Louvre Hotels-owned Sarovar to take over management contracts of Golden Tulip’s portfolio in India

This is an EXCLUSIVE story. Do not reproduce or use in any manner whatsoever without the writer's permission.

 

After acquiring a majority stake in India’s largest independent hotel chain Sarovar Hotels & Resorts back in 2016, one of Europe’s largest hospitality firms Louvre Hotels Group (LHG) is now looking to further consolidate its presence in the Indian hospitality market. This is being done by taking over the management contract portfolio of Golden Tulip Hotels & Resorts (GTHR) and bringing them under the management of Sarovar Hotels & Resorts.

Golden Tulip currently manages 24 hotels (as per https://www.goldentulip.com/en-us/hotels-india) under Royal Tulip, Tulip Inn and Golden Tulip brands across India. It is a separate hospitality firm in partnership between Louvre Hotels Group and veteran hotelier and restaurateur Vimal Singh who is managing director, Golden Tulip Hotels & Resorts, South Asia.

According to industry sources, as a result of this consolidation initiated by LHG, Sarovar Hotels is in the process of taking over the management contract of properties that are currently being operated by Golden Tulip Hotels in India.

“In fact, the management contract of Golden Tulip Hotel in Lucknow is already with Sarovar since a while now. It’s work-in-progress though for hotels in Jaipur and Navi Mumbai as we speak. Over the coming months, Sarovar will take over management contracts of a majority of hotels that are currently under Golden Tulip Hotels & Resorts in India,” said a source requesting not to be quoted.

The possibilities of properties in Golden Tulip Hotels & Resorts network in India coming under a single entity were being contemplated ever since Louvre Hotels Group acquired majority stake in Sarovar Hotels & Resorts. However, Saurabh Chawla, global chief development officer, LHG, during an earlier interaction back in September 2018, had said that Vimal Singh is a partner and that LHG was never looking at acquiring his stake in the company.

”He still is a partner. The commercial arrangements in the scope of the partnership, there is no intention to acquire his stake. I think the idea is to find synergies between the two entities because we are a shareholder in the two and that makes sense and that’s what we are evaluating at this point in time,” Chawla had said then.

The overall hotel industry scenario was considerably better back then and provided no compelling reason for a possible take over of the Golden Tulip portfolio. However, that’s not true anymore. The COVID-19 pandemic has completely devastated the hospitality business scenario globally and more so in India.

The Indian hospitality industry has been under lockdown since March 2020. As a result, owners and managers of hotels, resorts, restaurants across categories are struggling for survival. Furthermore, in the absence of any support, in terms of a financial relief package from the government, most business owners are contemplating shutting shop in the near future.

Continuous fixed costs coupled with no visibility on revenues whatsoever are adding to the challenges of business continuity. Hotel companies with strong balance sheet could probably weather the storm however, a large majority will succumb owing to the after effects of the corona virus outbreak. While efforts are being made to contain the spread of this deadly virus, the overall situation with numbers increasing significantly on a daily basis isn’t looking very encouraging.

An industry poised for growth is now staring at a bleak future. All the planned milestones and projected revenue and profitability targets have gone awry. These not so encouraging signs, industry sources said, would have possibly led to a rethink by Vimal Singh and Louvre Hotels Group resulting in a decision to hand over the management of hotels in the Golden Tulip portfolio to Sarovar Hotels.

“I believe the Golden Tulip partnership between Vimal Singh and Louvre Hotels Group will also complete its tenure over the next couple of years. In a growing business scenario waiting it out would have given a higher payout to the exiting partner. However, with uncertainty looming over the Indian hospitality industry, I think it’s best to move out if one has managed to negotiate a good deal,” said a hotelier on conditions of anonymity. Financials pertaining to this deal could not be ascertained.

In September 2018, LHG had partnered Indian firm Orange Tiger Hospitality (OTH) to introduce its new brand 'Kyriad' in the Indian hospitality market. As part of the master franchise agreement, OTH would operate and manage Kyriad branded hotels in India and the Indian sub-continent i.e. Nepal, Sri Lanka, Bangladesh, Bhutan, Maldives, Pakistan and Mauritius. 

