RBI Finally Takes Up The Issue Of Internet Wallets And Cash Cards In India

Finally.

Over two years ago, the Reserve Bank of India (RBI) put into cold storage, a Paypal-like service from by the Times of India Group called Wallet365. Wallet365 was essentially a pre-paid transaction instrument, much like Cash Card services like Itz Cash Card and Done Card, though with an Internet Wallet, you can withdraw money as well. There were concerns that you could start an account with just an email address, and Know Your Customer (KYC) norms were not being followed. More on why and how the RBI stopped the service, here.

Now RBI has finally taken up issue of “Pre-paid instruments”: they’ve published an “Approach Paper” and invited comments regarding “smart cards, magnetic stripe cards, internet accounts, internet wallets, internet purse, mobile accounts, mobile wallets, mobile purse and paper vouchers.”

We went through the Approach Paper, and noticed some issues:

– Not keen on Internet Banking? The RBI don’t appear to be very keen on Internet Wallets, though - to begin with, only banks will be permitted to  transfer funds online or using mobile phone networks.
– Limiting Use Of Cash Cards: Semi-Closed System Payment Instruments (Cash Cards) up to Rs 500 may be to be issued without any KYC subject to reporting of annual/suspicious transactions. Which means cash cards above Rs. 500 will require KYC verification. Remember that the average transaction amount for railway tickets using cash cards in August was Rs. 889.96, and a large number of users who don’t have bank accounts will be affected.
– Limiting Reloading Of Cash Cards: Semi-Closed System Payment Instruments (Cash Cards) may only be reloaded by debit to a bank account or using credit cards. What works for Cash Cards is that people can buy them from vendors or reload them by paying cash.

Download the approach paper here

Importance of This Regulation: 

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Cleartrip Launches Train Booking; Service Fee; 10-20% Topline Contribution

Around 30 minutes ago, Cleartrip launched online rail ticketing, becoming only the second OTA after Thomas Cook to roll out the services.

To understand the significance of this rollout, sample this - the Indian Railways did $102 million in online transactions last month. It’s the scale that excites OTAs like Cleartrip. Hrush Bhatt, co-founder of Cleartrip told MediaNama that at over 160,000 transactions per day, the Railways does double the transactions that the Airlines do in a day. The opportunity is also othere because of fewer points of sale for Railways. Comparing the two: flights have their own sites, an agency facing site, third parties, affiliates and downstream distributors.

Service Fee
The monetization is going to be by charging an additional service fee to customers. IRCTC charges Rs. 13-25, based on the fare class, and Cleartrip intends to charge a similar service fee on top of that. In fact, that’s a model that’s being considered for the flight ticketing as well, if the zero percent commissions model is imposed, though the IATA and the airlines haven’t finalized anything yet.

Contribution to revenues
Cleartrip has estimated a topline contribution of 10-20 percent from rail ticketing, which Bhatt says is a conservative estimate, with a bottomline estimate of 5-10 percent. Bhatt says that it’s still a very large number, if the top 3 OTAs to account for even 20-30 percent shift in IRCTC transactions - of around 40,000 - 50,000 transactions per day. By the end of the year, the company expects a topline contribution to be split as follows: 75 percent from Flights, 15 percent from trains and 5-10 percent from Hotels.

Cleartrip piloted a train search earlier this year, and Bhatt says they got 2500 visits/day without really spending anything at all on promotions. They’ve upgraded their search several times, based on user feedback. The OTA doesn’t intend to launch a TV campaign for train ticketing - “The margins here do not justify such large investments in marketing.” They do have plans for online marketing, though.

Bhatt also added that Hotels are a nascent market still, currently contributing 10 percent to revenues. They offer a margin of between 12-25 percent, depending on the deal with the hotel.

Related:
- Not Surprisingly, Cleartrip To Launch Rail Ticketing; Rs.30-35 Margins
– Cleartrip Promotes Crighton To CEO; Lays Off 42
– IRCTC Does $102 Million In Online Transactions In August; Payment Trends
– Yatra Launches In US, UK; Impact Of Zero Percent Commissions

Not Surprisingly, Cleartrip To Launch Rail Ticketing; Rs.30-35 Margins

Online Travel Agent Cleartrip is planning to launch Railway ticketing today according to LiveMint, thus becoming only the second OTA to offer the service after Thomas Cook. The launch isn’t surprising, since Cleartrip was among the first OTAs to launch a Railway ticket search earlier this year, sans the booking capability. I just gave it another go, and they haven’t allowed users to book tickets just yet. We’ve written to Cleartrip for a confirmation that the launch is planned for today. Not unexpectedly, MakeMyTrip, Yatra and Ezeego1 also plan to start rail bookings.

Cleartrip co-founder Hrush Bhatt offers some insight on the margins - which are around Rs. 30-35. While that is low, it’s still better than the 0 percent commission that the Airlines will be enforcing by the 1st of November. That said, crude oil prices fell below $92 to the barrel yesterday, down from a high of over $140. It’s too early to tell - the fall was rather drastic, so might recover, but if Aviation Turbine Fuel (ATF) drops as well, one just might see Airlines go back on their plans. At least the agents (both online and offline) will now have a case for a commission.

Over the next few months, we’ll track the impact of the increase in online outlets offering Rail ticketing on the IRCTC numbers. Some details for July and August:

Much more here.

Other Developments in the Travel Space

– Zoomtra Goes International: Smile Interactive promoted travel meta-search engine Zoomtra has launched international flight ticketing. They’ll also be launching specific portals targeting inbound traffic from Singapore, US, UK and Canada. Details in the release here.

– Ixigo Adds Bus Services: Another travel meta search engine, Ixigo, has launched bus ticketing services covering 500 towns and 2300 routes. Details in the release here.

Related:
– Cleartrip Promotes Crighton To CEO; Lays Off 42
– IRCTC Does $102 Million In Online Transactions In August; Payment Trends
– Yatra Launches In US, UK; Impact Of Zero Percent Commissions