What started as convenience of payments a few years back, is slowly but gradually, turning out to be a revolution. We are talking about the mobile payments revolution, which from a mere recharge of Rs 10 or a bill payment has spawned into an economy of its own in no time.
With ever-increasing Internet and mobile penetration, the country is all set to witness a massive spurt in the adoption of digital payments in the coming years. Consider this: As per RBI data, the mobile wallet user base in India has even surpassed the total number of credit cards issued in the country. RBI data shows that till November 2015, around 22 million credit cards have been issued by 55 banks, while few estimates show there are more than 135 million wallet users in India. This clearly indicates the potential that mobile wallet companies hold in India.
A virtual wallet or a mobile wallet serves as a place to hold money online. One can make payments using the money stored in the wallet instead of using a credit card, debit card or net banking, which means that a bank account doesn’t need to be accessed. Once the money is in a wallet, one can use it to make payments for hosts of services. Mobile wallets allow users to instantly send money, pay utility bills, hail a cab, recharge mobiles, book movie tickets, and pay for offline shopping / purchases too.
Virtual Wallet in an Offline Store
Over the last one year, all the leading mobile wallet companies in India, including, Paytm, Mobikwik, Freecharge, PayU, Oxigen, Citrus among others, have garnered the huge market share by not just adding users on their platform but also by widening presence with offline tie-ups.
Offline biggies like Aditya Birla Group’s More, Shoppers Stop, Future Group’s Big Bazaar, Mother Dairy and various quick service restaurants (QSRs), including Domino’s, Cafe Coffee Day, McDonald’s, Pizza Hut, Beer Café, among others have started accepting mobile wallets in their physical stores and are even witnessing a shift towards the mobile wallets usage inside the stores.
Retailers are also looking for ways to embed loyalty capabilities in digital wallets. Many tie-ups between retailers and mobile wallets offer consumers more than just a convenient payment option. Cash-back offers and additional discounts are also part of the retail-cum-mobile-wallet game.
Recent studies show that mobile wallets with rewards automatically built in are all the persuasion millenials need to start using digital payment methods more.
“Customers find it hassle free and convenient to do cashless transactions via digital wallets. We have seen a lot of our customers moving to the e-wallet,” says VP – Business Operations, McDonald’s India – West & South, Ranjit Paliath, without sharing the number of consumers who use wallets in McDonald’s store.
McDonald’s tied up with Freecharge in January this year, and allows the services across all 240 restaurants in west and south India.
Just like McDonald’s, The Beer Cafe, India’s largest beer chain has also witnessed an uptick in the wallet users. While offline players usually partner with one wallet, beer Cafe has partnered with two — Paytm and Freecharge. And is all set to tie-up with Mobikwik soon.
“These three constitute 90 per cent of the mobile wallet share. And, just like most of the credit cards in India are spread between Visa, Mastercard and Amex, we feel that our guests should have the choice of their preferred wallet,” says Founder & CEO, The Beer Café, Rahul Singh, explaining the rationale behind using the three wallets.
Singh also feels that while e-wallets are largely being used for cab hailing, travel or movie bookings, restaurant segment can be the next big space where wallet can become a common sight.
“Eating out constitutes a large chunk of non-discretionary spend and we definitely see consumers proliferate the restaurant segment too, specially the QSR and Café chains which have a centralised enterprise level platform,” he says. All the beer cafe outlets have an enterprise level platform and therefore the mobile wallets are accepted across all its outlets.
Government as a Catalyst
While the smartphone and Internet penetration are driving this growth, one cannot neglect the initiatives undertaken by the Government to curb cash use in the system.
In March this year, the Union Cabinet cleared the implementation of a few short and long term measures to promote digital and card-based payments in the system. Some of the measures include withdrawal of surcharge, service charge or convenience fee on card and other digital transactions.
The Reserve Bank of India (RBI) has also allowed 11 payments banks and 10 small finance banks to open shop. Paytm, India’s largest mobile wallet, is one of them.
RBI also wants to make it cost-effective for banks to provide point of sale (PoS) terminals (for using credit and debit cards) at small merchant establishments. Reduction in PoS terminals can prove to be the biggest boost for cash less economy, taking even small merchants under its ambit, since majority of merchants currently are reluctant to take PoS terminals, as these are costly, take more time than cash payments and also make business owners accountable.
A report by Business Standard suggests, that there are 15 million retail shops in India but only 0.6 million have PoS terminals.
Acknowledging the Government’s role, Palith says, “While the sudden growth in the digital payments landscape in India has been driven to a great extent by the increased smartphone penetration, one cannot discount the catalytic effect other factors such as government initiatives – Digital India, improved infrastructure and enhanced services have had on the industry for e.g. Telecom operators now offering 3G and 4G services across more geographies at extremely affordable prices, giving a tangible boost to e-commerce businesses.”
Mobile Wallets – Frontrunner for a Cashless Economy?
India is largely a cash-happy nation. Credit card penetration in India is still quite low and continues to find resistance.While it may be too early to say whether wallets can pave way to cashless economy or not, they have definitely started to fill the gap with widespread acceptability.
“Today, at The Beer Café, 73 per cent of the entire consumer billing is being settled by credit card. This would not have been the case few years back when cash was considered the vital currency. Mobile wallet has the highest level of security and consumers don’t need to even carry their plastic cards or cash. As we have seen the physical need of going to a bank replaced with ATMs, we do see the mobile wallets disrupting the plastic cards,” asserts Singh.
“Plastic card companies are also innovating with touchless payment like airpay etc. Whether consumers prefer mobile wallets or the credit cards, one thing is for sure – it is going to be a cashless world,” he concludes.