Who would want payment wallets, when UPI is faster: HDFC Bank's Aditya Puri

Payment wallets not a viable business option, says the HDFC Bank chairman

Payment wallets such as Paytm and Mobikwik may have benefited due to the government's demonetisation drive but HDFC Bank Chairman Aditya Puri feels these are not viable business options.

“Payment wallet is not viable in the long term. For a wallet to be operational you have to transfer money from your bank to the wallet. I think wallets have no future. There is not enough margin in the payment business for the wallets to have a future," Puri, said at the annual Nasscom India Leadership Forum (NILF) in Mumbai.

He also asked as to why anyone would need wallets that are operational only when money is transferred from banks when the Unified Payments Interface (UPI) makes it possible to carry out payment transactions faster.

According to the HDFC chairman, wallet companies cannot "copy" the Alibaba model and Indian regulators are "better". 

Drawing from his experience from a trip to the Silicon Valley, Puri said that even products like Apple Pay and loan.com are different versions of the wallet and there is no "re-imagining" of a bank that is happening in the Valley.

Puri also added that for the e-wallets to be viable they will have to create a bigger universe.

Regarding the growth of e-wallets in rural areas, Puri had to say: “The question that arises then is how is my wallet better than a cash back? PayTM reported a loss of Rs 1,651 crore. You cannot have a business that asks one to pay a bill of Rs 500 and take Rs 250 as cashback.”

With banks coming out with their own mobile apps and wallets, competition has also intensified among players including PayTM, Mobikwik and Freecharge. Other factors such as the ICICI Bank blocking payment from Flipkart's PhonePe app or SBI's refusal to allow its customers to transact on Paytm have also emerged as fresh concerns.

When asked about the higher interest rate offered by some of the upcoming payment banks, Puri advised to wait for the launch while maintaining that such returns are not sustainable.

"When Paytm launches the bank, then we will see. Judge the risk and put your money. You might get the interest," he said.

He also sounded sceptical about the future of Payments Banks, flagging customer acquisition as a potential difficulty.

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"As far as the new banks are concerned, they will have to spend like the others on getting customers. It is like making chicken curry without the chicken. Get the chicken and I will tell you how much competition there will be," he said.