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Technology Innovation in B2C Gold Transactions

Harshit Pande MMTC-PAMP India Pvt. Ltd.

 

The fact that unlike most global markets, India does not have a standard spot exchange rate and a uniform stringent quality standard, adds to the confusion of gold buyers. Hence, consumers largely rely on relationships with jewellers for price and quality assurance. After making a purchase, lack of information about selling / buy back prices across vendors and the hassle of safe and inexpensive storage, poses additional challenges for using gold as a highly liquid asset.

 

India consumes ~1000 tonnes of gold annually - a third of to India’s Gem & Jewelry Export Promotion Council (GJEPC). This demand is massive, compared to India’s 3% share of world GDP and currently, Indians own more than 22,000 tonnes of gold.

 

Despite their high consumption, the absence of world-class refining in India meant the Indian consumer had limited options to buy assured quality gold. Banks identified this vacuum; during 2002 - 2012, as many as seventeen banks were importing and selling customized minted gold coins. The introduction of import controls on gold in 2013 put an end to this avenue, making the Indian consumers depend on a less-than-transparent market mechanism to purchase gold.

 

Sensing the market need, MMTC- PAMP (a public private joint venture between MMTC Limited, a Government of India undertaking, and PAMP, a Swiss refinery), set up India’s first and only LBMA accredited Good Delivery Gold & Silver refinery. Now that Indian consumers could access gold and silver products with complete quality assurance, this set the stage for us to explore whether gold is as easily accessible to all sections of the society? And is it available in a transparent manner across channels? The top 20% of Indian population accounts for 80% of the annual gold consumption1. This could be due to the minimum purchase value of gold (at-least 1 gram worth ~Rs. 3,000) which is 40% of the monthly per capita income in India, making the minimum ticket size unaffordable for most.

 

For those who can still afford to purchase, access to information about best prices and quality is the next hurdle. Being highly price sensitive (1% increase in price reduces demand by 0.9% in the short run and 0.5% in the long run2). The fact that unlike most global markets, India does not have a standard spot exchange rate and a uniform stringent quality standard, adds to the confusion of gold buyers. Hence, consumers largely rely on relationships with jewellers for rice and quality assurance. After making a purchase, lack of information about selling / buy back prices across vendors and the hassle of safe and inexpensive storage, poses additional challenges for using gold as a highly liquid asset.

 

While digital disruption has revolutionized product categories ranging from houses to grocery, it has largely left customer-access to the gold market untouched. A big advantage of digital technologies is democratization of information.

One can get information on prices, product reviews and purchase options available across vendors, for any product category, in a few clicks. The digital- savvy younger generation in India looks for transparency in price and quality, convenience of transaction, storage, delivery, coupled with the ability to make transactions of any ticket size. What if the consumer could safely buy, store, & redeem 999.9 gold of any desired denomination, as well as be able to sell it back easily at honest, real-time prices, all within a few clicks ?

 

This set the stage to reach out to consumers directly and make gold available with complete transparency and convenience. To make quality gold accessible to everyone, MMTC-PAMP launched a customer-focussed Gold Accumulation Plan (GAP) in April 2017, in association with Paytm. Digital technology forms the backbone of GAP.

 

How does GAP work?

After logging into the Paytm platform, consumers can view live gold prices linked to the international markets, which are uniform across India; buy and accumulate gold of any value starting as low as one rupee. Never before was gold purchase possible for the smallest of ticket sizes. Purchases can be made 24*7, 365 days a year, a feature useful in the peak festival seasons or when there are sudden fluctuations in price that the consumers might want to take advantage of.

 

Customer’s fractional gold purchase is backed by physical storage of the corresponding accumulated quantity. Thus the total quantity of gold is “allocated”, which further assures and safeguards the customer’s gold holding. The customer’s gold is stored in secure vaults, fully insured and free of charge at the MMTCPAMP facility.

 

The consumer can choose to redeem all or part of its gold holding in the form of minted coins; customer can also exercise the option to sell it back to MMTC-PAMP through the same Paytm platform at the current selling price. A 24*7 customer care enables the customers call for support when they need it. Customer data is analysed to evolve the product further to better serve customer needs in the most affordable and convenient manner possible.

 

Since GAP’s launch in April 2017, over 1.5 lakh customers have bought ~150 Kgs of gold and the number is growing month on month. Digital Technology enables real-time access to consumer data and is changing the way we have traditionally looked at key business drivers and consumers insights. For example, we see high consumer traffic from 10:00 p.m. to midnight – that’s when the markets are mostly shut. We see consumers checking price 15 times before making a purchase – is this due to easy access or a smartphone addiction? Understanding these and many other stories evolving through data is our biggest challenge and the most valuable opportunity to understand the consumer better. This helps us keep our commitment to go beyond just making gold easily available. Through tech innovation and a series of partnerships with jewellers and logistic providers, we are simplifying the entire gold value chain, to enable our customers to convert their gold holding with us into coins/bars or jewellery. Technology is an indispensable part of our lives today. It not only helps remove the main information and access barriers for the consumer, but also aids better understanding of customer needs, thus providing insights to evolve the GAP product for future and allowing MMTC-PAMP to streamline the end-to-end value chain in the Gold industry in India.

 

Disclaimer: Views are personal and not the views of the publisher.