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The Future of Mobile Wallets

The consumer will decide the fate of each payment instrument depending upon its user interface, convenience, use cases and most importantly security.

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Those of us who have lived through the demonetisation in the Indian economy in November 2016, will tell our children and grand-children about the shortage of cash, the long queues at banks and ATM machines and the feeling of helplessness at the inability to pay even for the smallest purchases as well as the need to preserve what little cash we had, due to the uncertainty looming ahead. However, there is another story that many of us will also identify with – the immediate transition to mobile wallets to facilitate payments, both small and big. Indeed, the use of wallets boomed so much post demonetisation that many of those firms suddenly wiped out the red in their balance sheet and became successes and investor darlings overnight.

Mobile wallets remove many inconveniences from the everyday transactions other than cash transactions. Storing both payment-related credentials (such as credit/debit card and bank account details) as well as non-payment-related information (such as loyalty cards or ticket information), mobile wallets provide a simple way to manage payments, track transactions, participate in loyalty programs, and most importantly, replace the need to carry around bulky plastic cards.

While pure-play digital wallets, such as PayTm and Mobikwik, had been operating before demonetisation, many digital wallets from banks and erstwhile digital payment facilitators were launched thereafter. To improve the value proposition of a mobile wallet offering, banks tried to replicate the approach of delivering a comprehensive range of financial and product services within a single digital interface. 

While e-wallets first started with offering basic services such as telecom recharge and bill payments and as payment options on most popular e-commerce portals, wallet companies have transitioned to creating an e-wallet payment acceptance infrastructure at physical retailers. Today, wallet platforms can be used to recharge mobile phone credit, pay utility bills, book a holiday, secure loans, buy entertainment tickets, travel on the metro or by a flight, and even trade gold.

The exponential growth in smartphone and mobile internet users in India, due to cheaper handsets and increasingly economical data plans, further fuelled the mobile wallets usage in the country. Wallets providers have simplified the transaction experience and offer value-added services (VAS) to drive sustained usage. Due to a sizeable customer base, wallets can potentially drive transaction volumes at merchants and, as a result, major e-commerce merchants in India have partnered with leading wallet players.

In the next five years, the Indian mobile wallet market is set to grow by 150% with transactions totalling $4.4 billion. 

Smartphones will become further feature-rich and cheaper while also containing the QR and contactless reading capabilities that mobile wallets require. 

The check-out process, whether in a physical or a digital transaction is extremely seamless with e-wallets. Hence, for e-wallet payments to take off, further acceptance by brick and mortar outlets is key, especially in tier III-VI towns and villages. 

Global players such as Samsung Pay, Google Pay, Paypal etc. have already made inroads in India, allowing merchants to accept payments from customers using both QR and NFC technology.

Another use of e-wallets, limited though it may be, is that it can be used to carry multiple types of currencies. Whether you use Euros, dollars, yen, or dinar, they still provide the same smooth buying experience. Especially for Indians going overseas, this is a godsend. 

There is going to be an increased focus on managing risk in the payments space.  Many wallet apps are taking significant strides to reduce the risk of security breaches through robust cyber-security frameworks; adding more personal layers of security, such as addition pin-codes, two-factor authentication, etc. are some such measures.

In addition, an entire generation of millennials is now entering the prime buying time of their lives. Indians in the age group of 18-35 now number 450 million, as per latest estimates by Kantar IMRB and Dialogue Factory – March 2019. Considering that a significant chunk of this group are digital savvy, it would not be far-fetched to infer that they will be ready and willing to forego cash entirely in favor of e-wallets. The onus will now be on the entire merchant eco-system to take the plunge and upgrade their point-of-sale technology and payment protocols to allow for digital transactions from this population. 

Overall in the e-wallets space, there is likely to be an uptick in acquisitions and consolidation this year. In 2019, it’s likely that a few top players will emerge, acquiring or eliminating mobile wallets along the way, as the PayU - Citrus Pay and PhonePe – Zopper Retail acquisitions proved recently. 

E-wallets saw total transaction value grow 210% in the November 2016 to March 2017 period, but this has since slowed to 123% in the April 2018 to February 2019 period. However, the e-wallets are introducing plethora of new use cases to enable them to grow. In the digital era, it is the survival of the best and the most agile. Platforms which have a longer term strategy, compelling use cases, cost effective and quick alternate know-your-customer (KYC) mechanism and deep pockets would continue to grow with the overall growth in digital payments. The key is to be a one-stop shop for all daily needs of the consumer. While Unified payments Interface (UPI) has grown exponentially, consumers in India from urban to rural have their own payment and transaction preferences. The consumer will decide the fate of each payment instrument depending upon its user interface, convenience, use cases and most importantly security.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Pranay Jhaveri

The author is Chief Business Officer, Euronet Services India

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