The rivalry between e-wallets and banks came to the fore on Friday with HDFC Bank chief Aditya Puri saying companies which hold on to customers through cash-backs are loss-making and have no future. "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 summit here.
"Wallets as a valid economic proposition is doubtful. There is no money in the payments business. The current loss reported by market leader Paytm is Rs 1,651 crore. You cannot have a business that says pay a Rs 500 bill and take Rs 250 cash-back,'' Puri said.
Wallet companies cannot copy the Alibaba model as well, as the domestic regulators are better, he added. Interestingly, HDFC Bank also has a wallet service called Chillr. Puri said ApplePay is also another version of the wallet and there is no reimagining of the bank happening there.
Banks and standalone wallet players have been at loggerheads and there have been instances last month like blocking of money transfer by ICICI Bank into Flipkart's PhonePe or SBI refusing to let its customers transact on Paytm for security reasons.
The National Payments Corporation of India had intervened in the matter first ruling in favour of Paytm and then abruptly reversing the decision after the banks explained their concerns on the issue.
Stating that banks also have wallets for e-commerce transactions, Puri said the standalone wallet players depend on banks as an intermediary to get funds. Additionally, the launch of the Unified Payments Interface (UPI) makes it possible for banks to carry out payments transactions faster.
"Is this wallet any better than mine, other than a cash- back? I don't have a Rs 1,651 crore loss. You eliminate the loss, then we will talk,'' he said.
When asked if the higher interest offering of over 7 per cent by payments banks which space Paytm plans to enter soon, Puri said let's wait for the launch of the bank but maintained that such high returns are not sustainable.
"When Paytm launches the bank, then we will see. Judge the risks and put your money. You might get the interest,'' he said.