At a time when most sectors involved with the digital economy — including e-commerce, ride sharing, food technology — are trying to find stable ground, the booster shot provided by demonetisation to financial technology sector has allowed companies in this area to indulge in expenditure for expanding their activities. While large e-commerce companies such as Snapdeal have let go of close to 600 of their employees to control its rising cost and to restructure its business, companies like Paytm have announced investment of Rs 600 crore to expand its QR code-based payment network.
“On our journey towards becoming India’s first profitable e-commerce company in two years, it is important that we continue to drive efficiency across all parts of our business, which enables us to pass on the value to our consumers and sellers. We have realigned our resources and teams to further these goals and drive high-quality business growth,” Snapdeal had said in a statement.
Apart from Snapdeal, another company to announce restructuring of its operations was homestay startup Stayzilla. “I would like to announce today that we would be bringing to a halt the operations of Stayzilla in its current form, and looking to reboot it with a different business model,” co-founder and chief executive officer (CEO) of Stayzilla Yogendra Vasupal had said in a blog on February 23.
Founder and CEO of Paytm, Vijay Shekhar Sharma, also took to Twitter last week to offer jobs to those “feeling the heat of restructuring”. However, Paytm is not the only financial technology firm facing tailwinds at a time when many other internet companies are in troubled waters. Mobile wallet company MobiKwik on February 23 announced an investment of Rs 300 crore for expansion aimed at growing its user base. “The increase in user base will also catapult MobiKwik’s annual gross merchandise value (GMV) to $10 billion by end of the year from the current $2 billion,” the company had said in a statement, adding that the it would deploy the funds in loyalty initiatives, expanding its network, and launching other financial services such as loans and investments on its platform
Furthermore, another digital payments operator ItzCash, without disclosing the financial details, had said that it made an equity investment in the Bengaluru-based expense management startup Finly. “The expense management market for corporates is approximately a $25 billion opportunity in India, expanding multifold annually with an increasingly demand for digitisation,” said Bhavik Vasa, chief growth officer of ItzCash.
Experts believe that the shot in the arm to start-ups and internet companies in the financial space came mainly due to the demonetisation announcement, in which the government scrapped 86 per cent of the country’s currency notes, pushing the citizens to resort to means of digital payments such as mobile wallets, net-banking, along with government-backed instruments such as unified payments interface (UPI), USSD, Aadhaar Enabled Payments System, and apps such as BHIM.
Alibaba-backed Paytm, which claimed it had 150 million wallets before demonetisation was announced, said on February 27 that its wallet base expanded to 200 million. MobiKwik, too, which currently has 50 million wallets, said it expects its user base to grow to 150 million during 2017. However, in January, the third month after high-value currency notes were delegitimised, electronic financial transactions declined over December. As per data released by the Reserve Bank of India, digital payments fell 10.2 per cent in volume terms and seven per cent in value terms during January 2017 compared with December 2016. Industry analysts believe that this decline could suggest that the high-note currently being enjoyed by the financial technology companies could be short-lived, and things might change once cash supply in the economy normalises.