The master franchise with OTH is for a 15-year tenure and the Indian partner had then committed to launch eight hotels under Kyriad. LHG had also said then that it plans to use a similar master franchise route to introduce its two other brands viz. Première Classè and Campanile in the Indian market over the coming years.

Owned by one of China's leading travel and tourism conglomerates, Jin Jiang International Co Ltd Louvre Hotels Group (LHG) is a major player in the global hospitality industry with over 1,500 hotels and in 54 countries. The hospitality firm operates in segments ranging from one-star to five-star with the its historic brands viz. Première Classe, Kyriad, Campanile, Tulip Inn, Golden Tulip, Royal Tulip), the five brands of the Sarovar Hotels network in India, the french Group Hôtels and Préférence and Chinese brand Metropolo.

(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

IHCL to home deliver dishes via Qmin mobile app starting July 25

Qmin home delivery service will cover top 10 markets including Delhi, Chennai, Bengaluru etc. over a period of five weeks

Come July 25 and South Asia’s largest hospitality firm IHCL, a Tata Group company, will introduce the Qmin, a mobile application for home delivery of dishes from some of its iconic restaurants. That's not all. This will be followed by the launch of the gourmet Qmin Shop in August and a loyalty platform in September.

A repertoire of culinary experiences, Qmin will commence home delivery of dishes from the hotel chain's eight iconic restaurants in Mumbai, in the first phase. Among the list of restaurants are Golden Dragon and Souk from Taj Mahal Palace; Thai Pavilion and Trattoria from President; and Ming Yang from Taj Lands’ End to name a few. To start with the Qmin service will cover top 10 markets in India including Delhi, Chennai, Bengaluru etc. over a period of five weeks.

According to Puneet Chhatwal, MD and CEO, IHCL, this addition will augment the group’s food and beverage (F&B) offerings leveraging a digital platform to address a growing consumer demand for online gourmet food delivery services. “Qmin will scale up in the months ahead to include the gourmet Qmin Shop with delicatessen-based food choices. Taj has been home to our guests for more than a century. With the launch of Qmin, we bring Taj to their homes,” he said.

Qmin will bring curated dishes made using the highest quality ingredients and a variety of cuisines, delivered in the comfort and convenience of the home. Available on both android and IOS mobile devices, Qmin will offer its guests a differentiated delivery experience with an enhanced focus on maintaining stringent protocols of safety and hygiene.

This will include contact-less delivery and the mandatory use of protective gear for delivery executives in extremely sanitised vehicles. The packaging will be eco-friendly utilising bio-degradable materials and with customised insulation boxes to preserve the food whilst being delivered. A dedicated toll-free number 1800 266 7646 will also be made available for guests to place orders.
 
Qmin will expand its scope and bring Taj@Home to other cities in the near future. The gourmet Qmin Shop presenting epicurean specialities and authentic artisanal brands will open in August. Qmin will be integrated with IHCL's loyalty program in September, where guests can earn and burn points using Qmin services.
(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

Indian Hotels to debut own home delivery business under a new brand

This is an EXCLUSIVE story. Do not reproduce or use in any manner whatsoever without the writer's permission.

 

Tata Group's hospitality company will launch state-of-the-art mobile application in a week

 

An experiment, to deliver food from restaurants housed in some of its luxury properties in Mumbai, is set to go mainstream soon. Tata Group’s hospitality business, Indian Hotels Company Ltd (IHCL), will launch a mobile application next week that will allow customers to order home delivery of food akin to ordering from online food delivery aggregators like Zomato and Swiggy.

In an earnings call on Thursday evening, Puneet Chhatwal, managing director and chief executive officer, IHCL, said the move is part of the hotel company’s efforts to drive revenue growth. 

“Our RESET response to COVID-19 is based on revenue growth. We have lined up a number of key initiatives including new lines of revenue. In fact, within a week from now we will be launching our own home delivery business under a new brand through our own state-of-the-art (mobile) application. This was long desired in our business from the digital side,” said Chhatwal without sharing further details.

