Mobile Wallet Adoption Life-Cycle in India

1. Introduction

There is no denying that India is going digital rapidly and so are its payment methods.

Following exhibits from “Digital Payments 2020” reveal the same scenario.

Mobile wallets are the accounts that one can make on several mobile wallet service provider’s platform (shown in the following figure). Money is transferred into these account using debit/credit card or net banking and then, transactions are done using these wallets via smartphone or computer.

Source: https://www.techinasia.com/talk/mobile-wallet-wars-india

Above three categories of wallets shown can be better explained as follows:

Source : YOURSTORY

Master Circular — Policy Guidelines on Issuance and Operation of Pre-paid Payment Instruments in India, has been issued by Reserve Bank of India, which governs the legal aspects of the mobile payments in India.

2. Where does Mobile Wallet lie in product adoption curve?

In India, the Mobile Wallet lies in the Early Majority phase of the product adoption life-cycle curve.

3. Profiles of adopters

Source : https://medium.freecodecamp.org/medium-isn-t-just-startup-people-30a3752b09b9

Above figure explains the product adoption life cycle.

Innovators: People who are the first to try new products. In the Indian mobile wallet context, tech-savvy young Indians in the age group of 20 to 30, who are ready to take risk with the new technology and are staying in big metros enjoying good internet connectivity form this group.

Early Adopters: Middle to high income working professionals with good exposure to technology, form this group for mobile wallets in India. They are ready to use minimum viable product and work as evangelist for the product. They are the ones who introduce the product to early majority. The people in this group use mobile wallet for day to day use, e-commerce and daily transactions. These are also the people staying big metros as well as several tier-1 cities in India.

Early Majority: They are the people who belong to the tier-2/3 cities and smaller towns in India. They will accept the product once it shows some promise. Mobile wallet, with easy user interface and efficient customer support services would appeal to this group. Security will also be a matter of concern for this group.

Late Majority: People in this group will start using mobile wallet, once it has been able to demonstrate its usage and establish trust. People in the age group of 40+ in tier 2/3 and smaller towns in India would form this group. they are not willing to take risk of any sort.

Laggards: People in this group are resistant to any change in the status quo. They will only migrate to a mobile wallet if all the conventional option become too cumbersome to use as compared to mobile wallet. Mobile wallet has to become ubiquitous for this group of people to adopt it.

4. Factors and challenges which affected rate of mobile wallet adoption

Challenges 1. Lack of Interoperability : As of now, it isn’t possible to transfer cash from one wallet to the other due to restrictions by banks. 2. Bank Charges: The charges to withdraw money from your wallet is as high as 2%. 3. No Interest: Money transferred to the wallets doesn’t earn interest 4. Legal Restrictions: The current withdrawal restrictions for moving money from wallet to bank is capped at Rs. 25,000. 5. Lack of good Internet: This is a pertinent problem in India. 4G access is limited and 3G is also not as good. However the situation has been improving recently.

Positive Factors 1. Access to large customer base : With increasing mobile internet penetration the user base for mobile wallet is going to be huge. 2. Progressive Regulatory Environments : The Indian regulatory environment is intending to promote digital payments. For example KYC relaxation for small transactions, NCPI launched Unified Payment Interface and Bharat Bill Payment System (BBPS). 3. Technology Improvement : Technology is improving fast and making mobile wallets more conducive. Smartphone penetration, ubiquitous connectivity, biometrics, cloud computing etc are going to help. 4. Digital Identity : Using Aadhar for online authentication for KYC data helps speedy on-boarding of the customer.

Along with all these factors, there was also a sudden shock in the industry due to demonetization last year which propelled the growth of digital wallets further.

5. Growth and product adoption comparison with other payment methods

Growth According to the data released by RBI, mobile wallets grew 24.5% month on month and 575.31% year on year in terms of number of transactions and 5.8% month on month and 307% year on year in terms of amount transacted.

Source : MEDIANAMA

Morgan Stanley estimates that India’s addressable digital consumer payment market to be worth $350–400 billion in 2017. (Source)

Mobile Wallet Adoption in comparison to PPI (Prepaid Payment Instruments) cards

For the month ending March 2017, number of transactions using Prepaid Payment Instruments — essentially Mobile Wallets and PPI Cards grew by 22% as compared to February 2017, and 375% compared to March 2016, according to data from the Reserve Bank of India. The amount transacted grew 11% month on month and 78% year on year. (Source)

Hence it is clear from the data that the rate of growth of mobile wallet is much bigger than the rate of growth of PPI cards.

6. Growth hacks

Growth hacks for Mobile wallets in India could be

1. Easy to use Wallet app: It should be intuitive, include local languages and involve technology like biometric for authentication.

2. Universal Reach : It should be universally available and accepted via mobile app.

3. Inter-Operability : It should inter-operable with other wallets in order to grow exponentially

4. High on Security Aspects : Wallet companies should be able to gain customer’s trust in security aspect of the wallet.

5. Reduce Barrier for Customer : Charge merchants, not customers.

6. Mine Customer data for additional revenue streams

7. Exploit Next generation Technologies

7. Summary

The future for the mobile wallet is bright in India. The regulatory framework is supportive, the infrastructure (internet and smartphones) is getting better, technologies are improving, the ecosystem is developing and user-base is increasing. India still has a lot of potential to grow its mobile wallet segment due to its huge population. A report titled “Digital Payments 2020” by google and BCG US$500 Billion digital payment ecosystem in India, a large chunk of which shall be driven by mobile wallet industry. Although there are challenges, but opportunities are humongous.

References 1. Digital Payments 2020 by BCG and Google 2. PCM, Mobile Wallets Vol 3. Issue 4 | April 2017

Also published at Medium by Ambuj Mishra