Will Digital Gold Platforms See More Takers? Increased internet penetration has given a fillip to buying and selling of gold online, facilitated by startups such as SafeGold, indiagold, MyGoldKart and a few others

The pandemic has led to a digital revolution in many sectors and sub-segments within these sectors. Digital gold is one such relatively new concept that is picking up fast in India. The ever-increasing internet penetration has led to buying and selling of gold online, facilitated by startups such as SafeGold, indiagold, MMTC-PAMP, MyGoldKart and few others.

Also riding this wave are well-known brands such as Tanishq, Kalyan Jewellers, among others, who have started offering digital gold as a new product to their customers and are also giving away festive discounts such as investment of just INR 100. "They are taking advantage of the convenience as well as the low ticket sizes. This widespread adoption has made digital gold more accessible, affordable and a convenient option for the new generation of Indian consumers," said Gaurav Mathur, MD of SafeGold, a platform that enables consumers, retail investors, bullion dealers, and jewelers to buy, sell, gift and accumulate 24K physical gold digitally.

Many of these startups, including SafeGold, offer Systematic Investment Plans (SIP), gold gifting options, exchange for jewelry and loans against digital gold balance. Users can take delivery of their vault stored gold, at any time or even use the gold balance to pay for physical ornaments, says SafeGold, which has partnered with banks, e-commerce platforms, payment applications and retail jewelers such as Axis Bank, Federal Bank, DBS, Airtel Payments Bank, Tanishq, Amazon Pay, PhonePe, Bajaj Finserv, Mobikwik etc. for the same.

Young investors are also using digital gold to diversify their investment portfolios. "Digitization of a fragmented sector that gold has remained until recently, driven by innovation, increased accessibility of digital solutions as a result of internet penetration, and trust, are driving the growth in the digital gold space," said Dirk van Quaquebeke, managing partner, BEENEXT, which has invested in SafeGold.

Further, gold is a familiar investment stream for Indians across generations and demographics. "Investment in gold has always been in the genesis of the Indian investor, digital gold has made this asset class accessible to a larger investor base. Several advantages of digital gold such as convenience, purity guarantee, saving on storage cost, liquidity and flexibility in ticket sizes are driving gold investors to Digital Gold which in turn is driving the growth of digital gold investing platforms," said Ankur Bansal, co-founder and director, BlackSoil.

Other than increased adoption and trust on internet-based products, there are few other reasons fueling the growth of these platforms. "Unattractive yields across traditional investment instruments coupled with easy access to knowledge about alternate investment options have encouraged people to try out newer products," explained Nitin Misra, co-founder, indiagold. indiagold offers three main products - doorstep gold loans, doorstep gold lockers & digital gold.

However, the younger population, majorly those under 35, seem to be more comfortable with digital gold. "Gold has typically been seen as an investment class which has been preferred by the older demographic, however, investments in digital gold have seen increasing participation from professionals in the age group of 25-35 years," added Bansal.

Factors Leading To Hesitancy

One of the reasons for hesitancy is a lack of awareness about the nitty-gritty of the products. Digital gold being a new concept, there are certain misconceptions surrounding it which makes customers hesitant to invest, claim the startup. "For example, some believe that gold purchased online is not pure gold or that when a user invests in digital gold, they do not physically own it. Both are not true. We offer 24K pure gold online, and every purchase, regardless of the amount, is stored in a secure and insured vault that the user can access at any time. The legal title to the gold is held in the customer's name once they've purchased it," said Mathur of SafeGold.

MyGoldKart is another platform launched three months ago, that deals in digital gold and silver and involves buying, selling, redeeming and gifting. Vidit Garg, director, MyGoldKart, feels that the only resistance or hesitancy for this phenomenon is that it is not regulated by the government which may affect the customers to even try buying digital gold from platforms like his.

In February this year, K Rajaraman, additional secretary, Department of Economic Affairs (DEA) in Finance Ministry, said that the government is in the process of deciding on the regulation of digital gold accumulation schemes and how consumers can be protected while at the same time ensuring the industry grows. He said the emerging facet of gold is digital gold, which is an unregulated space.

Hesitation arises because of a lack of awareness that the digital gold has actual physical gold backing it, which can be accessed through a seamless process, said Quaquebeke of BEENEXT. For instance, on MyGoldKart customers can buy digital gold starting from INR 1 and once they have invested in digital gold, IDBI Trusteeship ensures that an equivalent amount of physical gold is stored in his or her name in a safe vault with BRINKS, which makes exchange easier for customers.

"It took time for the market to build trust in the e-commerce industry in India. From the pre-cash-on-delivery days, the industry has now come a long way in the country due to increased awareness and trust. As more trust and awareness gets built into the sector, we believe digital gold will also continue to grow," added Quaquebeke of BEENEXT.

Creating Awareness

Startups in the space have started educating the stakeholders, including consumers and the ecosystem players such as SMBs or jewelers. Experts believe they are doing it in two ways. "One, by enabling SMBs to tap into the growth of digital platforms. Second, by allowing consumers to buy gold across multiple channels. Digital gold is the modern and secure way of investing in gold compared to traditional ways of securing it in physical form in one's home," said Quaquebeke.

Indiagold's Misra feels there is no one silver bullet to remove hesitation. "It's a tried & tested combination of customer communication, marketing messaging, product onboarding, product usage & customer support," he said.

Presently the industry is also in talks with the government to regulate this industry so that customers will be able to invest in digital gold without any hesitation and reluctance. "We believe that as the segment grows and there is more information available around the product, we will see even more customers across demographics increasingly investing in digital gold and reaping its benefits," said Gaurav Mathur, MD of SafeGold.