Year 2016 may belong to e-money in India‏

E-commerce is passe. Two developments last week signalled milestones in the next big wave in India's I\internet economy. The first was Ratan Tata's investment-cum-advisory interest in PayTM, a mobile payment firm spun off by One97 Communications, and the other was a report that e-commerce startup giant Snapdeal is in advanced talks to acquire Freecharge for what seems like a mind-boggling amount of Rs 2,800 crore for a company that only sells you recharge services with some fancy discounts and freebies thrown in.

We don't have the details yet, but it is clear that both these steps underline a trend that the e-commerce game is going to be less about things or services bought and sold with conventional profit margins and more about the way huge amounts of cash are flipped by mysterious giant online machines.

If that sounds a bit confusing, that is not surprising. What is going on right now is a profoud, tectonic shift in the idea of money itself.

Look back: we already have frequent flyer miles for airline travellers and reward points for credit card users. In effect, these things help you buy airline tickets or gift items -- just like cash. The online universe is capable of generating much more of this kind of "shadow cash" -- as I call it. A new set of companies will form competing networks to flip your cash using interest rates, gift coupons and discount mechanisms to alter the financial universe.

There are online sites such as Cashkaro.com that offer cash-back discounts when you make a purchase through this site. These sites have back-end partnerships with e-commerce companies.  Amazon and Flipkart have made big deals out of online sales events when big discounts are on offer-- because flipping cash is big business.

Simply put, these e-commerce companies in league with mobile-money or online coupon companies are effectively "printing" some kind of new age cash-- because anything of value between two parties or entities can be made to look like cash.

What happens at the back-end are huge financial flows that are accummulated by specialised service providers who in effect function like banking companies of some kind. The arrival of payment banks for which the Reserve Bank of India initiated the process will formalise this process. PayTM has already applied for a payment bank licence.

There are two things to be noted here. The year 2016 may belong to e-money, with many of these fancy discount and recharge companies taking your cash and playing it with the way banks do. E-commerce players will become something like "fast-moving technology trick" companies to generate high volumes using consumer research and software.

The better flipper wins. It is not an easy game.

http://www.hindustantimes.com/n-madhavan/year-2016-may-belong-to-e-money-in-india/article1-1326548.aspx

Urban co-ops banks (UCBs) allowed to issue credit card in India by RBI; UCBs eye NextGen tag with credit cards

By allowing urban cooperative banks (UCBs) to issue credit cards, the Reserve Bank of India has opened the doors not just for more business but also for an image makeover of these banks. The approval is seen as a push to these traditional banks to emerge as NextGen banks. In the Monetary Policy announcement, RBI Governor Raghuram Rajan said, “With a view to enlarging the scope of urban co-operative banks for expanding their business, it has been decided to allow financially sound and well-managed (FSWM) scheduled UCBs, which are CBS-enabled and having minimum net worth of ₹100 crore, to issue credit cards.”

The move is set to boost credit growth of UCBs, from the present 14-15 per cent annually. Jyotindra Mehta, Chairman, Gujarat Urban Co–operative Banks Federation, said: “This is a welcome decision. This will put us on par with NextGen banks, which offer a variety of services. This is a step for UCBs to further progress on the technology front.” Gujarat has about 235 UCBs with deposits of over ₹29 lakh from 30 lakh members and customers across the State.

Apart from being a CBS-enabled bank, a UCB also needs to fulfil other criteria such as CRAR not less than 7 per cent, gross NPA less than 7 per cent and net NPA not more than 3 per cent. Also, the UCB should have posted profit for the past three consecutive years, without attracting any penal action from the regulator. Subhash Gupta, Chief Executive, National Federation of Urban Cooperative Banks and Credit Societies, said: “Credit cards would strengthen the brand image and improve the marketing position of UCBs. Advances business will get a boost as most UCBs will charge almost in line with the prevailing credit card providers.”

As on March 31, 2014, there were a total 1,589 UCBs in the country with deposits of over ₹3.15 lakh crore and advances close to ₹2 lakh crore.

