Why Paytm Karo is not an option for every Indian

The latest advertisement by Paytm which urges people to use their wallet service is nothing but a mockery of the Indian economic system. According to the advertisement, the domestic help is more conscious than the middle-class woman. I am wondering why brands get out of touch with the reality. We all know that demonetization is hurting the common people and not the rich who have access to credit and debit cards. Also, unlike the common man this class purchases from high-end supermarkets and not the neighboring grocery shop. We don’t have a clear picture of how many small shopkeepers have access to Paytm wallet and accept money through that medium.

Social media marketing rests on driving mileage by hitting the right note which the public wants to hear. At times, the strategy hits the bullseye while sometimes it generates negative publicity. Ironically, in the Paytm case, the harsh reality of our economic system has been twisted and misinterpreted to accommodate the advertisers' message. Later, Paytm changed the ad, replacing "stop the drama" with "don't worry about me" on their Twitter account.

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I am certainly not against the cashless system but such arrangement takes some time to settle itself amidst the masses. According to the World Bank, only 50 percent of the world’s population aged 15 years or older have an account at a formal financial institution and the majority of the “unbanked” live in developing countries.

Cash Vs cashless transaction

According to a RBI report published in March this year and entitled Concept Paper on Card Acceptance Infrastructure, ATM withdrawals account for 90 percent of the total volume of debit cards transactions and approximately 95 percent of the total value. Between October 2013 and October 2015, the number of POS terminals increased by 28 percent whereas the number of ATMs grew by around 43 percent.

Numerous consumer payment surveys have shown that cash is widely used for low-value transactions. According to Guillaume Lepecq, CEO, AGIS Consulting, “In the U.S., according to the 2015 Diary of Consumer Payment Choice, cash continues to be the most often used consumer payment instrument and dominates small-value transactions.”

“In 2015, 32 percent of consumer transactions were made with cash, compared with 40 percent in 2012. Growing consumer comfort with payment cards and the growth of online commerce, among other factors, has contributed to this trend. However, a broad range of results suggests that cash remains resilient and continues to play a key and unique role for consumers,” he added.

According to the same report, 90 percent of cash transactions were made for buying food and personal care supplies, auto and vehicle-related, general merchandise, and gifts and transfers to people.

Who drives the cashless agenda?

The drive towards cashless economies is driven by commercial banks and private payment service providers rather than governments or central banks. In Sweden, for example, the exercise has been driven by the two major commercial banks, which are closing down ATMs and denying cash services at branches, making it more expensive and burdensome to get hold of cash. But recently the central bank has declared that these banks have gone too far and is calling for a debate in Parliament on the minimum level of cash services banks should offer.

Make hay while the sun shines.

Card acceptance rate in India has increased considerably, thanks to the availability of card readers and QR scanners at merchant outlets. However, despite high levels of card acceptance, consumers continue to use cash for small-value transactions.

So, in my opinion, India is not ready for “Paytm Karo”, until and unless every merchant outlet, big or small, accepts such service. Cash gives us security, the peace of mind which is not the case with the digital wallets.

In this digital age, where social media is transforming consumers’ perception of privacy, where big data is leading to the monetization of consumer information, the space for anonymity is gradually shrinking. In this context, cash is the last frontier for anonymous but regulated transactions.

For Paytm’s drama, I will quote Aerosmith’s song, “Dream on, dream on, dream on, dream until your dreams come true.”

And it backfired...