July 04, 2020
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Just Tap For A Lighter Purse

Demonetisation, a pushy Centre, cheap phone data and e-commerce have spiked the use of mobile wallets

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Just Tap For A Lighter Purse
A customer pays through a mobile wallet in Delhi
Photograph by Tribhuvan Tiwari
Just Tap For A Lighter Purse

For mobile wallet company Mob­ikwik, the last few months have been extremely fulfilling. Their app download has increased by 200 per cent and traffic has grown a massive 100 times. This is not an isolated development. With the government pushing for a cashless India and clearing frontiers for digital payments, the post demonetisation mon­ths have seen mobile wallet companies and digital payment systems raking in the moolah. Most of them are seeing their numbers shoot up as people, by force or by choice, have adopted digital means to make payments.

Of all the payment methods available, mobile wallets have been the most popular, as it is one of the simplest ways of paying. Merchants have also aggressively gone digital. Since demonetisation, Mobikwik’s overall transaction numbers have increased 198 times; its offline tra­nsaction value has increased 4-5 times.

Of course, a major driving force behind the growth of mobile wallets in India is the increasing usage of mobile internet. This, too, got an enormous fillip when operators reduced their data charges due to cut-throat competition and the mom­entous advent of Reliance Jio. With India adding five million smartphones a month, these numbers are to bulge significantly.

Numbers of digital payers will go further north as the mobile wallet market in India is expected to grow three times in the next five years. Analysts are more hopeful. A study by Assocham and market research firm RNCOS says that the Indian mobile wallet market will grow by a CAGR (Com­pound annual growth rate) of 196 per cent between FY 2017 to FY 2022. It is exp­ected to grow from a current size of Rs 350-400 crore to over Rs 2,000 crore.

Even before demonetisation, the mob­ile wallet industry was growing  fast. In the last two years, mobile wallet tra­­­­nsactions rose five times, surpassing both credit and debit card transactions. This was driven by another huge impetus: mobile payments form the backbone of the e-commerce industry, which itself is growing at a swift pace thanks to the bur­­geoning smartphone and internet penetration. Today, most e-commerce deals happen through mobile phones.

Encouragingly for firms, mobile wallets are penetrating tier II and III cities. Says Bipin Preet Singh, founder and CEO, Mobikwik, “Mobile wallet usage is going from the top 100 cities to top 500 towns and cities; it is going to the real Bharat.”

The rapid growth of mobile wallets is visible from the fact that Mobikwik’s gross merchandise value (GMV) has dou­bled since November 2016. It is at $2 billion now; and is targeting $10 billion by year-end. Moreover, Mobikwik has doubled its GMV since November, with 20 million new customers added since Nov­ember (its net user base is 55 million). The firm has set its eyes upon 500 million users in the next 24-36 months.

Mobikwik shares the expanding pie with others. Market leader Paytm too has seen its numbers jump. Says Deepak Abbot, senior VP at Paytm, “We have not seen any slowdown in adoption of digital payments and mobile wallets following remonetisation.”

The company has seen 20 per cent higher volumes in March as compared to February this year. Paytm is seeing seven million transactions a day and 180-200 million transactions a month. It has a user base of 205 million, and is increasing at an average of two lakh users a day. It sees 3-6 million app inst­allations every month, with a merchant base that is increasing by 20,000-30,000 merchants a day. Currently, five million merchants accept Paytm payments. The company aims to take this up further to 10 million by the end of 2017.

Recently, the RBI and TRAI asked mob­­ile service providers to open up the Unstructured Supplementary Service Data (USSD) access, which allows mob­ile banking transactions and digital pay­­­­ments on basic feature mobile pho­­nes. This will help mobile wallets further.

A study by Assocham and RNCOS says that the Indian mobile wallet market will grow by a CAGR of 196 per cent between FY 2017 and FY 2022.

The second huge leap has been in the use of cards. In the demonetised period, debit card usage increased six-fold, acc­ording to data from National Payments Corporation of India (NPCI). Proactive measures by the government is behind it. Pramod Saxena, CMD of payment company Oxygen Services, says, “The merchant discount rate (MDR) for cards was very high, at 1.5-2 per cent, and that was a barrier. So merchants were unwilling to use it actively. Post demonetisation, the government has reduced MDR to 0.8 and subsequently to 0.4 per cent. This has increased usage.”

The low number of merchants accepting credit and debit cards was ano­ther problem. Though there are about 3.5-4 crore merchant establishments and shops in India, there are only 14 lakh Point of Sale (POS) terminals where these cards can be used. The bulk of these are in tier I and tier II cities, with few in tier III and IV towns. In the post demonetised months, the government pushed through 10 lakh more terminals, helping increased card usage. It plans to double the card acceptance infrastructure to boost card payments.

The government has also launched a number of other digital payment mec­hanisms which are also seeing good numbers. This includes the Unified Payment Interface (UPI) under the NPCI, Aadhaar Pay, and BHIM. Acc­ording to the NPCI, mobile payments have increased five times, ECS payments have doubled, Rupay payments have increased six-fold, while AEPS and e-commerce payments have both  increased threefold post demonetisation.

Now, companies are also jumping into the digital payments bandwagon. Last week, electronics giant Samsung laun­ched its own payment system, Samsung Pay, which will aggregate all services on one platform and allow users multiple payment modes through a single interface. Says Asim Warsi, Senior VP, Samsung, “We felt it would be important to look at the pay­­ment service for India adju­sted to the Indian context of payment. India was rapidly growing on wallets and debit cards and UPI. We designed the service accordingly.”

The government is also launching the Bharat QR code for payments. It is pla­nning a unified QR code which can be used by all companies and mobile wal­­lets who become its member. Its objective is to enable multiple company dig­­­ital payments from a single interface. Says A.P. Hota, MD and CEO, NPCI, “The government has a plan to increase digital transactions from the present 11-12 billion a year to 25 billion a year. We have to see how big a challenge it is.”

That does not look difficult, considering that the Centre has opened up multiple channels for digital payments and that new initiatives are drawing in even non-smartphone users into digital payments. The targets are steep, but with over 100 crore mobile users—a number proliferating in geom­etric progression—they may be ach­ieved much bef­ore their scheduled time.

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