariyanuri, a S&P Global Market Intelligence analyst.

PhonePe advertises insurance products on television. Google Pay recently allowed retailers to open digital stores within their app. Paytm, on the other hand, plans to seek permission to regulate the sale of insurance.

In Bakharia village in the state of Bihar, with a population of about 1,500, almost all twelve stores or more and shops walking on posters or highway stickers with QR codes.

Ranjan Patel, who owns a small betel nut shop, said he signed up for more apps after customers started demanding payments with smartphones. Now, about 80% of them do.

“They like to show off their smartphones and scan QR codes to pay,” he said.