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Digital Gold Deposits-Here to Stay?

Sep 27, 2022

People’s love for gold is no secret. A symbol of grandeur, prosperity, and luck, this yellow shiny metal is considered a safe and time-tested investment.  

50% of the world’s gold consumption is in the form of jewelry, 40% in investments, and 10% in industry. India, China, the United States, Turkey, Saudi Arabia, Russia, and the UAE are the biggest consumers of gold jewelry. Indian households in particular are known to have piled up around 24,000-25,000 tonnes of gold, valued at $1,135 billion, or equivalent to more than 40% of India’s nominal GDP (World Gold Council’s (WGC) report). This number has been on a steady rise no matter the price fluctuations. It is forecasted that India’s Gold Reserves will rise from 700 Tonnes in 2023 and 750 Tonnes in 2024 (Source: Survey conducted by Trading Economics). 

Surge in the usage of digital gold  

The charm of physical gold will never fade anywhere in the near future. But issues in accessibility (pandemic driven), purchase limits, security, and storage, triggered the need and rise of digital gold. Sovereign gold bonds and exchange-traded funds (ETFs) with set lock-in periods, liquidity factors, and availability (as they’re only available in tranches) concerns put digital gold in the spotlight. 

People started gravitating toward digital gold as a viable investment instrument. Digital gold deposit plans offered by banks and NBFCs began easing investment journeys for customers. They provided an incredibly practical and secure way to invest in gold.  

Today, consumers can start their savings journey with a minimum of 100 INR and add to their savings with the convenience of multiple apps and websites. Banks like SBI, HDFC, and Axis are among the most reputed gold deposit service providers, along with fintechs like Paytm, PhonePe, etc. They ensure customers can purchase or deposit the best digital gold from anywhere, anytime.  

The following are key advantages that digital gold offers.  

  • Simplicity: Digital gold investments provide the customer a simplified solution that allows them to ramp up their savings whenever and wherever possible. 
  • Safety: With digital gold, customers can store their purchased gold in top-of-the-class storage vaults that embed safety into the equation. 
  • Stable pricing: Digital gold prices are uniform across the country. 

Gold deposit schemes emerged as a safe haven for people to earn returns from their idle gold. RBI updated the Gold Monetization Scheme in 2022, to optimally mobilize gold held by households and institutions and enable its use for productive purposes. Inclusive of Revamped Gold Deposit Scheme (R-GDS) and Revamped Gold Metal Loan Scheme (R-GML), the upgrade holds a long-term vision of reducing India’s reliance on gold imports in the long run.  

What is a Gold Deposit Scheme (GDS)? 

Gold Deposit Scheme (GDS) is a kind of fixed deposit in gold. Customers can deposit their idle gold and enjoy up to 2.5% interest, tax benefits on earnings, and a lot more. The return will be a lump sum amount at the year-end or a monthly payment of a pre-determined amount, which can be redeemed in cash or gold. 

Banks and NBFCs offer several gold investment plans in the form of Exchange Traded Funds (ETFs), Gold Monetisation Scheme (GMS), Gold Coin Scheme, physical gold coins and bars, Sovereign Gold Bonds (SGBs), and now digital gold. 

Banks lend the gold deposited with them to the jewelers for a certain period and charge interest at the rate of around 4-5%. So, the difference between interest earned from jewelers and interest given to gold depositing customers will be the bank’s profit. 

How do we enable gold deposits?  

Our gold deposit platform is built with the sole purpose of offering the most sought-after asset in a digital format. It is envisioned to solve the challenges that customers face in buying and saving gold assets. As a full-scale solution, our partner platform covers the aspects of user registration, onboarding, KYC process, and payment gateway integration up until the process of buying and selling. The platform offers an end-to-end flow that enhances and digitizes the customer experience. 

Banks and NBFCs can easily deploy signature gold investment solutions by harnessing the power of M2P’s Gold deposits API stack. We enable customers to buy 24K, 99.9 % pure gold by embedding convenient digital payment options, which in turn opens door to new revenue streams. 

Key highlights of M2P partner platform 

Seamless onboarding and integration 

Our API-driven gold deposits platform seamlessly onboards the customer with simple KYC verification. It enables the customer to initiate the buying process first for their preferred gold purchase. Then it directs them to the registration flow and profile creation. 

Buy process 

The customer is given the option of buying their desired gold in terms of weight (in grams) or amount (in rupees). A 5-minute timer for the live price feed is displayed to help the customer buy digital gold. As the next step, the customer can view an inclusive list of the purchase details that lists the gold rate, applicable GST (3%), corresponding gold weight, and the total purchase amount. Upon confirmation of these details, the payment cycle will be initiated. 

Sell process 

M2P’s gold deposit platform allows customers to sell vaulted gold at low ticket sizes, around the clock, at the tap of a button. On selecting the desired amount (in rupees) or weight (in grams) of gold, the customer will be directed to the sell verification screen, where the customer’s bank details get verified along with the penny drop process. On confirmation of the sale, the amount will be directly credited to the customer’s bank account and the customer’s gold balance will get updated in real-time. 

Transaction layer 

The gold deposit platform provides real-time reports and insights for customers to predict accurate and consolidated gold balances. With its end-to-end process across the payment ecosystem, the platform makes sure the transactions are recorded and verified for each buy/sell process of digital gold. This ensures customers have complete access and can view/download invoices of every purchase/sale transaction initiated via the partner’s platform at any time. 

M2P’s Gold Deposit Platform employs an API-driven technology stack to seamlessly integrate all the stakeholders to create an efficient and top-notch investment platform. If you want to roll out a gold deposits program for your customers, we’d love to work with you.  

Write to us at business@m2pfintech.com to get started! 

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