m-wallet growth turns a trickle as cash returns to wallets

As cash seeps back into the system, the government's cashless vision seems to be slowly fading away with the growth of mobile wallet transactions plummeting from a blistering 125% in December to just 12% in January.

The slide corresponds with the spike in ATM withdrawals and the dip in the usage of credit and debit cards at point of sales (PoS) machines as well as in mobile banking, data from the Reserve Bank of India (RBI) reveals.

India's cash habit may just be set in stone with digital and m-wallet transactions getting the short shrift, the recently released provisional data shows.

M-wallet companies, including PayTm, FreeCharge and MobiKwik, benefited massively with a major chunk of transactions moving to digital following Prime Minister Narendra Modi's move to demonetize high-value currency notes on November 8 last year. Paytm alone claimed to have added 23 million new users in November and December.

In terms of volume, 13.80 crore transactions valued at about Rs 3,300 crore took place on m-wallets in November. In December, the total volume of transactions rose to 21.31 crore and their value spiralled by a whopping 125% to Rs7,448 crore.

But this was short-lived.

The following month, January, saw a growth rate in value terms of just 12% -- that is, the value of m-wallet transactions notched marginal growth from Rs.7,448 crore in December to Rs 8,353 crore in January.

This can be explained by the influx of cash in the market, which as on March 3 this month was at Rs 11.98 lakh crore, 33% higher than the lowest recorded currency in circulation – Rs 8.98 lakh crore on January 6.

With the increase in cash availability, mobile banking has also taken a hit. Representative provisional RBI figures of five banks for February show that mobile banking in volume and value terms has been falling consistently since November.

In February, the total mobile banking transaction value was Rs 1.08 lakh crore, a 21% fall from its December highs of Rs 1.36 lakh crore. In terms of volume of transactions, mobile banking slowed down from 7.23 crore in November to 5.62 crore in February.

India's love for cash is becoming apparent from other data sets as well. For instance, the total value of debit and credit cards usage at ATMs shrunk 52% in November to Rs 1.23 lakh crore as restrictions on cash withdrawal were put in place.

In December, as cash became hard to come by and lines outsides bank grew longer, withdrawals at ATMs stood at Rs 85,000 crore, around 31% less than its November figures. However, with the progressive relaxations on cash withdrawals, cards were back at ATMs with Rs 1.51 lakh crore being withdrawn from ATMs in January, a strong 77% jump from December levels. Even the number of times cards were used at ATMs rose -- from a total of 56 crore in November to 71 crore in January.

Data on usage of credit and debit cards at point of sale (PoS) machines released by RBI shows that the Indian people are not keen on swiping cards as accessing cash becomes easier.

This is evidenced by the fall in January data of card usage at PoS machines in value terms. In December, the total transaction value of cards swiped at PoS stood at Rs.89,100 crore, which fell to Rs 81,712 crore in January, a fall of 8%.

If one is to consider the representative data released by RBI, then the fall in value terms for card usage at PoS in February is even starker, registering a fall of 25% compared to December and an 18%fall compared to January.

Brickworks Media, a market research and data company, carried out a survey in eight metros, which found that the usage of wallets had fallen by 50% in January and February compared to the engagement seen in November and December. Pankaj Krishna, founder & CEO, Brickworks Media, told DNA Money that the daily frequency of usage for e-wallet payments has decreased by 4 times post demonetization.

"Post demonetization, as cash flow returns to normal, people have access to cash, resulting in a drop of nearly 50% in e-wallet payments. Indian consumers still prefer traditional modes i.e. cash/debit or credit cards over e-wallet payments; however, there are a few categories like travel, local food joints and online purchases, petrol pumps where e-wallets are still popular."

With the cash withdrawal limits coming to an end this week, not many would bet on digital transactions holding their own against the hard currency.