M-wallets may make hard currency history

Consumers are opting for digital payments for not just e-commerce and auto rides but to make big-ticket purchases such as gold and motorbikes.

The rise of the smartphone as a payment tool is reflected in the brisk growth of mobile wallet transactions in the country, according to RBI data and the trend is only expected to grow with the introduction of unified payment interface and payment banks.

M-wallets have emerged as the most significant contributor in pushing cashless and electronic payments.

According to RBI data, m-wallets have already surpassed mobile banking in volume terms. For the year 2014-15, the volume of mobile banking transactions stood at 171.92 million, compared to 255 million m-wallet transactions. The number for credit card and debit card stood at 21.11 million and 553.45 million, respectively.

For the financial year ended March 2016, the volume of m-wallets transactions doubled for the April 2015-February 2016 period to over 550 million. According to research firm RNCOS, the market size for mobile wallets is expected to grow at a CAGR of 30 per cent from its current size of Rs.350 crore to Rs.1,210 crore by 2019.

“It won't be long until the physical cash that we depend on vanishes. Money will be invisible or virtual,” Suresh Sethi, Business Head, M-Pesa at Vodafone India said.

The growth in m-wallets is mainly a result of a simpler payment process for consumers and the increasing reach of smartphones and the Internet. A mobile wallet is the digital equivalent of a physical wallet where one can store money and then use it for payments or transferring money.

“The bulk of out wallet transactions are done under 10 seconds. In comparison, payment gateway transaction may take anywhere up to 100-180 seconds to process,” said Govind Rajan, Chief Operating Officer, FreeCharge.

FreeCharge currently has one million transactions daily on its platform and aims to push it to seven million a day by the end of this financial year.

“People are using wallets for all sorts of things… right from a Rs.5 payment to up to Rs.8 lakh purchases. They buy gold jewellery on Dhanteras… motorcycles, air tickets, taxis, recharge, DTH bill payment, electricity payment, university fees… They are doing practically everything using their wallets,” Nitin Misra, Vice President at Paytm said.

Paytm is currently the leader in the segment has about 125 million wallet users. It sees about 60 million monthly transactions on its platform.

Likewise, Upasana Taku, Cofounder at MobiKwik said: “In 2014, mobile recharge was the dominant player for MobiKwik accounting for 55 per cent of our business. In 2015, we introduced for the first time mobile payments to brick-and-mortar stores with exclusive tie ups with the likes of Big Bazaar, Barista, WHSmith India, Archies, etc. By the end of 2015, payments at online and offline stores really took off. It now makes up for 40 per cent of our total GMV and is already the single largest contributor to business.”

In the last three months, MobiKwik, which has over 30 million users, has seen average spend grow from Rs.500 to around Rs.1,000 on its platform.

Higher spends

Ms. Taku said currently most wallets have a monthly transaction limit of Rs.10,000 but with the introduction of KYC norms, many users are now increasing their wallet limit to Rs.1,00,000 and starting to make higher spends every month.

“For example, users today pay even as much as Rs.10,000 to book a Tata Value Home. We expect to see many more making such high-ticket purchases.”

Interestingly, a report by Nielson points out that the penetration of mobile payment apps among users is similar across towns of all sizes with 60 per cent of people in large town (with over 10 lakh population) and 58 per cent in smaller towns using the facility. However, usage is higher among small town users, with these consumers spending 109 minutes a month on such app against 91 minutes in bigger towns.

Increased smartphone penetration due to lower handset prices has led to a surge in adoption of wallets, said Mr Sethi, adding that while almost half of e-commerce payments are happening through the mobile. The adoption of wallets is the highest in 18-30 age group as 50 per cent of smartphone users fall in this age bracket, he said. Vodafone, which also offers M-pesa in many African countries, said the current usage in India was mostly centred on money transfer unlike in Africa where storage of cash is preferred.

“Customers in India pre-dominantly use our service to transfer money, followed by recharges and for utility bill payments. M-pesa covers about 70 per cent of the electricity billers.

Money transfer contributes to over 65 per cent of the overall transactions, catering largely to the migrant population enabling them to transfer money to their families back in the villages,” Mr. Sethi said.

Significantly, as per an IAMAI-IMRB’s Digital Commerce 2015 Report, only about eight per cent of buyers pay online using m-wallets, while 21 per cent prefer to pay using debit card, 16 per cent prefer credit cards and majority 45 per cent prefer cash-on-delivery mode of payment.

Integration issue

One of the reasons for the lower usage of m-wallets for ecommerce payment currently, Mr. Rajan said, was that all e-commerce players have not integrated mobile wallets as a mode of payment.Mr. Misra from Paytm said at their e-commerce website, they are seeing over 95 per cent transactions through the Paytm wallet.

While on one hand major marketplaces such as Snapdeal, Flipkart and Amazon are trying to build a foothold in the m-wallet segment, players such as Paytm have made inroads into being an e-commerce marketplace.

In such as scenario it is possible that players encourage the use of their own wallets on their platforms.

“Captive wallets that serve only their platform have a huge disadvantage; not everyone will accept them. Neither will they be able to focus on building a strong merchant network. Take for example Ola Money.

“Sure it's used on Ola, but outside Ola who uses Ola Money for payments? For Flipkart and Amazon the frequency of usage by a user is even lower than Ola. So why would a user park money in a wallet, which he or she would use only once in 1-2 months, remains to be seen,” Ms. Taku reasons.

Talking about the growth of the segment, Mr. Sethi said given the scale of mobile users in India, mobile banking has the potential to emerge as a game changer in terms of costs, convenience and speed of reach.

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Printable version | Apr 11, 2021 8:32:11 AM |

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