Tech-savvy Indians shop with ‘cashless’ wallets

The digital wallet allows users to instantly send money, pay bills, recharge mobiles, book movie tickets, send physical and e-gifts both online and offline.— FILE PHOTO: AP

The digital wallet allows users to instantly send money, pay bills, recharge mobiles, book movie tickets, send physical and e-gifts both online and offline.— FILE PHOTO: AP  

Country heading for a cashless economy with a colossal change in the way netizens make their day-to-day transactions

aravandas, a restaurant owner in Kerala’s Palakkad town, would have a nightmare every time he leaves the cash box in someone’s custody and steps out to recharge his mobile phone. The young entrepreneur then decided to find a way out — he downloaded Paytm, a mobile wallet, on his smart phone, using which he now makes all his bill payments at the click of a button, from the comfort of his chair.

“Earlier, I had to rush to a recharge outlet for every top up. Now I can do it myself and sometimes even for my friends,” he says. Like Saravandas, there are many elsewhere, signifying a steady change in the mode of transactions being done in the country that is going digital and cashless.

E-payments and mobile wallets are getting more popular among the youth in the country. As these are gaining wider acceptance, a major concern of our financial regulator too is getting addressed — the Reserve Bank of India (RBI) has started working towards making India a cashless economy and to bring in accountability and transparency in each financial transaction.

Last week, the Union Cabinet cleared the implementation of a few short and long term measures to promote digital and card-based payments to curb cash use in the system. Some of the measures include withdrawal of surcharge, service charge or convenience fee on card and other digital transactions. With this, digital payment, which is already gaining traction, is expected to gain momentum.

Foreseeing this big opportunity, a bunch of youngsters has kick-started a movement by launching mobile wallets and is slowly changing the way Indians transact. A mobile wallet app is a virtual wallet where a registered customer can pre-load a certain amount of money with any service provider, which can be used for various bill payments and recharges. Broadly, there are four kinds of wallets in India - open, semi-open, semi-closed and closed.

The digital wallet allows users to instantly send money, pay bills, recharge mobiles, book movie tickets, send physical and e-gifts both online and offline.

Paytm, Mobikwik, Freecharge, PayU, Oxigen and Citrus are a few leading mobile wallet companies in India. While the leading players are talking about growing market share, many smaller ones too are entering the market to grab their pie.

Smartphone growth

So what is driving, enabling and creating the exponential growth opportunity in India? The major reason for this is the smart phone that enables internet penetration in to rural parts of India. Increasing government support is another catalyst.

Bipin Preet Singh, Founder & CEO at MobiKwik, a leading mobile wallet company that has a user base of more than 25 million people, says the growth of mobile wallet is directly related to adoption of the smart phone trend in the country.

“A major reason for the increase in wallets is the simple and convenient user interface as against the bank interface. Many users also feel wallet transactions are safer than credit card or net banking transactions,” adds Mr. Singh.

According to a recent report from TechSci Research titled ‘India Mobile Wallet Market Opportunities and Forecast, 2020’, the mobile wallet market in India is projected to reach $6.6 billion by 2020. As a testimony to the opportunity offered by the Indian mobile wallet, global investors are signing cheques worth millions of dollars for investing in these smart ventures. Mobikwik raised around $30 million from investors including Sequoia Capital, Tree Line Asia, American Express and Cisco. Chinese e-commerce major Alibaba Group and Ant Financial have invested more than $650 million in One97 Communications that runs Paytm wallet. Citrus Payment Solutions has also raised funds from Sequoia Capital and Ascent Capital.

In April last, e-commerce major Snapdeal had made one of the biggest acquisitions in the Indian e-commerce industry by buying wallet player Freecharge for about $400 million.

As the wallets allow a user to load cash from a very small amount to a maximum of Rs 10,000, the risk associated with the loss of money through transaction is minimal. Apart from this, the wallet companies provide high security standards for customers while transacting.

