Digital payment firms cash in on India’s money mess

Digital payment providers in India have mobilised hundreds of extra workers to enrol small merchants and offered their services for free, betting that severe cash shortages will prove to be the opportunity of a lifetime.

Signing people up, however, may be the easy part.

Getting shops and customers to change their reliance on cash permanently will involve convincing people like Mohammad Javed, a 36-year-old meat shop owner in New Delhi.

Working out of a bustling market in the capital, he is surrounded by banks and ATM machines, but says he does not know how to use a credit card machine, let alone a mobile wallet.

He says business has dropped since Prime Minister Narendra Modi´s shock move on Nov 8 to ditch higher value banknotes, but Javed does not believe mobile app providers offer a solution to his problem - or to his customers.

"We don´t have knowledge or resources to open a mobile wallet or card-swipe machine, and our customers who pay 100-200 rupees ($1.46-$2.92) are not interested either," he said.

Javed´s reluctance is a reality check for the likes of Paytm and smaller rival MobiKwik, which have gone into promotional overdrive since Modi´s announcement.

The prime minister, whose government supports digital payments, brought in demonetisation to crack down on the shadow economy and improve tax collection.

"Why should India not make a beginning in creating a ´less-cash society?´," he said on Sunday, "Once we embark on our journey to create a ´less-cash society´, the goal of ´cashless society´ will not remain very far."

The companies say results have been promising so far. Paytm, backed by Chinese Internet giant Alibaba Group Holding Ltd, has added 700 sales representatives since Nov 8, taking its number of agents to 5,000. The company, which has 4,500 full-time employees, plans to double the number of agents to more than 10,000, as it aggressively expands its network.

It says it has nearly doubled the number of small merchants signed up to its services to 1.5 million in the last few weeks and added eight million clients to the 150 million it had before the banknote ban.

MobiKwik, whose backers include US venture capital firm Sequoia Capital and American Express, said it had increased its agent base to more than 10,000 from about 1,000 before the Modi move.

Merchants on its platform have risen to 250,000 from 150,000 previously, and chief executive Bipin Preet Singh said they were aiming for a million in up to two months.