So far, IHCL has identified seven key initiatives to help drive revenues that will be unveiled gradually over the next four to six weeks (depending on the opening up of hospitality sector in India). Earlier this week, the hospitality chain launched the first initiative in Kerala, which is based on the concept of DriVacations i.e. holidaying at destinations and properties that are within three to five hour driving distance.

The new initiatives, Chhatwal said, are meant to compensate for the loss in revenue, or earnings before interest, taxes, depreciation and amortisation (ebitda) as well as profit after tax (PAT), which is the case for IHCL as well as the overall hospitality, travel and tourism industries across the globe in the first quarter of fiscal 2020-21.

“Additionally, we are coming up with strategies for new corporate, leisure, wedding and meetings, incentives, conventions and events (MICE) business across different space. “We will have new business based on the upcoming app involving gourmet shops in our hotels at key city locations,” he said.

In April, the hotel company had launched Hospitality@Home initiative involving three different varieties of hampers for people to pick up for personal consumption or gifting purposes. IHCL has also been driving The Chambers (its exclusive private club) membership for some time now.

The Chambers boasts of a completely new look, feel and design now and will be launched at Taj Mansingh in Delhi by September or October this year.

“It was delayed by three to four months for obvious reasons including air-pollution issues followed by COVID-19 pandemic as a result of which the hotel was shut. The Chambers will also debut in the London market giving the private club brand a great positioning. This will also be our competitive advantage going forward,” said Chhatwal.

As for the impact of COVID-19 pandemic on IHCL’s hotels, the company said in an investor presentation that approximately 50% of its properties across portfolio were closed or were acting as active quarantine centers as on May 31, 2020. The hotel company has put together a staggered opening plan post relaxation of the lockdown.

The management will also undertake effective asset management initiatives including monetisation of non-core assets, monetisation of hotel assets and minimisation of lease costs. 

For instance, in fiscal 2019-20, IHCL has raised a total of Rs 211 crore by selling land parcel in Pune (Rs 63 crore), 24 apartments (Rs 105 crore) and Taj Madras Flight Kitchen, Chennai (Rs 29.8 crore). The hotel company is also in talks to divest a few more assets in the current fiscal and lease it back or take it up on a management contract basis.

(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

Liquidity issues add to worries of cement dealers in Tier I and II centres across 13 Indian states

Trade channels, accounting for approximately 60% of annual cement sales, stare at around 30% demand contraction

With April and May becoming a total wash out months due to the COVID-19 pandemic, cement dealers in the country are headed into a vicious cycle. Delay in new construction activities, gloomy business outlook, fear of income loss, labour shortage and uncertainty with respect to resumption of normalcy were among some of the reasons cited.

In fact, a significant decline in cement sales followed by prolonged credit period and higher working capital requirements have already made life difficult for the fraternity thus adding to their survival challenges. The trade channels account for approximately 60% of annual cement sales.

According to Rahul Prithiani, director, CRISIL Research, the cycle of recovery of retailer dues is expected to extend by four to six weeks over and above the usual four weeks. “This will potentially increase the working capital requirement of dealers by 12-17%, even as they reduce credit exposure, infuse capital and curb non-essential expenditure,” said Prithiani.

Courtesy: CRISIL Research

A recent CRISIL Research survey with over 100 dealers across Tier 1 and 2 centres in 13 states, indicated a significant decline in volumes and an extended lockdown can only worsen the overall situation. A whopping 93% of the respondents said they expect volumes to shrink 10-30% in fiscal 2021 in the base case scenario, i.e. the lockdown easing in May.

The survey pointed that over 60% of dealers are holding low inventories (two to four days), but spoilage concerns persist. Dealers are hopeful of liquidating inventory by offering discounts as soon as the lockdown eases, to contain spoilage and get volumes going.

