India is on the brink of a digital payments revolution as more and more consumers are moving away from cash transactions.
In fact, data released by the Reserve Bank of India showed that October had the highest ever volume of online transactions at 965 million, a jump of 10% against 877 million in September.
It is no surprise then, that apart from several homegrown digital payments players such as Paytm and MobiKwik, global majors too are looking at the Indian market. Google launched its payments platform Tez in September. PayPal has launched Indian operations. Facebook-owned WhatsApp is also looking at a payments platform.
Speaking at GES 2017 in Hyderabad, Flipkart co-founder Sachin Bansal said that while digital commerce has seen an explosion in the last 10 years, what we don't realise is that 70% of online transactions still happen in cash.
"Although digital commerce has taken off and is on a very strong path of growth, digital payments are lagging behind," he said.
With faster internet speeds, over the next 10 years, there will be 10 billion 4G and 5G users and that, according to Sachin, will be a driver of the digital payments space.
Digital commerce has been a gamechanger so far. Hundreds and thousands of sellers are selling online. They didn't have the opportunity before. For customers, there is an access to a wider range of products, better prices and quality of assortment.
And when the digital payments transformation catches up, Sachin says, it will be much bigger because it will make it so easy for anyone to become an entrepreneur and for anyone to sell online. Operations will become smoother and transactions more transparent.
"Currently, cash accounts for 95% of offline retail and 70% of online transactions. Five years from now, I don't think cash usage will be as high in the digital space. We are seeing that consumer loyalty for people who use digital payment mode is way higher than those who use cash," he adds.
Financial Inclusion
Sachin Bansal said that increasing financial Inclusion too, helps businesses in a big way by opening up new opportunities.
"Financial Inclusion in the form of opening of bank accounts is happening pretty well in India. But the story is not complete till we take the need out of cash. The usage of digital form of payments is not very high. Propensity for people to use digital medium for transactions must increase," he says.
However, even with limited penetration, this is already happening in the country, where people are getting into a credit system which they didn't have access to, before. This gives companies such as Flipkart access to the credit history of its sellers, helping them in rolling out credit better. These are opportunities that weren’t available before digital commerce and payments came about.
"We get details on whether we can extend credit to them. There is a huge opportunity there because we have a whole trail of their business and we are able to assess their creditworthiness based on how good they are, how their products are doing and how customers are receiving them. We can use that information to make a much better assessment of creditworthiness," he said, adding that this helps sellers get loans to set up and expand their business.
"People who have disruptive ideas, digital payments can help them get out of the darkness," Sachin said.