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A recent trend was observed in the Indian payments market, wherein many banks launched their own mobile wallets in order to compete with existing players such as PayTM, Oxigen, PayUMoney, CitrusPay, FreeCharge, and MobiKwik. Banks decided to venture into mobile wallet space because with increasing popularity of mobile wallets, use of credit cards and debit cards started witnessing a decline, especially among the millennials and Generation X, leading to loss of revenue.

To ensure success of their own mobile wallets, few banks have started the practice of not allowing customers of competing mobile wallets to recharge using their bank accounts. For instance, in October 2015, State Bank of India (SBI) announced that it would no longer allow PayTM mobile wallet customers to load money from SBI accounts onto their wallet. Users of the Oxigen wallet also were not allowed by the payment gateways of SBI and Citibank to load their wallets. Sometimes ICICI Bank’s net banking service prevented Oxigen’s wallets from being loaded on suspicion of fraud. It was also found that some large e-retailers preferred not to have consumers transact in their marketplaces using mobile wallets belonging to competing companies.

To counter this threat to their business, mobile wallet companies are launching their own virtual prepaid cards. While banks and e-retailers can prevent customers from using competing mobile wallets on their sites, they cannot prevent customers from using a virtual prepaid card. Interestingly, mobile wallet companies are collaborating with banks to launch these virtual prepaid cards.

In 2016, FreeCharge mobile wallet launched a virtual prepaid card named FreeCharge Go Card in collaboration with Yes Bank and MasterCard. The virtual prepaid card allows customers to use the FreeCharge wallet to make purchases on all online stores in India, enabling wider acceptance. With launch of the virtual gift card, FreeCharge has leveled the playing field with its competitors PayTM and Oxigen who already have virtual prepaid cards in their portfolio.

PayTM had partnered with ICICI Bank to launch its virtual prepaid card in India, in 2015. This co-branded virtual card allows users to pay for purchases both online and at any retail outlet that accepts MasterCard, Visa, and RuPay cards. Consumers who want to use the card in brick and mortar stores can receive a physical card by paying an additional fee. Oxigen launched a virtual prepaid card in partnership with RBL Bank and Visa and can be used for making online transactions.

Similar to Oxigen, FreeCharge Go Card can also be used for making only online transactions. However, FreeCharge is exploring other alternatives to enable offline transactions with its mobile wallet. The company is partnering with ePaisa, Pine Labs, and other retail Pont-of-Sale (POS) providers to facilitate acceptance of FreeCharge mobile wallets. The company has also tied up with McDonald’s and Shoppers Stop to enable offline acceptance of its wallets.

PayNXT360 believes more such partnerships between mobile wallet operators and banking and financial services companies to occur in 2016 to launch virtual prepaid cards. These partnerships are mutually beneficial for both the parties as mobile wallet companies are able to provide wider acceptance to customers and generate additional revenues; while banks are able to tap into millions of mobile wallet users, who might not be customers, to cross-sell their products and services. With entry of more players, competition is expected to increase and virtual prepaid card issuers are likely to differentiate their offerings by improving product features that offer more security and convenience.


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