Additionally, payment delays from retailers appear inevitable considering these players are small and fragmented, and most likely to delay payments amid liquidity crunch, gloomy demand outlook and cement spoilage concerns. That, in turn, would stretch the receivables cycle and negatively impact cash flows of the dealers, as much as 95% of whom offer credit, CRISIL said in the report.

The elongated working capital cycle could last at least a couple of quarters, and the risk of retailers defaulting on payment dues would aggravate the financial pain. However, the collateral-free MSME loans announced by the government on Wednesday will come as a big relief, since it will help cement dealers access working capital debt.

Over 90% of the dealers surveyed are hopeful of manufacturers’ support in terms of better margins/ incentives, or liquidity support to weather the hard times. But chances of a swift revival post ease in lockdown remain bleak, with 58% of the respondents believing it will take over three weeks for operations to normalise, said the CRISIL report.

Guranchal Singh, associate director, CRISIL Research, said, “An intermittent rise in daily wages, freight cost, and construction material prices will deter restart of construction activity. Return of labour, freight disruption and dwindling consumer confidence will weigh on resumption of normalcy in the near term.”

Improvement is envisaged in the second half as demand picks up and receivable days gradually decline. But even here, recovery in urban areas may take longer due to extended lockdown, slowdown in real estate construction and higher dependence on migrant workforce.

A few dealers, though, are optimistic that the labourers, who have not been able to earn wages for nearly two months, would return quickly post-kharif sowing to capitalise on pent-up demand and halted construction activity.

Courtesy: CRISIL Research

(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

Lemon Tree partners Al Waleed Real Estate for Dubai hotel foray

Lemon Tree Hotels, one of India's leading hospitality firm in the mid-priced hotel accommodation segment, in partnership with Dubai's Al Waleed Real Estate LLC has entered the Middle East hospitality market. Through its management subsidiary Carnation Hotels, the BSE-listed hospitality chain has debuted in the international market with the launch of its first Lemon Tree Hotel in the United Arab Emirates (UAE).

According to Rattan Keswani, deputy managing director – Lemon Tree Hotels and director – Carnation Hotels, said, the UAE market holds immense business potential for the hotel chain and their's is the first branded mid-scale hotel in the area. "We have a locational advantage, with the hotel strategically situated close to famous destinations like Burj Al Arab, Kite beach and the Mall of Emirates, and are equidistant from Business Bay and JLT, the two major business districts of Dubai. Such is our proximity to the Burj Al Arab, that our guests can enjoy unhindered views of the iconic building from the pool deck, and even some of the rooms," said Keswani adding that the hotel company is hoping to have many more hotels in the region in the future.

Owned by Al Waleed Real Estate LLC, the hotels is located on Al Wasl Road and is within a kilometre from Sheikh Zayed Road and Jumeirah Open Beach. Featuring 114 guest rooms, the property boasts of a multi-cuisine restaurant, Lemon Tree Café, with al fresco extension, a conference room, a swimming pool, a well-equipped fitness center among other facilities.

The addition of this hotel, Keswani said, opens a new location for the brand, thereby increasing its appeal to existing and potential customers. "We are confident that our partnership will enjoy mutually beneficial results within a reasonable stabilisation period after the launch. The UAE and Gulf Cooperation Council (GCC) is a resilient market in the long term and we could foresee the need for a recognised mid-market hotel in the branded space," he said.
 

Ideal for business and leisure travellers, the hotel is a short 20-minute drive from Dubai International Airport and close to Dubai Internet City, Dubai Media City, Barsha Heights, and Knowledge Park. It is also well connected by road and air to the other Emirates, including Abu Dhabi, Ajman, Fujairah, Ras Al Khaimah, Sharjah and Umm Al Quwain.

(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

Pan India RevPAR of premium hotels to remain stressed in fiscal 2020

The revenue per available room (RevPAR) outlook, for hotels across India in the premium category, will continue to remain stressed in fiscal 2020 (FY20). As per a senior ICRA Research executive, this is mainly owing to subdued demand environment in the country. While individual hotels have initiated price hikes, their ability to sell at higher rates will primarily depend on their capability to manage daily demand and occupancy.



