India’s evolving mobile wallet industry – targeting neighborhood stores

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In recent times, India has witnessed an exponential growth in the area of digital payments. Mobile payments form a meagre part of the total digital payments industry. However, with massive smartphone user base of 250 million and increasing mobile internet proliferation, mobile payments are estimated to be over US$ 4 billion and growing exponentially. Also government flagship initiatives such as Digital India and financial inclusion of significant number of unbanked families (more than 145 million) are expected to pave way for growth in mobile wallet providers that will eventually emerge as mini banking institutions.

Presently, the mobile wallet provides services comprise money transfer and additional services related to banking transactions. Other value added services provided by the mobile wallets include shopping, ticketing, recharging, and bill payments.
Furthermore, to increase digital wallet penetration and strengthen offline wallet push, mobile wallets service providers are competing fiercely, which is driving innovation. Mobile wallet companies are aggressively targeting the huge and untapped offline payments market to let consumer completely use mobile/ digital wallets to make payments.

Strategic Insight – Changing Business Model

Recently, Mobikwik integrated a feature 'Explore Nearby' to its app to enable discovery of neighborhood stores, restaurants, and cafes. that accept wallet payments. The launch of this map-based feature is intended to help consumers locate neighborhood stores where cashless payments are accepted. It also identifies the nearest cash loading points to top up the wallet balance. The feature marks a critical point in the fast evolving mobile-wallet space and intends to gear India to a more cashless environment. Though the GPS based interface is the first execution of online-to-offline (O2O) strategy among Indian mobile wallet firms, the strategy is not new and is aggressively followed by RBI approved Paytm.

Paytm, with its offline models that comprise QR codes, one-time password and even sound-based payment, has projected to book over 4 million merchants by end of year 2016. The company recently entered into partnership with multiplexes PVR and INOX to use movie tickets as an anchor to expand its offline reach. The recent partnership between Paytm and multiplexes will let users to pay for their tickets as well as for food and other value-added services using Paytm wallet. Previously, Alibaba backed Paytm to drive cashless transactions in the offline market and encourage merchants to accept digital payments, also removed merchant fees for all transactions on its platform.

Believing in the offline push strategy, earlier this year Freecharge too inked a partnership with mobile payments company Ezetap to enable its wallet users to make offline payments at Ezetap's point-of-sale terminals. The tie up was aimed at transiting beyond organized retail points to the large unorganized retail sector which executes high volume of small-ticket cash based transactions.

In-app mobile wallets landscape has evolved from earlier exclusive tie-ups with one merchant to slowly gearing up for universal acceptance at brick-and-mortar neighborhood outlets. In India, less than 7% of the transactions take place through the digital channel. The players in the mobile wallet sector are all putting structure in place to gain market share by increasing their reach to offline stores through either individually tying up with multiple physical brands or with tie ups to other financial technology companies that have access to a set number of merchants.