The Future of Smaller Payment Wallets is Dead

Mergers and acquisitions are touted to be the only way forward to keep the DNA of the start-up alive

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Over the past few years, the success of digital wallets in India also led to the birth of many other me-too products. While the likes of Paytm and Mobikwik have met with tremendous success, there are many others that have failed to make a mark.


But where does this leave all these smaller wallets that have sprung up to cater to the needs of different segments of people? Will mergers and acquisitions be the only way forward to keep the DNA of the start-up alive?

HDFC MD and CEO Aditya Puri, at an event in Mumbai, had declared, "e-wallets have no future." He credited his statement to Paytm's reported loss of INR 1,549 crore and said their method of paying cashback will only lead to more losses.

Difficult to Justify Their Growth

The failing future of e-wallets comes naturally now, because not everyone can become everyone's favourite. Experts believe that this isn't just a trend in India but globally, as well. "Globally we have seen the same thing happening. In the US, there were over 150 e-wallets, but it's very difficult to justify their growth — how do they grow beyond a point of success," said Amit Goel, Co-Founder and MD, Let's Talk Payments.

Investors, who are otherwise interested in the Fintech sector, are done with payment and wallet companies. Sreekanth Perepu, Investment Director, Hyderabad Angels, said, "Standalone Prepaid wallet companies, which hold on to customers through cashback are making losses as there is not enough margin in the payment business for the wallets. They depend on banks as an intermediary to get funds. Also, the launch of the Unified Payments Interface (UPI) makes it possible for banks to carry out payments transactions faster."

According to Goel, it's now just common sense for investors to move beyond companies that are focused on mainly payments. "On our platform Medici, we are tracking over 8,000 fintech start-ups globally and 950 fintech companies in India. Out of these 950, at least 400 are payments focused. But the only handful of them will be doing good business," he said.

How Can They Survive

Further, pointing out how these start-ups can survive, Goel said, "When most of these start-ups start, they are very enthusiastic and they aim to go B2C. But slowly they realize the market is limited and they go B2B. These are what we call the White Label Mobile wallets for retailers."

But that's not the only way. "There's another ray of hope for these wallet companies. While we have all heard about the interoperability of Unified Payments Interface with banks, we have also been hearing that the same will be allowed for wallets too. So, once it is integrated and wallet-to-wallet operations are possible, it would be a great thing," said Goel.