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Year 2016 may belong to e-money in India

columns Updated: Mar 15, 2015 14:22 IST
N Madhavan

E-commerce is passe. Two developments last week signalled milestones in the next big wave in India's Iinternet economy. The first was Ratan Tata's investment-cum-advisory interest in PayTM, a mobile payment firm spun off by One97 Communications, and the other was a report that e-commerce startup giant Snapdeal is in advanced talks to acquire Freecharge for what seems like a mind-boggling amount of Rs 2,800 crore for a company that only sells you recharge services with some fancy discounts and freebies thrown in.

We don't have the details yet, but it is clear that both these steps underline a trend that the e-commerce game is going to be less about things or services bought and sold with conventional profit margins and more about the way huge amounts of cash are flipped by mysterious giant online machines.

If that sounds a bit confusing, that is not surprising. What is going on right now is a profoud, tectonic shift in the idea of money itself.

Look back: we already have frequent flyer miles for airline travellers and reward points for credit card users. In effect, these things help you buy airline tickets or gift items -- just like cash. The online universe is capable of generating much more of this kind of "shadow cash" -- as I call it. A new set of companies will form competing networks to flip your cash using interest rates, gift coupons and discount mechanisms to alter the financial universe.

There are online sites such as that offer cash-back discounts when you make a purchase through this site. These sites have back-end partnerships with e-commerce companies. Amazon and Flipkart have made big deals out of online sales events when big discounts are on offer-- because flipping cash is big business.

Simply put, these e-commerce companies in league with mobile-money or online coupon companies are effectively "printing" some kind of new age cash-- because anything of value between two parties or entities can be made to look like cash.

What happens at the back-end are huge financial flows that are accummulated by specialised service providers who in effect function like banking companies of some kind. The arrival of payment banks for which the Reserve Bank of India initiated the process will formalise this process. PayTM has already applied for a payment bank licence.

There are two things to be noted here. The year 2016 may belong to e-money, with many of these fancy discount and recharge companies taking your cash and playing it with the way banks do. E-commerce players will become something like "fast-moving technology trick" companies to generate high volumes using consumer research and software.

The better flipper wins. It is not an easy game.