Digital Payment Growth in India Brings Initial Headaches
While digital payments providers have enjoyed significant boosts in transaction volume—some as much as triple-digits—since the government banned two popular currency notes, the uptick in digital payments also has led to online traffic jams and fraud, according to several news outlets.
The India Express reports, for instance, that the country’s Central Bureau of Investigation is investigating 15 users and employees of India-based online commerce platform Paytm for allegedly seeking fraudulent refunds worth a total of approximately US$9,000. Such a small amount of alleged fraud makes it unusual that the CBI would not hand over the case to Delhi police, where the case originated, but according to the newspaper, the federal agency wants to set an example when it comes to corruption in the payments sector.
That’s not the only problem that in recent days has impacted Paytm, which said it has a user base of more than 130 million and has received investment from Chinese e-commerce giant Alibaba and its affiliate Ant Financial. A spike in traffic to the payment service had led to consumers not being able to access their Paytm digital wallet services, according to The Hindu Business Line. Transfers made by consumers, for instance, did not show up in some cases for 24 hours. Cab drivers also complained about not receiving payments from riders in a timely fashion.
One potential source of the problem? Digital transaction rates in India have increased as much as 1,000 percent since Nov. 9, when the country’s prime minister took out of circulation old 500 (US$7) and 1,000 (US$15) rupee notes, a move that apparently encouraged more consumers to use digital payment platforms. That has led to some delays online.
But as more people use digital payments, more criminals will surely follow, said India’s I.T. and Law Minister Ravi Shankar Prasad in a statement. “We have already put our systems on immediate alert,” he said. “We are keeping close watch on the situation. We have also issued detailed advisories to bank to see what are the steps that they need to put in place.”
According to the latest figures from the Reserve Bank of India, 48 mobile wallets operate in India. Consumers there made 59 million prepaid payments in November, up from about 18.3 million in June. Mobile wallet and banking transactions hit 72.3 million in November, up from about 58.6 million in June. The volume of transactions is potentially much higher as some observers of digital transactions in India doubt the Reserve Bank figures account for all mobile wallets or digital transactions in the country.