Vinutaa Sriraman, assistant vice president - large corporate ratings, ICRA Ltd, said, “While demand has recovered marginally during October to November 2019 period, overall revenues for FY20 are likely to be flat at about 0% to 3%. The margin outlook for FY20 is also expected to be largely flat. ICRA also does not expect the larger hotel companies to embark on debt funded capital expenditure (capex) programme given the experience of the recent past.”

In terms of city wise performance, majority of the key markets witnessed a decline in RevPAR in the first half of FY20. In fact, Bengaluru was the only key market that witnessed improvement in RevPAR. With negligible premium category hotel room supply additions over the past several quarters, Mumbai has continued its position as a city with the highest occupancy of over 70%. However, the south Mumbai market has performed better compared to north Mumbai.

While the up-cycle would be delayed, Sriraman said, the healthy demand expected over the medium term is likely to facilitate improvement in average room rates (ARRs) and occupancy. “Among major markets, Mumbai continues to post high occupancies, as fresh hotel room additions have been slow over the last four years. Being a gateway city, Mumbai’s healthy demand prospects would drive RevPARs over the medium term,” she said during an analyst call.

In the National Capital Region (NCR), Delhi has about 63% of the NCR inventory while the remaining is spread across Noida, Gurugram and Faridabad. While Delhi can support higher ARRs, Gurugram, which has been struggling over the last few years owing to the Delhi International Airport Ltd (DIAL) Aero City supply, is showing signs of improvement. The micro market of Noida is likely to witness muted growth in occupancies and ARRs over the medium term due to anticipated increase in supply in FY21, FY23 and FY24.

“Monthly occupancies were growing for about 48 months on a year-on-year basis. However, occupancy in the first half of fiscal 2020 (H1 FY20) declined following the increase in airfare post the shutdown of Jet Airways. Adding to the woes were muted corporate performance, weak consumer sentiment and slowdown in foreign tourist arrivals (FTAs) and domestic travel due to extended election period in the first quarter of FY20.



Pan India average occupancy declined by 1% to approximately 63% in H1 of FY20 compared to 64% in the same period of fiscal 2019. Market wise, Mumbai, National Capital Region (NCR), Pune, Kolkata and Goa witnessed some moderation in occupancy in this period. ARRs, which largely remained flat for nearly three years up to the third quarter of fiscal 2016, started witnessing some traction beginning fourth quarter of FY16. The traction continued for the whole of FY17, FY18 and FY19.

“When demand slowdown impacted ARR in the first quarter of FY20, rates recovered marginally in the second quarter. As per ICRA estimates, ARR across India stood at Rs 5,400 for the first half of fiscal 2020 compared to Rs 5,500 in the same period last year. Current ARRs are lower by 30-35% from the peak levels witnessed in H1 of FY19. Corporate request for proposal (RFP) rates have been negotiated about 4% to 5% higher for the cycle starting January 2020. However, effective pass through of the same will depend on demand pick up,” said Sriraman.

The ARR movement is city specific. While most cities have witnessed a decline in ARR for H1FY20, cities like Mumbai and Bengaluru have reported growth. Impacted by lower occupancy and ARR, revenue per available room (RevPAR) declined by about 3% to 4% to close at about Rs 3,400 in the first half of the current fiscal. While the RevPAR was higher by Rs 500 than the all-time low of recorded in FY14 and FY15, it was still 30% lower than the peak in H1FY2009. Having said that, it was still equal to the peak RevPAR witnessed in FY11.

In NCR, there was a marked variation in performance across micro markets. With a large part of the business travel into Delhi being government related businesses, there was a decline in both ARR and occupancy in Delhi. On the other hand, Gurugram showed positive traction in both ARR and occupancy with inflow of corporate guests despite the auto sector slowdown. “The second quarter of fiscal 2020 will witness some pick up in government related travel in the Delhi region. Overall, pan India ARR and occupancy remained under pressure in H1 of FY20,” she said.

