As Jio partners Sodexo, do more digital players have appetite for food coupons?

Digital wallet JioMoney's tie-up with Sodexo could potentially shake up the food coupon space as an instrument once deemed a liability turns increasingly lucrative for customers.

Reliance Industries-owned JioMoney, the wallet offered by Jio Payments Bank Ltd, on Thursday announced that users could now make mobile-based Sodexo Meal Cards payments via its platform.

As part of its guidelines for prepaid payment instruments, Reserve Bank of India had in March last year mandated that all meal voucher offerings go digital. Since then, the likes of Paytm, Zeta and MobiKwik have ventured into this market, which is worth nearly $1 billion according to some estimates.

Meal coupons are among the tax-saving instruments offered by companies to their employees, with the digital version gaining currency over the past couple of years.

Digital shift

Directi Group-backed Zeta, founded by serial entrepreneur Bhavin Turakhia, was among the first to cash in on the digital shift as the cashless space became increasingly attractive after demonetisation in late-2016.

Mobile wallet companies, which were among the biggest beneficiaries of the cash ban, also saw the opportunity to add more value and monetise by offering food coupons.

Paytm launched the facility last April while rival MobiKwik followed suit earlier this year with a product called Magic.

From a customer’s point of view, the shift to digital and the arrival of multiple players have opened up several use-cases for meal vouchers, which were earlier a liability of sorts. 

“The utility of Sodexo was limited to supermarkets, largely, which is essentially the grocery space,” said Rohan Agarwal, engagement manager at RedSeer Consulting. "The main target segments of these vouchers are the young working professionals and the majority of them are singles who do not do grocery shopping regularly. For them, these cards often turned out to be investments which were not working well."

With the move to digital, Agarwal said, the same customers could now use Sodexo and other cards on food delivery platforms such as Swiggy. 

“If they were doing five meals a month on Swiggy earlier, there's definitely chances of this increasing to 7 to 10 now,” he added.

Where Sodexo stands

For wallet companies, their edge over Sodexo is that they offer the entire gamut of tax-saving instruments under one roof. 

For instance, Magic includes employee benefits such as reimbursements for food, fuel, medical leave, travel allowance, among others.

Paytm’s Food Wallet offers an interface where employees can see real-time balance and locate the nearest food outlet. It can be used at office cafeterias as well as at a range of online and physical merchants, including small standalone outlets. It also provides corporate employees with tax-saving benefits.

While Sodexo, run by Sodexo SVC India Pvt. Ltd, is well-entrenched and still the largest player in the market, other payment methods offering discounts could eat into its market share as their convenience could find favour with consumers.

But Sodexo is no pushover. It has global tie-ups with multiple corporates that will make it difficult for companies to dislodge it from the perch. 

In addition, Sodexo has deployed 100,000 unique points of acceptance across 1,500 cities in India. It also has physical cards loaded with money, which can be used for online payments on platforms such as Swiggy.

Market outlook

Some industry experts see limitations.

"The market is only as big as the salaried class and its growth is limited by that," said Harish HV, a former partner with consultancy firm Grant Thornton. "However, the salaried class forms the largest tax-paying group in the country."

He also feels the industry is still in flux. 

"The wallet model might find it challenging to take on WhatsApp if they integrate meal coupons," he said. "A lot of highly-paid salaried class will prefer UPI-based payments rather than a wallet." 

Instant messaging application WhatsApp is currently a beta version of its payment feature.

Ultimately, it appears that customers stand to gain the most.

“The arrival of more companies into this segment will increase the uptake of the cards by the employees at organisations and more and more companies will start offering these meal vouchers,” said Redseer's Agarwal. "With multiple players entering into this segment, it’s going to increase the competitiveness, partnerships and offers."