Indian Payments Startup MobiKwik Nabs $25M From Tree Line, Cisco, AmEx And Sequoia

The rise of e-commerce in India has triggered a wave of startups that are leveraging the increasing adoption of smartphones to provide mobile payment solutions. Alibaba invested in Paytm at an apparent billion dollar valuation earlier this year, and now MobiKwik is the latest to be flushed with new cash. New Delhi-based MobiKwik has pulled $25 million in funding, led by Singapore-based hedge fund Tree Line Asia. The deal included participation from a couple of interesting strategic investors — Cisco and American Express. Existing investor Sequoia Capital was also in the heavy-hitting Series B round. MobiKwik raised a $5 million Series A in 2013, and it is targeting a $100 million Series C which it aims to complete in the second half of this year.

Rival Paytm claims 25 million registered users, but its service covers e-commerce as well as a payments wallet and mobile recharge services. MobiKwik currently claims “over 15 million” registered users for its payment wallet, but it is ambitiously shooting to raise that figure to 100 million by the end of next year.

 With credit card penetration in India low — not to mention the rate of bank account usage also small — mobile wallets are emerging as a way to handle payments with more complexity than cash-on-delivery and a more engaging model than bank accounts, which can be challenging for those in rural locations. MobiKwik is betting that a network of physical retail points will help push its digital service to more people. It claimed to have a national network of more than 100,000 merchants, through whom customers can load money into their wallet and also make payment in person. That’s important because, as we seem to point out every day, although India’s smartphone adoption is growing, it is still nascent. That makes offline an important component for any digital service. Beyond helping on the payment side, MobiKwik said it has (followed Paytm) and applied for a payment banking permit. It plans to “disrupt the delivery of financial services in India by using mobile technology to reach people that the existing banking networks have been unable to reach.”

In particular, adding reputed industry players Cisco and American Express will not harm its chances of moving beyond merely facilitating payments. “We are delighted to have American Express and Cisco on board. We intend to leverage their strong understanding of financial transactions, user behavior and bleeding edge technology to make MobiKwik the most trusted way to pay in India,” MobiKwik founder and CEO Bipin Preet Singh said in a statement.

India’s Snapdeal Buys FreeCharge‏

Snapdeal.com, one of India’s largest e-commerce companies, said Wednesday that it has bought mobile-payments company FreeCharge, for an undisclosed amount. 

New Delhi-based Snapdeal is a brand controlled by Jasper Infotech Pvt. which has Japan’s SoftBank Corp. and eBay Inc. as investors. It has about 40 million users and 100,000 merchants selling everything from cellphones to cars on its site. Snapdeal Considers Acquisitions in India, CEO Says It hopes the acquisition of FreeCharge will give it an edge in the battle with its competitors in India, Flipkart Internet Pvt. and Amazon.com Inc. The deal will help Snapdeal “offer all our customers access to the widest selection of products and services online,” Kunal Bahl co-founder and chief executive of Snapdeal said in a statement.

 The company wouldn't disclose details of the transaction but one person familiar with the deal said the acquisition cost $450 million paid through a mix of cash and equity.

 Mumbai-based FreeCharge is controlled by Accelyst Solutions Pvt. and is backed by U.S.-based venture firm Sequoia Capital, Belgium’s Sofina SA and others. FreeCharge has more than 20 million users who use the site to top up their mobile-phone accounts and pay utility bills. More than 85% of the FreeCharge’s transactions come through mobile phones. Roughly half of its customers have their credit-card details stored on the site which makes them particularly attractive as potential customers for Snapdeal.

 The acquisition comes as Internet usage is rising in India. Asia’s third-largest economy had more than 300 million Internet users at the end of last year. That number is set to double in the next five years with the rise in the use of smartphones.

Snapdeal has been on an acquisition spree. In December, it bought a gift recommendation site Wishpicker.com and in February, it bought an online luxury fashion site Exclusively.com. Last month, it bought a majority stake in digital financial-products distribution company RupeePower. It didn’t disclose the prices of any of these purchases.

RuPay Card Offers 1% Cashback

The RuPay card, launched by the National Payments Corporation of India (NPCI), is now offering 1 per cent cashback in a direct challenge to international payment card companies like Visa and MasterCard. The cashback facility is available across all RuPay debit cards, which can be used at ATMs, point of sale terminals (PoS), and online transactions.

This implies whatever purchase one makes using the RuPay card, 1 per cent of that purchase amount will be credited back to the account of the cardholder.