Banks vs Mobile Wallet Players

Digital banking customers being keen to try out new payment services are making big Indian banking giants worrisome. Many Indian banks, including India’s largest lender State Bank of India, ICICI and HDFC are gearing up to take on a battle with non-bank companies offering mobile wallets with their own ready-made payment systems, a wide merchant network and an on tap customer base.

Last year saw banks like ICICI, SBI, Axis Bank and HDFC launching their own payment instruments- Pockets, Buddy, Lime, and Payzapp respectively to prevent customers from moving money to newly emerging non-bank companies like Paytm, MobiKwik, and Citrus Pay.

Axis Bank Chief Executive, Shikha Sharma speaking to Economics Times, said, "It is an evolving space and the shift is towards digital transactions. None of us know the pace of the shift. Everyone is trying to experiment with space."

Banks are also tying up with new tech innovators to keep costs to minimum and are leveraging their existing brand value to attract customers away from wallet players. "Investments in this business for us are in terms of deployment of resources as a platform has been provided by our technology partner, ease in small-value payments attracted the bank to this space," said Manju Agarwal, deputy managing director, corporate strategy and new businesses, at SBI.

Parag Rao, who heads cards and merchant procuring at HDFC Bank said he has been leveraging the bank's merchant and customer base to offer attractive discounts for PayZapp users. HDFC Bank dominates card spending with a 3 lakh strong network of point of sale terminals. It is this offline success that it wants to replicate online.

This, however, isn’t causing any worries to non-banking wallet companies. They point out to the fact that spending through debit and credit cards is still nascent despite an exponential increase in cards issued.

"Banks are excellent settlement engines, but when it comes to user experience, we have been able to train 123 million people over the last five years to make digital transactions without glitches. People trust us with their money," said Nitin Mishra, head of products at Paytm.

The data from RBI shows that the number of outstanding bills and credit cards has expanded more than three times in the past six years. Nevertheless, paying in cash is still people's preferred choice.