In a nation obsessed with the yellow metal, the sale of 1,000 kg of gold in 10 months through digital payment companies using mobile applications is a huge step forward. Financial technology start-ups like Paytm, Tmw and PhonePe have made waves while catering to over four million customers — individuals and families — in India and selling gold online. Leveraging technology and ‘emotionally connecting with customers’ through gold is a big plus for fintech companies that have come of age.
It is interesting that most such purchases have come from tier-two and tier-three cities in the country. Financial Chronicle’s page one report in the Friday edition clearly drives home the point that with a burgeoning middle class boasting of high income, the proliferation of gold transactions on the net by millennials will only rise.
For long, gold has not been used in India for merely making ornaments or high-end consumption of connoisseurs. Gold across the country has been a hedge against financial distress and also to be passed over as an asset down generations. Normally gold has been sold or bought from the family goldsmith and later the known ‘Marwadi’ shops.
Digital payments companies making inroads into gold transactions, especially among youngsters, reflects big business potential going forward. Indeed, making gold purchases possible with savings of Rs 1 per day is a step forward in democratising the bullion market, with the help of technology. Digital transactions in gold pursued by the government through bonds that can be traded have marked the opening of a new market for the yellow metal. Exchange-traded funds (ETFs) had earlier made investments in gold in a big way to take exposure in the yellow metal.
Fintech companies should perhaps extend their transactions, storage and trading services to silver, platinum and diamonds as well to expand the new market. However, bullion transactions by fintech companies may have to be brought under RBI norms to ensure investors do not get cheated.
In the manner that SEBI has put together norms for ETFs, the RBI has managed investments in sovereign gold bonds via banks, a central agency may have to quickly put together a framework for fintech companies to get into gold transactions. Officially, India holds gold worth 558 metric tonnes — below 11 other countries globally. But, an estimate of the World Gold Council has estimated domestic holdings at 22,000 tonnes. The entry of fintech companies and the rise of the middle class would turn India into a global market for gold. India will have to leverage its gold assets to enhance wealth through value add products, branded and unbranded.