Cashbacks get more complex

If you are loyal to a particular mobile wallet, you will be able to encash the benefit

Mobile wallets and e-commerce retailers are changing the way they have been offering cashbacks. You can no longer use what you get in one transaction. Now, cashback comes with restrictions on the amount a person can use, as well as a validity period.

MobiKwik, for example, has started offering what it calls SuperCash. Whatever users earn as cashback in promotions, sits in the SuperCash section within the wallet. On every transaction thereafter, 10 per cent of the SuperCash is offered as discount. One unit of SuperCash equals Rs 1. The points expire 45 days after the end of the calendar month in which a customer receives them. Other companies such as Yatra and OYO Rooms, too, follow a similar model with their eCash and OYO Money, respectively.

Explains Daman Soni, vice-president, growth, MobiKwik: “These work more like loyalty points than cashback. An individual gets a discount on every transaction.” The structure of the discount is similar to the miles airlines offer or the points system on credit cards. MobiKwik is also planning to introduce tiers like air miles and credit card points. More a user spends, the higher points they can earn and use.

Just like air miles or credit card points, these kinds of cashbacks make sense for individuals who are loyal to a particular brand. This way a customer gets more benefits without changing his spending habit. A clear benefit is that points can be accumulated faster and the conversion of these are better. But, it also requires you to use the same wallet, same flight booking company or the same hotel chain. If you don’t have preference for a wallet or an online retailer, you may not be able to make the most of it. Mobikwik says it has seen 32 per cent improvement in retention and 28 per cent increase in transactions for each user.

Experts say more players are going to give up freebies and unconditional cashbacks in the mobile wallet and e-commerce space. “This is how most start-ups have evolved globally, following a freemium model,” says Rajeev Banduni, co-founder and CEO, GrowthEnabler — a firm that provides insights and intelligence on disruptive technologies to Fortune 500 companies. He further explains: “In the initial days, when the company or the segment is new, they offer freebies to acquire customers and make them habituated. When they have enough customers, they try to monetise them by incentivising customers only for repeat business.”

Soni says demonetisation saw a sudden surge in individuals using digital payments. It helped e-wallet companies gain customers rapidly. They are, therefore, now moving towards restricted but assured discounts.

The heavy discounts and freebies are still available but only selectively. These are available especially for customers who sign up with companies for the first time. Existing users can get higher benefits after he refers a new customer, and the latter uses the service. Many also offer higher cashbacks if they add a new service or partner or transactions during the off season (usually airline and hotel booking apps). Paytm, for example, offers Rs 500 cashback for airline bookings to its new customers and Mobikwik gives higher cashback when they sign up a new merchant.