M-Wallet In India To Grow Three-Fold By 2019

by Sohini Bagchi    Nov 24, 2014

mobile wallet

When Apple entered into the mobile wallet space, experts predicted it would change the fortune of the mobile wallet (m-wallet) and mobile payments industry in India. True to their assumption, the m-wallet market, which includes money transfer, services related to banking transactions, value-added services such as shopping, ticketing, recharging and bill payments, and has been nascent until recently is fast picking up, and is estimated to grow over three-fold in the next five years.

According to a study by research and consultancy firm RNCOS, the current Indian market size for m-wallet stands at about Rs. 350 crore and is estimated to rise to Rs. 1,210 crore by 2019. The segment is projected to grow at a CAGR of around 30 per cent in the next five years from 2015-2019, the report says.

High growth potential

Researchers predict that the growth will be driven by increase in demand for smartphones, which is estimated to grow at a higher pace, and rising mobile Internet users, which has grown at 92 per cent in 2013. New and emerging market players will also drive growth is the segment.

Mobile wallet has a high capacity as an alternative to traditional and current payment systems in India. The growth observed in m-commerce sector in India has moved its payment systems to mobile devices, say researchers stating that any smartphone user can install m-wallet application in the handset and can create own log in account. They will get a permanent pin number for utilizing m-wallet services.

Some of the major m-wallet players are Airtel Money, mRupee, Vodafone m-Pesa, Oxigen Wallet, Paytm, Mobikwik and Idea Money. There will be more players in this segment, giving tough competition and thereby a fall in the prices and better service, predict researchers.

In such a scenario, higher working population engaged in banking and online purchasing of products, discounts offered by firms to attract customers in festive seasons for purchase through m-wallet and expansion of service portfolios by the companies will continue to be key growth engines in this segment.

The RNCOS study estimates that money transfer businesses, followed by recharge and bill payments and utilities areas will enjoy the maximum growth in this segment.

The holdbacks

Despite its promising future, experts believe that the mobile wallet segment is facing challenges in India. The study also notes that factors such as alternative money transfer channels, lack of awareness, stringent policies on restriction of cash-out facility, low margins and poor internet connectivity in many areas are holding back its growth.

“People do not understand the larger concept. Mobile wallet is a complex software, where multiple players can play,” technology evangelist Sam Pitroda told IANS in an interview. “I really wanted to create a leather wallet metaphor on mobile phone — one that gives all the functionalities I get in leather wallet. It has four phases – mobile banking, mobile payment, mobile commerce and mobile transaction,” he explained. His company C-Sam had developed a mobile money transaction platform in 2010, which he sold off to MasterCard later.

While the technology is used and present in some forms in some African nations as well as countries like Brazil, Bolivia, Costa Rica, and Singapore, Pitroda and several others believe the concept has not matured in India. It has huge potential but it will take another 10 years to pick up in India as the standards are not in place. There are complex issues of interoperability and security,” he added.

However, in India, telecom service providers like Vodafone India and Bharti Airtel have their individual mobile wallet platforms and they are trying their best to grab this opportunity.

In a recent article with TOI, Suresh Sethi, business head – M-Pesa, Vodafone India said, while this industry is still nascent, it offers exciting opportunity for innovations and experiments. “Our current offering has been created post extensive research, customer insights from our pilots. And, 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,” he said adding that tie-up with ICICI Bank makes it possible for us to make financial inclusion possible in remote areas.

Bharti Airtel too has been investing substantially in Airtel money to cater to the need of the customer. According to a source, the company is creating a state-of-the-art technology platform and training programs to educate the masses.

Growth to continue…

However, the potential for m-wallet in the country is huge. In India, nine out of 10 customers are looking for more mobile interactions with banks, telcos, retailers, utilities and other businesses, found an SAP study released last month, which stressed on the increased internet penetration in the country is driving consumers nearly two-third of the consumers to access internet on mobile at least once a day.

“We are seeing a maturing of the mobile payments market, as we move from a service that is driven by person-to-person payments to one that must tackle the challenges of the retail environment,” said Diarmuid Mallon, lead, Global Mobile Marketing Programs, SAP, which suggests that in addition to improving the payment experience, mobile wallet apps need to support a multitude of services such as loyalty and couponing.

There are however positive indications with more and more consumers being introduced to the concept for the first time and many companies are beginning to make their very first mobile-related investments in India. Experts believe that the payments industry is slowly approaching a tipping point and that mobile wallet would inevitably become a viable every day payment tool in the coming years.