The Em Space Widens

Mohan Raj, 24, a BPO employee in Noida near Delhi, begins his day by paying for a taxi. He pays his electricity bill en route to work. Later, he buys lunch and recharges his mobile phone. In the evening, he books movie tickets and takes his friend to a cafe. Routine day, right? Except that Mohan did not even once use physical cash or his credit or debit card. He made all the payments using a mobile wallet. Another young media professional put it more bluntly: “Seriously. Do people still use credit cards anymore?” she asks, only semi-joking.

For people who have limited money and need small transactions—that’ll be an overwhelming  majority of the country—m-wallets are a no-brainer. Using these, one can keep money and can make payments online or at retail stores. A user has to charge the wallet by putting money in it, which can be done online through a credit or debit card or a bank transfer or through a physical outlet. Many feel the simplicity of this means it will soon overtake other forms of payment.

Led by the young and upwardly mobile, across India there is a conscious shift to m-wallets as people take to digital money. It’s changing the way people make payments, shop or pay their bills. It’s altering people’s habits of carrying loose cash to carrying money in digital wallets tucked inside mobile phones which can be flashed anywhere and everywhere or online to buy that book or a pizza or to transfer money to a relative. “People always need to buy things and they may forget their wallet, but no one forgets their mobile phone,” says the owner of a large retail store in Noida.

The m-wallet has already become the digital currency of choice for utility bills like gas and electricity and for mobile phone and DTH recharge. In recent months, however, the m-wallet has gained currency with physical retail outlets as well where everyday merchandise is bought. Mobile wallet operators feel that this is just the beginning and the real explosion in growth is yet to happen. Says Nitin Gupta, CEO and founder, PayU Money, “At the moment, it is mostly in low value transactions. There will be many innovations which will realise its true potential. And that will happen soon.”

The overall mobile wallet market in India is expected to grow three times in the next five years. According to a study by research firm RNCOS, the market size for mobile wallets in India is expected to grow by a CAGR of 30 per cent from its current size of Rs 350 crore to Rs 1,210 crore by 2019.

That’s why there is a rush among mobile wallet players to sign up with retail outlets, restaurants and neighbourhood stores to enable them to accept mobile wallets instead of real money. Paytm, the biggest player among mobile wallets, is on a retail push and is signing up retail outlets in a hurry. Others like Mobikwik have tied up with big retailers like the Future Group. There is also a move by players to sign up with neighbourhood grocery shops to make them mobile wallet-enabled. All leading players feel this is where the future of m-wallets lies.

Graphic by Prashant Chaudhary

Although m-wallets have been around for about 4-5 years, the noticeable shift happened in the last year-and-a-half. Explains Jitendra Gupta, MD, Citrus Pay, one of the leading mobile wallets, “A year back, desktops accounted for 80 per cent of transactions while mobiles were at 20 per cent. Today, mobiles have a share of 60 per cent while desktop is going down.”

The move towards mobile wallets is quite pronounced even against traditional payment instruments like debit and credit cards. According to RBI data, there are about 21 million credit cards as of 2015. Against this, Paytm alone has about 105 million registered wallets and sees 75 million transactions a month, far more than what credit cards see. Other players—Mobikwik, Citrus Pay, Oxigen, PayU Money—have smaller but fast- growing numbers. In fact, mobile wallets are catching up even with the 441 million debit cards issued by the banks to date. M-wallets are also adding merchants with every passing day.

Most wallet players harp on the convenience factor of using the mobile wallets. Says Nitin Mishra, VP, Paytm, “The convenience of a mobile wallet can be very addictive over a period of time. As against 6-7 steps in a credit card, this is a one-click payment.” Also mobile wallet transfers are fast and take just 5-6 seconds to take money from one mobile to another.

Security is the other aspect that wallet operators harp about. While credit and debit cards have the danger of being cloned or copied and are always under the danger of online fraud, mobile wallets are secure and a user’s exposure is limited. Says Saket Agarwal, CEO, SpiceMudra, another mobile wallet operator, “In a mobile wallet, your risk is limited to only what you have in your wallet.” On an average, despite the upper limit for a mobile wallet being Rs 10,000, people mostly put in a few hundred rupees.

There are issues, of course. “The only problem with mobile wallets is there are too many players—from independent players to banks to mobile companies— and a retailer has to open wallets for each one. The low limits in mobile wallets is also a limiting factor for their use,” says Kumar Rajagopalan, CEO, Retailers Ass­ociation of India. That said, by and large retailers have welcomed m-wallets.

A very important element in mobile wallets’ success is financial inclusion. There is a whole class of migrant population, who go to other states to earn a living. An overwhelming majority of them do not have bank accounts or any means to transfer money back home. Most of them have mobile phones though and are fast becoming users of mobile wallets to transfer small sums of money. Says Agarwal, “Given the population and the digital divide, there will be a huge requirement to serve the rural side of people who have no other means to send their money to their families.”

And that has become one of the largest functions of the m-wallet. Vodafone’s MPesa for instance, has 95,000 outlets of which 60 per cent are in rural areas and cater to money transfer from bigger cities apart from acting as an engine for the government’s subsidy distribution. Sta­rting from a pilot in Jharkhand, MPesa now operates with eight state governments in this area. Says Pramod Saxena, founder and CMD, Oxigen, which first launched the concept of mobile wallets in India, “Financial inclusion is the biggest traction for mobile wallets and will be its single biggest use. Money transfer already accounts for 50 per cent of the volume of transactions on mobile wallets followed by mobile and DTH recharge with 35 per cent and bill payments accounting for the rest.”

Looking at its success and popularity, many new players are starting mobile wallets, including mobile operators. Leading players like Airtel, Vodafone and Idea already have wallets. Even leading banks have jumped in. Acc­ording to RBI data, close to Rs 19,000 crore worth of transactions were made from mobile phones in April 2015. With smartphones becoming more affordable and new technologies like 4G bringing high speed internet to mobiles, this can only go to the next level. Of course, the final frontier remains good ol’ cash.