Product adoption lifecycle for Mobile wallets in India
The business-consumer relationship is swiftly becoming digital. From e-commerce platforms to robo-advisors, businesses are transforming the way they operate to meet the ever-changing needs of their clients and the increasing use of mobile phones and devices.
A mobile wallet is a virtual wallet that stores payment card information on a mobile device.
Mobile wallets are a convenient way for a user to make in-store payments and can be used at merchants listed with the mobile wallet service provider.
User Profile Analysis
The mobile wallet market in India is poised for significant growth as Indian consumers are increasingly turning away from cash and card, says leading data and analytics company GlobalData.
According to the 2017 Consumer Payments Insight Survey by the company, India is one of the top markets globally in terms of mobile wallet adoption with 55.4% survey respondents indicating that they have a mobile wallet and use it. India is followed by China and Denmark.
Paytm, PhonePe, Freecharge, MobiKwik, Google Pay, Amazon Pay and Airtel Money are some of the leading wallets in Indian market. Based on this data lets see the adoption life cycle of each products.
The graph is plotted based on the assumption that there will be 373.88 million smartphone users by 2019(TAM).
As you see, Paytm is leading the market with approximately 300 million users and is close to enter the Laggards persona. Paytm was founded in 2010 and overcame its early chasm by demonetisation. Now India is the leading market in world for mobile wallet.
Airtel Money had a solid user base, before they even started mobile wallet, as they are the leading telecom service provider. In 2016 they added the mobile wallet service and now they have a whopping 250 million users.
Out of all the wallets listed above, PhonePe is the youngest, founded on 2015. But being the youngest, they showed promising growth and have a solid user base of 100 million. Flipkart being their parent company, they won’t be shy of market expertise.
Except, Google Pay and FreeCharge, everyone else is past early adopters phase. Demonetisation played a crucial role in pushing the masses from the chasm period to early-majority. Companies were able to identify the opportunity and act upon it.
Product Benchmarking
According to India Mobile Wallet Market Size & Analysis, Forecast & Opportunities, 2018–2023, mobile wallet market registered whopping double digit value growth, with a CAGR of 67.10% during review period of 2013–17 despite headwinds like mandatory KYC. The market advanced on the back of rising digital awareness, increasing smartphone ownership coupled with surging internet penetration, and convenience associated with such services.
Post the implementation of demonetisation in November 2016, the use of digital payment methods in India received a major boost. According to the National Payments Corporation of India (NPCI), the value of the BHIM Unified Payments Interface (UPI) transactions skyrocketed to INR 1 Tn while the volume of transactions reached 913 Mn, up from a meagre 7 Mn in April 2017.
The adoption level in India is much higher compared to many of the developed markets such as the US and the UK, where consumers predominantly use cards. Mobile wallet transactions grew manifold in last five years, rising from INR24bn in 2013 to INR955bn in 2017, and will surpass INR1tn mark in early 2018.
One would imagine that this massive growth of digital payment methods would consequently lead to a decrease in the use of cash. However, in spite of all this, the cash in circulation as of June 22, 2018, was only 9.8% more than it was on June 23 in 2017. This indicates that even though there is a greater appetite for digital payments systems, the Indian economy continues to be heavily reliant on cash.
Mobile wallet has become a mainstream payment instrument in India. GlobalData’s survey shows that the share of cash or cheque (cash on delivery) in total e-commerce transaction value declined from 31% in 2013 to 16% in 2017, whereas the mobile wallet share jumped from just 7% to 29% during the same period. The usage of payment cards dropped from 38% to 32% during this period.
Industry Analysis
Factors affecting the rate of product adoption:
- Convenient payment option and pricing benefits (cashback/discounts), transaction fees is much lower compared to traditional card-based payment system.
- Rise of number of smartphone users is a major factor in product adoption.
Challenges for product adoption:
- The significant growth in the market has led to the mushrooming of mobile wallet operators, all gearing up to get a piece of the mobile wallet pie.
- To remain competitive, wallet providers are now looking beyond ‘just payments’ and focusing on value-added services. These wallets encompass additional services such as utility bill payments, mobile top-up, hotel/airlines bookings, buy entertainment tickets, and even gold purchases.
- While technologies are abundant, their penetration is lagging and while innovative startups that can reduce the cost burden on users are present, adequate support for their growth is scarce.
- Most of India’s mobile wallets may become non-operational by March, say payment industry executives as they fear companies will be unable to meet the central bank’s deadline to complete verification of all customers by the end of February 2019.
Growth Hack Analysis
The sector is experiencing an unprecedented jump in growth since November 2016, when the government demonetized high currency bills (Rs 500 and 1000) — which represented 86 percent of India’s cash in circulation. By February 2017, digital wallet companies had shown a growth of 271 percent for a total value of US$2.8 billion (Rs 191 crore).
Though the economic reform was a blessing, paytm which started as a recharge portal soon developed into a wallet and an ecommerce portal. So let’s assume, along with the blessing companies had its own growth hack. Focusing on value-added services were one of the hack they had in place.
Summary
Indian market embraced digital payment methods to survive the changing economic needs. That led to an exponential growth in the companies, leading to increased adoption and maturing themselves to ‘late majority’ persona in product adoption life cycle, skipping the chasm.
But still lot of overheads and challenges in terms of government regulations and technological penetrations. As they have a solid user base build, let's hope they solve it.
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