Asia's Stock Markets from the Ground Up by Herald van der Linde

Author:Herald van der Linde [Linde, Herald van der]
Language: eng
Format: epub

Tap an app

Picture the scene. An Indian TV commercial starts with a wide shot of three students, one clearly senior to the other two, chatting in a grocery store as they buy ice cream. One of the younger students insists on paying but the senior won’t have it; while he is rummaging through his wallet for cash, the younger student steps forward and scans a Paytm QR through his Paytm App. Baffled, the older student looks at the shopkeeper, who tells him that this is the new way to pay. The commercial ends with a frown on the face of the senior student and the message from the sponsor: “Scan any QR and pay directly from your bank account”.

If the holy grail in Indian business is the ability to distribute merchandise across the whole of the country, the internet and new payment systems have revolutionised how companies can get access to the lucrative rural market. Most Indians had little access to basic bank services30 but that is now changing. In 2014, India embarked on what was to become perhaps the most ambitious financial inclusion initiative of all time. The Pradhan Mantri Jan Dhan Yojna (JDY) programme, designed to give all Indians access to a bank, offered special saving accounts, debit cards and mobile banking apps to entice people to participate.

It worked. People signed up in droves, giving many households access to a bank account for the first time. The secret to success was India’s Aadhaar card, an identification system that stores the fingerprints and irises of more than a billion Indians on its database. Take your Aadhaar card to a bank, set up an account and from there it is a small step to sending and receiving funds instantly from anywhere in India using the apps of banks or other payment services. In the first two years of the JDY programme, a staggering 255 million new bank accounts were opened.31

These days, millions of mom and pop kirana stores accept digital payments using QR codes. Even humble street food is available with a tap on an app.32 This mobilisation of local savings has also been a big boon for stock markets. Suddenly, investing in mutual funds or buying stocks on online platforms was only a click away, and small-time domestic punters became a force to reckon with.

Some banks were quicker to jump on this lucrative new bandwagon than others. Young private sector banks such as HDFC and ICICI are tiny compared to the State Bank of India (SBI)33 but their slick websites and consumer-oriented approach meant they soon gained market share. Many of the large state-owned banks, chock-full of bad loans and traditional thinking, were stuck in the slow lane.

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