With competition for a share of the digital payments market hotting up, leading players like Paytm and Google Pay are expanding their offerings to include investment products to keep customers continually engaged and build brand loyalty.

Two investment areas that have found favour with the digital payment companies are mutual funds and gold, which the companies believe will help rope in large numbers of retail customers.

Paytm Money, for instance, aims to become a full stack wealth and investment management platform, offering products that can help retail investors to participate in wealth creation schemes. Obviously, mutual funds is considered to be the best option to launch investment operations with.

As part of this, the company is reportedly planning to offer free risk  assessment for every mutual fund scheme by providing detailed information and tools to compare the risks involved in each fund with the risk profile of the users. The plan envisages starting investments with as little as Rs 100 and upwards.

Google’s G-Pay, which is seeking to give Paytm a run for the money, has unveiled plans to introduce gold-backed investment plans for its users. The new product, to be called Google Pay Gold services, will allow G-pay customers to buy and sell gold as well as invest in gold products. G-pay already includes KYC verification norms, which makes it easy to collect all mandatory information required for investors.

According to G-pay’s terms and conditions, users can set up their gold account by undergoing the two-factor authentication as may be required by Google and comply with the registration process and KYC requirements as may be mandated by applicable laws.

The digital payments ecosystem in the country has made substantial progress.  While the banks led the initial thrust, development and support of digital payments infrastructure and systems, non-banks have entered the market and expanded the range of payment services, backed by their strength in technology and customer-centric innovation. Banks and non-banks are partnering to offer a combination of trust and innovation.

 The RBI’s Committee on Deepening of Digital Payments has described this as the ‘best of both worlds’ approach, which it believes has resulted in the recent growth in the number of digital payments. Merchant payments are growing as non-bank entities are pushing those transactions.

According to the committee, the metric of digital payments for the country has shown significant growth, from 2.4 digital transactions per capita per annum to about 22 in 5 years. The committee estimates that with the right enabling measures, this can grow by a factor of 10 in three years. The growth will most likely be driven by a shift from high value, low volume, high-cost transactions to a low value, high volume, low-cost transactions. This is what companies like Paytm and G-pay are now targeting.

The total number of digital users is currently estimated at 100 million. According to published reports, Paytm is leading in the number of transactions, closely followed by Google Pay and PhonePe. Paytm clocked more than 221 million transactions in January, while Google Pay and PhonePe were at about 220 million each.

The government-promoted Bharat Interface for Money (BHIM) has reportedly been losing steam over the past few months as more transactions are flowing through private non-banking applications. As per the latest numbers shared by the National Payments Corporation of India, BHIM reported 14 million transactions in January, down from 17 million in December 2018.

The average ticket size of a UPI transaction is said to about Rs 1,600, while for Paytm it is Rs 1,907, for PhonePe  Rs 1,300 and for Google Pay around Rs 1,200.

Cards have also played an important role in the spread of digital payments and the use of cards has gone up in the same way as other digital payments have done. There are three dominant card schemes in India – RuPay, Mastercard and Visa.

Over the past few years, the number of credit cards has grown, but it is overwhelmed by the increase in the number of debit cards. This has been interpreted as a tremendous gain in financial inclusion, bringing in most Indians into the banking system through the issue of debit cards to access their accounts. As more cards have been issued, there has been a growth in the acceptance infrastructure as well, although the growth in the latter has been slower than what was seen in the issuance of cards.

While the POS infrastructure in the country has more than doubled over the past 5 years, the ATM infrastructure grew as well, but there has been a contraction in their number. This is expected to accelerate further as the cost of handling cash through the ATMs is prohibitively high.