Recently, the RBI had issued certain guidelines that allow the users to increase their limit to Rs 1,00,000 based on a certain KYC verification.

The mobile wallet user base in India has even surpassed the total number of credit cards issued in the country. The RBI data shows that till November 2015, around 22 million credit cards have been issued by 55 banks, while a rough estimate shows there are more than 100 million wallet users in India.

In a bid to garner market share, almost all players are offering cash back and discounts, which can be used for another transaction. Some players even provide offline way of wallet balance top up. Mobikwik has its 'Cash Pickup' service in select cities that will facilitate cash to be directly added to MobiKwik wallet.

With this up tick in the number of users, there is a clear indication that the wallets have moved from the big cities to smaller towns. According to reports, the early adopters of wallets were in the northern and western parts of India, but due to the drop in smart phone prices and 3G tariffs, virtual wallets are growing pan India.

“Our focus really is on solving problems of payments and making payments frictionless. In today’s offline world, bill payment is a cumbersome process and as we solve those issues, more and more consumers will come up,” says Govind Rajan, Chief Operating Officer of Freecharge. The rapid growth in the user base of smaller players has prompted many major players like telecom companies and banks to enter this segment. India’s leading lenders - SBI and ICICI Bank, have launched wallets called SBI Buddy and Pockets respectively.

Leading private telecom operator Airtel too operates Airtel Money. PingPay, Payzapp, Idea Money and m-pesa are some of the wallets operated by telecom players and banks. Cab aggregator Ola has launched Ola Money, an independent wallet for mobile recharge and money transfers.

Diversifying business model

Apart from focusing on the core business, some of the players are diversifying their business. Paytm, which started with phone recharges and then extended to DTH and bill payments, has now entered the e-commerce and financial inclusion services.

In August, the Reserve Bank granted in-principle approval for Paytm and 10 other entities to set up payment banks in the country. The payment banks can accept deposits of up to Rs.1 lakh and also offer current and savings account deposits for its customers.

Paytm is expected to launch this service by June and media reports state that it is hiring a former RBI executive for the job of payment bank CEO.

“We are the largest wallet company in India and all our customers can become Paytm Bank customers too. The moment one they become a Paytm Bank customer, they can keep money up to Rs 100,000. We can extend a lot of financial services like credit and insurance. This means we will move from payments to financial services,” says Nitin Misra, Vice President – Paytm.

Aditya Birla Group’s food and grocery retail arm ‘More’ and Paytm have partnered to offer wallet to make payments for their food and grocery purchases across 500 stores in 137 cities. This clearly speaks of the new trend and opportunity that wallet players are aiming at. Most of the players are now looking at widening their base even in the offline retail segment. Mobile wallets that were initially used for bill payments and recharges are now being used for various other services. Going forward, mobile wallets would grow and metamorphosis to be a major tool for shopping. Another reason cited for the offline use of virtual wallet is that it is driven by cash. With the current level of card penetration and the government’s move to reduce cash in the system, virtual wallets may emerge as the preferred means for cashless payment.

different Types

OPEN WALLETS: The ones that allow you to buy good and services, withdraw cash at ATMs or banks and transfer funds; these services can only be jointly launched with a bank. Apart from the usual merchant payments, it also allows you to send money to any mobile number bank account. M-Pesa by Vodafone is an example.

SEMI-OPEN WALLETS: You can't withdraw cash or get it back. In this scenario, a customer has to spend what he loads. Airtel Money is a semi-open wallet, which allows you to transact with merchants having contract with Airtel.

CLOSED WALLETS: Quite popular with e-commerce companies, where a certain amount of money is locked with the merchant in case of a cancellation or return of the order, or gift cards.

SEMI-CLOSED WALLETS: These do not permit cash withdrawals or redemption, but allow you to buy goods and services from listed merchants and perform financial services at listed locations. Paytm is an example.

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