Demand drivers and their performance
Demand for the hospitality industry is multi-pronged and depends on foreign tourist arrivals, domestic leisure and business travel and MICE or meetings, incentives, conventions and exhibitions segment. Domestic guests account about 75% of the total demand while FTAs account for the balance. Business travellers account for about 60% to 65% of the demand, while leisure travellers account for the balance 35% to 40%. The ratio varies depending on the destination.

“The calendar year (CY) 2018 was a strong second year of international tourist arrival growth in continuation with a 7% growth witnessed in CY2017. This was higher than the 4% yearly average of CY2005 to 2016. For H1 CY19 the growth slowed to 4% due to economic headwinds and the already high base,” said Sriraman.

While Asia Pacific witnessed a 6% FTA growth during H1 of CY19, growth in arrivals into India stood at 3% and was lower than the Asia Pacific or global international tourist arrival (ITA) growth. Foreign tourist arrival, in year-to-date October CY2019 has been impacted by global trade wars and the economic slowdown.

The Pulwama attack in February 2019, the Indian general elections during April and May 2019, the second bout of Nipah virus in Kerala in June 2019, diversion of traffic to the Cricket World Cup in UK in May to July 2019, the Kashmir crisis and ensuing travel advisories in August 2019, Thomas Cook UK shut down in September 2019 and extended monsoon have further worsened the situation. In December 2019, USA and UK have issued reason travel advisory for women visiting India, which could further impact arrivals in the country. Bangladesh, USA and UK were the top three FTA source markets for India in October 2019.

The e-tourist visa (e-tv) scheme
Tourist arrivals, under the e-tv scheme, accounted for about 25.1% of the overall FTAs in India in year-to-date (YTD) October CY2019. The e-tv scheme, which started in November 2014, with about 43 countries has since been expanded to include over 165 countries. During YTD October CY19, travellers under the e-tv scheme grew at a healthy 20.9% on y-o-y basis, also lower than the 44.7% witnessed in YTD October CY2018. This is due to high base effect and slowing FTA growth.

Foreign exchange earnings (FEE)
FEE grew by about 2% in USD terms during YTD October CY2019 as against a 7.5% y-o-y growth, during YTD October CY2018. In Indian Rupee (INR) terms, the FEE growth was higher at about 6.1%. However, this was also lower than 11.3% for YTD October CY2018. Per traveller USD spend, witnessed a 1.2% decline, while in INR terms, it was higher by about 2.7% for YTD October CY2019.

Domestic passenger trafficIt grew by a modest 2.9% during YTD September CY2019 compared to a strong 21% y-o-y growth for the corresponding previous year. On year growth in domestic passenger traffic was in double digit every month since September 2014 until December 2018. April 2019, was the first month of decline since June 2013.

“Increase in airfares following the grounding of Jet Airways aircrafts in January 2019 and eventual shut down in April 2019, slowdown in domestic travel due to an extended election period of six to seven weeks, Nipah vitus alert for the second time and Kerala, muted corporate performance and consequent cut on discretionary travel spends, lower consumer confidence as indicated by the RBI current situation index, extended and excess rainfall in several cities like Mumbai and Goa, and water shortage in cities like Chennai have also impacted domestic travel,” she said.

Corporate performance
With second quarter FY2020, revenue growth entering a negative territory in almost four years, the uncertain business environment and cost-cutting initiative could have a bearing on travel related spends in the near term.

Supply dynamics
The supply growth pipeline in the Indian premium hotel segment is expected to be about 4.5% compounded annual growth rate (CAGR) during FY19 to FY24. With the pickup in supply announcements over the last few months, the incremental supply pipeline for FY20 to FY24 is now in line with the addition during FY14 to FY19. However, the growth rate is lower given the higher base.

According to ICRA research, total inventory to be commercialised over the next five years has increased from about 98,900 rooms in November 2018 to about 1,08,000 rooms in December 2019. This is an increase of about 9% in the last one year. Incremental supply is largely focused on Bengaluru, Mumbai and NCR, and is likely to be opened in FY23 and FY24.

