- Mobile Wallets Adoption in India
As per several market research studies, the digital payment market in India is forecasted to grow at CAGR of ~60% from 2017–2023. Eased regulatory norms, improvement in telecom connectivity and declining prices of handsets has pushed the rapid adoption of smartphones in India and country is estimated to have 530 million smartphone users by 2018. Therefore, Indian government’s push for digital transformation and cashless economy post demonetization has thrown a big opportunity for mobile wallets. From mere being used by internet enthusiasts to now by small vendors in a rural part of India, mobile wallets have become as handy as cash.
Mobile wallets adoption since 2014 has been very encouraging among consumers and merchants, given their extended facilities of mobile recharges, e-commerce transactions, utility bills payments, safety and convenience of making and accepting payments. The rise of PayTM, Freecharge, MobiKwik etc. gave an ecosystem to other existing players to switch to mobile wallets as an additional mode of doing transactions. We can think of Airtel Money, OlaMoney, and now even few banks are also coming up with their mobile wallet systems. Also, thanks to schemes like Pradhan Mantri Jan Dhan Yozna, where the mass opening of bank accounts even has smoothened the ride for mobile wallet companies which now enjoy the large subscriber base.
Let’s understand what mobile wallets are and why are they or will be preferred over other modes of either making or receiving payment.
What is a mobile wallet?
Mobile wallet is a facility or an app on your smartphone which carries your credit or debit card details for handy transactions either online or offline. There are four types of mobile wallets available in India i.e. open, semi-open, semi-closed, and closed.
Open wallets are operated by banks and apart from buying goods and services, they allow withdrawal and fund transfer too e.g. m-pesa by Vodafone with ICICI bank.
Semi-open wallets allow transactions by having a contract between the merchant and the mobile wallet company e.g. gift cards by banks.
Semi-closed wallets e.g. PayTM, FreeCharge, MobiKwik, Oxigen etc. does not allow cash withdrawal and allows usage only at contracted merchants. They also allow direct transfer to another wallet for usage.
Closed wallets are issued by e-commerce companies, where a certain amount of money is locked with the merchant in case of a cancellation or return of the order. They do not permit cash withdrawal or redemption e.g. flipkart.com, jabong.com, and makemytrip.com.
Why are they preferred and adopted faster?
Mobile wallets are preferred by consumers and merchants as they offer safety, convenience and cost benefits. For example, for consumers, they offer heavy discounts, cash-back benefits, and convenience at large. On another hand, cost savings to merchants by eliminating the need for POS terminals which may not be economically viable for small businesses.
Mobile wallets offers digital identity, digital value, and digital authentication to access low cost financial services.
Where most of credit or debit cards charge annual fees, mobile wallets differentiated themselves by offering free services. Also, as per RBI guidelines, mobile wallets synchronization with Aadhaar-linked accounts is convenient and safe to consumers instead carrying their physical cards with a risk of theft or misuse.
Mobile Wallet’s Adoption Curve & Consumer Profiles
Now, let’s understand how mobile wallets are adopted among consumers, what stage are they at and what lies ahead?
Early Market Stage
Innovators make ~2.5% of the total market. This segment mainly includes tech enthusiasts including bloggers. Though it’s difficult to group them by age, they are mainly from college going to corporate professionals passionately driven by technology, and living in the metro cities. This segment included users of an app like PayTM for recharging their mobile phones initially.
Early Adopters, contributes to ~13.5% and makes it a significantly important segment to set the tone of the product. They are evangelists who determine the usability and sustainability of the product in the market. They majorly reside in the urban areas, have a love for technology and prefers to become an ambassador for the product in their circle. Again, they can be from college going to corporate professionals.
Early Majority contributes to a heavy segment of~34% who follow early adopters footsteps.
Late Majority too contributes ~34% and are a set of mature users who adopt the product when its settled in the market and becomes a proven success. They are also deal seekers.
Laggards are risk averse set of consumers who resist to change or not motivated by technology. They are mainly old age consumers who prefer to stick to their old age way of doing things instead.
Among the five stages, from early adoption to early majority, products faces
Chasm where product hits a wall in terms of sales because, while the early adopters are satisfied with a product with minimal features, the early majority want something that is a significant step up from their current market options. They want a product that solves all their pain points; they tend not to show any interest in a product that doesn’t meet all their expectations.
PayTM, took demonetization drive as an opportunity and offered consumers and merchant to deposit, transfer and accept payments through their app. They reached out to rural parts of India quickly and exponentially expanded their user base to 270 Million by late 2017. Its competitors struggled but catching up slowly. Therefore, we can conclude that mobile wallets are currently in early majority stage on the product adoption curve but moving steadily towards late majority following evolving legal, financial and regulatory compliance in India.
However, given rapidly growing smartphone user base, mobile wallets are still facing challenges in India i.e.
Digital wallet companies in India that have acquired a large customer base are building an acceptance platform by impanelling merchants to accept payments; however; this obstructs the principle of interoperability.
Areas of poor connectivity pose another challenge where transactions often fail or timeout hence poor customer experience. Another challenge can be low digital literacy among consumers especially in rural areas and their inability and comfort with technology.
Given the pace at which Indian economy is growing, India is a market for today and tomorrow. Established mobile wallets in developed nations now settling in quickly in India due to its technological progression and promotion of entrepreneurship culture. The central bank, government, and other regulatory authorities are working hard to give an ecosystem to the digital payment system and making India a less informal economy. Therefore, mobile wallets are very likely to expand its wing in rural parts of India giving power to small vendors and shopkeepers and bringing transparency in the system.
- Date of publication:
- Tue, 02/13/2018 - 22:12
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