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Popular App Paytm likely to merge Wallet Business with Payments Bank Operation

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Paytm Logo. Wikimedia

New Delhi, Dec 5, 2016: One97 Communications, the firm that owns Paytm is merging the virtual wallet business with payments bank operation. Reserve Bank of India has also awarded `in-principle’ approval to Vijay Shekhar Sharma, the founder of One97 Communications to set up a Payments Bank. But, how exactly will the Paytm Payment Banks work? Well, it is basically the transfer of business.

Wallet business will move to payments bank while One97 will be managing the sales part for the wallet business. The transfer will be complete once payment bank licence is obtained.

Alibaba Group and its affiliate Ant Financial pumped in USD 680 million into Paytm’s parent One97 Communications last year, taking its total shareholding to over 40 percent in the country’s largest mobile wallet operator Paytm with close to 160 million customers.

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However, the Chinese entity will not have a direct shareholding in the payments bank. A spokesperson from Paytm said, “We are working hard towards the launch of the payment bank and expect it to launch in due time. We are working with Fidelity, Infosys and Oracle to deploy a scalable platform that will be able to meet the requirements of the bank when it launches. There are no timelines.”

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RBI had initiated the era of differentiated banking with SFB (small finance bank) and PB (payments bank), and 21 entities, including 11 for payments bank, who were given in-principle nod last year.

However, three big firms ie. Tech Mahindra, Cholamandalam Investment and Finance Company and a consortium of Dilip Shanghvi, IDFC Bank and Telenor Financial Services — backed out of the payments bank licensing race.

Further, last month Airtel became the first entity to go on board with the Payments Bank operation. With the onset of government’s demonetisation move, virtual wallets like Paytm, Freecharge and Mobikwik have seen a rise in their users.

– prepared by Shambhavi Sinha of NewsGram. Twitter:  @shambhavispeaks

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Demonetisation, Aadhaar Spurred Digital Payments Growth: RBI

Pointing to a major area for improvement, the study showed that only three per cent of the population in India used the Internet to pay utility bills in 2017

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long term impact on Real Estate
Demonetisation aided with RERA and GST will put long term impact on Real Estate. Pixabay.

After the demonetisation of Rs 500 and Rs 1000 notes in 2016 pushed digital payments, Aadhaar-enabled electronic know your customer (eKYC) resulted in an exponential growth of such payments in the country, according to a new report by the Reserve Bank of India.

Transactions in which both the payer and the payee use digital modes to send and receive money are referred to as digital or electronic payments.

India recorded an accelerated growth rate of over 50 per cent in the volume of retail electronic payment transactions in the last four years, said the report titled “Benchmarking India’s Payment Systems”.

The growth in 2018-19 was largely due to the steep growth in Unified Payments Interface (UPI), it added.

“In India, the smartphone revolution has seen an explosion in digital payment options, from e-Money to the Unified Payments Interface (UPI) to a combination of the two. After demonetisation, the use of e-Money picked up on a very large scale,” the findings showed.

The digital landscape changed with higher usage of e-Money, UPI, Aadhaar Payments Bridge System (APBS), RuPay, and Bharat Bill Payment System (BBPS), among others.

With 3,459 million e-Money transactions, India was only behind Japan and the US (data on China not available) in 2017 with respect to volume of e-Money transactions, the report said.

The study revealed that over the years, the number of debit and credit cards also increased considerably in India.

Aadhaar Card Reader Logo. Source: Wikimedia

India had 331.60 million and 19.55 million debit and credit cards respectively at the end of 2012. The numbers grew to 861.7 million and 37.49 million respectively at the end of 2017.

By March 31, 2019, the number of debit and credit cards issued were 925 million and 47 million, respectively.

However, the study showed that the cost of digital transactions was a factor inhibiting their growth.

Merchants have to cash out or transfer to their banks accounts at a cost and at times these costs are passed on to the consumer.

“A few countries have tried to regulate costs to ensure that the charges are not usurious, but the jury is still out on whether such a regulation promotes the growth of digital payments. With banks pushing and merchants pulling, it isn’t clear if such caps will discourage the use of cash,” the report added.

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Pointing to a major area for improvement, the study showed that only three per cent of the population in India used the Internet to pay utility bills in 2017.

The report compared the payment ecosystem in India with the systems and usage trends in other major countries such as Australia, Brazil, Canada, China, France, Germany, Britain and the US. (IANS)