“Part of the incremental supply is because of up-scaling and re-branding of midscale hotels into premium category rooms. Over the FY20 to FY24 period, about 3% to 4% of the incremental supply in the pipeline, is from brownfield expansion. A sizable part of the supply pipeline in FY20 and FY21, in the top eight cities tracked by ICRA are owned by real estate players. The supply pipeline in Goa and Kolkata are expected to come in FY20 and FY21 while incremental supply in Hyderabad, Mumbai and Bengaluru is spread over the years,” said Sriraman adding that large real estate developers like Prestige, Bhartiya City, Oberoi Realty and DB Group are aggressive on the hospitality sector.

Red flags
These have intensified currently. Demand weakness and supply uptake will continue to weigh-in, in the near-term performance and demand will be contingent on the overall economic revival.


(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

Secure digital banking and payments system is a long road ahead

A recent video that went viral on WhatsApp about how a person was tricked into downloading a third-party mobile application and digitally robbed of every penny in her bank account was disturbing to say the least.

Earlier this week, the driver of an Ola cab I was travelling in, narrated an incident that happened with him over a week ago. A customer paid him the cab fare of Rs 1,500 using the Paytm mobile application. However, the money vanished from his bank account after the payment was being done!

"No one has a clue what and how did it happen," he told me followed by asking if I'm going to be paying with Ola Money, Paytm or cash. The cab driver has lodged a complaint and is now hoping the issue to get resolved soon. "They are saying, it will take 40 days to figure out where has my money gone," he told me seemingly worried about the possibilities of the money coming back into his bank account.

These are not one-off incidents wherein someone was robbed of her/his hard earned money. A Google search on digital payments frauds/ scams will throw up numerous results of instances wherein people have been deceived and have eventually lost money from their bank accounts in some manner or the other. Apparently, there are instances wherein users have also lost money while transacting with Google Pay or G Pay.

What's more surprising is the fact that such frauds/ scams are far from dying away. A recent report by the Reserve Bank of India (RBI) said that the country's banking system detected frauds worth Rs 71,500 crore in the financial year 2018-19. I am sure, the number will be significantly higher in 2019-20 when the Indian central bank comes up with its report next year.

New tricks are being used at frequent intervals and the common Indian citizen who is anyway struggling to make ends meet is faced with the challenge of keeping her/his money safe in a bank account, a digital wallet or mobile payment applications that keep harping about their safety features while playing ignorant to the vulnerabilities.

At the receiving end always is the user of such applications who places faith in the ability (or inability) of companies running the digital payment systems. The burden is always passed on to the user who has to be vigilant all the time.

While regulators and the administration have issued communications creating awareness about such frauds and scams across various digital modes of transaction, it's not enough to arrest the problem. Even the so-called intelligent minds in the information technology space working with banking and financial institutions and digital payments companies aren't able to find ways to address this issue.

I recollect a discussion, earlier this year, with a senior executive heading the start-ups initiative at one of the top global IT companies operating in India. Their portfolio of 'unicorns in the making' comprised ventures instituted by IITians as well as IT industry experts with extensive experience in the financial technology space.

However, none were really working on offering a solution to this pressing issue about payments frauds/ scams. And mind you, the problem is not something that's master-minded by a tech wizard. These are very common people sitting in some remote location of rural India, using basic ways and means for phishing and skimming while going untracked.

What's really holding back tech companies from using their prowess in finding an effective solution to this problem? Is it so difficult to design systems and processes that ensure safety and security of savings in bank accounts and modes of digital payments used by citizens?

People want to graduate towards a cashless society but with no respite from frauds and scams, they are finding solace in the convenience of cash for everyday transactions.

What seemed to be an opportunity, post demonetisation, to promote digital transactions and payments in the country is slowly losing its sheen. Adding to the challenge are vulnerabilities in the system that’s shattering the common Indian citizen’s confidence every passing day. This makes me wonder, does a secure digital banking and payments system really exist or it's just a myth.
(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)