India's smaller cities progressing most with mobile payments
Small Indian cities are adopting digital payments faster than larger metropoles like Delhi and Mumbai, according to recent figures. MobiKwik reported a 1,000% increase in adoption of its wallets in Tier-II and -III cities, while FreeCharge has seen a ten-fold rise in retail merchant sign-up enquiries and Paytm reports an average of four transactions per customer per week in smaller cities compared to three in big cities. The shift has been driven largely by the Indian government's recent demonitisation which saw the withdrawal of two high-denomination notes.

On the one hand where digital modes of payment have percolated to the smaller areas of the country, the low-income late adopters of technology in urban centres have also started using electronic payment methods.

The largest incremental demand for online payment platforms is coming from outside the big metros, from areas considered to be a low-penetration market for digital payment businesses.

Following the government’s November 8 demonetisation announcement, mobile wallet firm Paytm has seen an average of four transactions per customer in smaller cities, higher than the average three transactions reported from big cities such as Delhi and Mumbai, where transactions clocked an average of just four per week before November 8.

MobiKwik has cited a 1,000 per cent increase in adoption of its wallets in Tier-II and Tier-III cities, including street sellers from places such as Ranchi and Bhiwadi.

FreeCharge has reported a ten-fold surge in the number of retail merchant sign-up queries, with a majority of the queries coming from grocery stores, pharmacies and food joints.

“While the number of our wallets in Mumbai, Delhi and Chennai have shot through the roof, what we are seeing is that the smaller cities are accepting it now like never before. In bigger cities, people were doing four transactions a week on an average, now they are doing three transactions a day. In smaller cities, they are doing four transactions a day. Rural people definition for us is not in the top cities, which for us means the top 50 cities of this country,” Vijay Shekhar Sharma, founder and chief executive officer of Paytm, said.

Sharma said Paytm has the highest traction from Hyderabad and Chennai, followed by cities such as Delhi, Mumbai and Bengaluru. The mobile wallet firm, which currently has 150 million users, said it will target more people in Tier-II and Tier-III cities to boost its existing user base.

MobiKwik also reported a 1,000 per cent increase in adoption of its wallets in Tier-II and Tier-III cities. “Before demonetisation, wallets were an option. Now, they are a need. The entire industry has grown manifold in November and this unprecedented growth will continue. We have seen a massive 1,000 per cent jump in adoption from Tier-II and Tier-III cities, urban cities have obviously grown tremendously,” Upasana Taku, co-founder, MobiKwik, said. “Many street sellers from cities such as Ranchi and Bhiwadi are also using our services,” she said.

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On the one hand where digital modes of payment have percolated to the smaller areas of the country, the low-income late adopters of technology in urban centres have also started using electronic payment methods.

From a local cycle shop to a cane juice seller to a temple, Taku said, have “started adopting” digital payment platforms in the wake of the ban on high-denomination notes. “Earlier, these sellers did not feel the need to use a mobile wallet but now they receive us well.”

Trends observed by Snapdeal-owned mobile wallet operator FreeCharge are on similar lines. “FreeCharge saw a 10x surge in the number of retail merchant sign-up queries, with most of the queries coming from grocery stores, pharmacies and food joints to immediately sign up to start accepting digital payments,” Govind Rajan, CEO of FreeCharge, said, adding that the shift in consumer transactions was also evident in merchant transactions that have increased nine times.

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In the unorganised sector, which include small retail and mom-and-pop stores, merchant payment transactions grew six times.