‘Buy through this XYZ digital wallet and get Rs. 50 cashback on every ticket booked,’
I recently got this email from PVR Cinema’s which most of us do. I usually receive it a few times a week and it keeps me informed about the latest movies. Near the bottom are the various offers which now are dominated by Mobile Wallets. All of them vying for your attention and begging to pay part of the ticket price, on your behalf. And all I have to do is make the transaction, through them. The Mobile Wallet space in India, just like this email has seen the density of brands in the market, offering mobile wallet services, soar. Now we have a never exhausting list of applications which can offer me discounts, cash-backs, vouchers and coupon codes.Digital Wallets or Mobile wallets started with mobile recharges but have now moved up the value chain and provide a whole host of other services like, shopping, paying for food and cabs and even booking a new home.
Currently the RBI regulation stipulates a fund transfer limit of Rs. 10,000 for a non-verified user and Rs. 1,00,000 for a verified user. There are 4 types of mobile wallets. Payments Bank licenses are only granted if the companies meet certain conditions stipulated by RBI such as a minimum paid up capital of Rs. 100 Crores. There can be a partnership between the vendor and a commercial bank. All in all, 11 licenses were granted in August 2015.
So now we have unlimited options when it comes to who to choose and why. Let’s talk about a few of them. We have seen mobile wallets segregated by revenue or funding but there are other ways to categorise the players in the market.
There are some which are either owned or backed by banks since mobile wallets as a financial service has a pretty direct plug-in to their existing infrastructure. Than there are the telecom companies who want a piece of this pie as well, with every player in the market have their own product to offer. And than we discuss the independent players with whom the industry started but we are not sure whether they will be there till the end.
Telecom operated Mobile Wallets
Basically every major telecom service provider in India has a Mobile Wallet as part of its product portfolio. Since the one of the initial services offered by mobile wallets were mobile recharges, it was an expected development.
Airtel which was one of the first movers in the market had tried a joint venture with State Bank of India, way back in 2011. They got the Payments Bank license from RBI in August 2015 and started Airtel Money in a joint venture with Kotak Mahindra Bank. Right along with them Reliance Jio was also granted a Payments Bank license with State Bank of India. Idea also got their license for Idea Money with their partner, Axis Bank. Vodafone has m-Pesa which is a major player in the market along with TATA Docomo who have mRupee.
It makes sense for Telecom players to be involved in mobile wallet and payment solutions. This is yet another value add and can be a diffrentiator for the offerings presented by each player. Thus this a rather successful move towards creating a self sufficient ecosystem. This would definitely help in improving customer loyalty as well as improve ARPU (Average Revenue Per User)
Wallets by Banks
For financial institutions and banks, it is a natural transition for them to adapt their services to the changing needs of their customers. We have most major banks in the Indian market, either buying into or developing mobile wallets for their customers. We have ICICI Bank launching ICICI Pockets in February 2015, HDFC with Chillr, LIME and PingPay by Axis Bank and one of the late entrants, State Bank of India launched State Bank Buddy launched on 18th August 2015.
Banks have seen various cycles in which they had to completely overhaul their business model and investment plans based on the changing needs of their users. The first cycle saw the increase in the number of bank branches in the country. It was a time where there was direct contact between the customer and the bank. The 2nd cycle saw the growth of ATM’s to reduce capital investments and increase reach in a cost effective manner. 3rd cycle saw internet banking infrastructure being developed along with mobile apps which complimented the changing user behaviour leading to a massive reduction in capital investments. And now we are in the 4th cycle where the whole banking infrastructure has now moved to mobile with direct interaction between the the seller, the buyer and the bank. Also, there is an additional option of re-charging your mobile wallets by depositing cash at the local kirana stores and have the money transferred to the wallet
Through this enhanced data availability, up-selling and cross-selling based on improved targeting can be turned into a major contributor to increasing revenue. Add a few 3rd party members and you have alternate revenue streams. This has a major additional advantages for the banks. A more comprehensive user personality will now be created with new data points available on the user’s spending habits.
This is where things get really interesting. We have bootstrapped mobile wallets like Ruplee which is bootstrapping right now to Paytm which has raised massive investments. Other’s like Freecharge have been bought over. However there are plenty of up and comers in the market. Recently Paytm and Oxigen wallet spent millions of dollars in marketing campaigns along with Mobikwik which ceased their marketing activities somewhere before Diwali. We should not forget one of the very early players, which was Nokia which started Nokia money and laid the groundwork and lead the fight to improve
Financial technology start-ups have seen the most activity in recent months. Since most of the obvious business models like e-commerce, cabs, food delivery etc were the first one’s to see lot’s of players and these industries are in the consolidation phase now with many players like Groupon, a daily deals site exiting and TinyOwl laying off staff and shrinking operations.
Paytm is the exclusive wallet service for RoomsTonite, exclusive payment platform for Uber and even pay for Metro rides and already claims to crossed the 100 million user base. While Mobikwik is the wallet of choice for IRCTC tickets, Big Bazaar and even loans
Even if the mobile wallet market in India has huge potential and is growing at an incredible rate with great strides made in changing user behavior and habits while improving trust and faith in the product. However the players and the industry as a whole are facing major issues.
User verification or KYC which is a huge headache for every player in the market
Infrastructure issues such as lack of connectivity which causes payments being stuck and lost due to crappy mobile network.
Merchant education and integration of payments systems which is a huge challenge due to lack of consistency in the software used.
User behaviour is and will remain to be a major barrier with dependence on cash rather than a wallet.
Government policy is a major issue in India is almost every industry and its the same with mobile wallets as well.
And last but not the least is when the user does not have a bank account.
The saying “When the going get’s tough, the tough get going” applies in this case too.
We have Paytm creating KYC centers along with investing in a network of agents who can do the KYC verification for them. m-Pesa has 95,000 agents across the country to educate and enroll users. Mobikwik sends agents for verification to your doorstep as well. Some players are also working on integrating Aadhar data in their structure.For modifying user behavior, ease of use and also to deal with those who do not have bank accounts, their are players who collect cash from your doorstep but also provide cash collection services at the local kirana stores such as m-Pesa and PaytmTo deal with Infrastructure issues, the mobile wallet players have optimised their apps to such an extent, that the apps manage to run even on EDGE networks (Remember those blue Reliance phones). State Bank of India is making their app operable with feature phones.
Paytm also said “We wish to tie-up with organised retail partners, your local kirana shops and create app-cash points. So these merchants will accept Paytm payments, but also give you top-ups and in some cases do the eKYC as well. The idea is to drive up our offline merchant payment points as well. We plan to have 50,000 of these by the end of the year,”
It will be rather interesting to see who will survive this consolidation phase. The problem will arise when the funding runs out and all these mobile wallets will have to depend on their own profits to finance further expansion and achieve scale. Currently the players are subsidising the user while burning VC cash with the whole industry hoping that they reach the critical mass before running out of funds and than move to the next stage of improving revenue per user.
We have fingers crossed but for now, let’s order food at half the price, enjoy free movie tickets, hail cheap cabs and get cashbacks on utility bills.