India’s digital spend small but opportunity huge: Panellists at VCCircle event
Photo Credit: Shah Junaid/VCCircle

Notwithstanding the recent decline in online personal spend, India’s digital payment landscape has tremendous growth potential with the government incentivising such transactions and opening up various services to online payments, said panellists at News Corp VCCircle Payments Forum 2017.

Even though personal consumption expenditure through digital channels in India accounts for a mere 3% of the total, it has the potential to contribute as much as 25-30%, which is close to markets like the US and China, the panellists said during a discussion titled ‘Riding the payment tide right: Opportunities for entrepreneurs'.

In the US, online personal spend accounts for 35% of the total.

Vishwas Patel, CEO of internet payment gateway Avenues India Pvt. Ltd, attributed the gap between India and the US to the still-in-infancy merchant network here.

“The 'where' aspect is missing in the link. The merchant acceptance network needs to grow and tax breaks are needed, something similar to the policy adopted by South Korea,” Patel said.

Krishnan Dharmarajan, executive director at Centre for Digital Financial Inclusion (CDFI), said incentivisation will help remove inefficiencies from the system. “Government services need to be tapped. Look at e-commerce portals, and how digital payments are embedded in their services,” he said.

Dharmarajan cited payments made at petrol pumps, and said certain policy reforms could boost the share of digital payments at such outlets. “Bank cards account for 20% of all payments at petrol pumps. If digital payments are allowed, this number could rise to 50%,” he said.

He also expected certain announcements by the government, with the 2017 Budget having laid down a target of Rs 2,500-crore worth of digital transactions. “At present, we are at Rs 35-40 crore in digital transactions. We could see great transformation in this area,” he added.

One such recent move was allowing users to buy mutual funds via digital wallets. Capital markets regulator Securities and Exchange Board of India (SEBI) last month allowed retail individual investors to invest up to Rs 50,000 per financial year through the digital wallet route.

Digital wallets saw 213 million transactions in December, compared with 138 million in November 2016, following the government’s demonetisation drive. The December data seemed even more stellar in the light of the fact that digital transactions in November had grown 40% from the previous month. In value terms, mobile wallets clocked a mammoth Rs 7,448 crore in December, up from Rs 3,305 crore in November.

Following a peak in January, digital payments have seen a decline with most of the money coming back into the system.

Prayank Swaroop, Principal, Accel Partners, said incentivisation has temporary results and stakeholders need to look at other, more important areas like data analytics and trade shift.

“We need to look for layers below incentives. Players should look at creating their own data. For instance, Chinese farmers use apps to track data on their clients and customers. This data is sold to big data analytics companies,” Swaroop said.

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