The past couple of years have seen the launch of several mobile wallets in India, one of Asia Pacific’s fastest growing markets in this space. Researchers forecast that the country’s mobile wallet business will grow to about US$ 11.5 billion by 2022.
As opposed to credit cards, which were languishing at about 21 million at the end of 2014-15, mobile wallets have galloped to more than 135 million users already. This is the broad outlook that has motivated every kind of financial services player, from payments focused startups (MobiKwik, Oxigen) to banks (SBI – Buddy, ICICI Bank – Pockets, HDFC Bank – PayZapp etc.) to telecom operators (Airtel Money, Vodafone mPesa) to digital platform companies (Paytm, Ola Money), to invest in a digital wallet of their own.
Although the opportunity is undoubtedly interesting and there’s a reasonable chance of success, India’s digital wallet providers should take into account a very important market reality – customers are flooded with choice, and are unlikely to maintain more than a couple of digital wallets, especially given their common and limited functionality. Therefore there is a need to expand focus in terms of proposition, target audience, and data usage. As wallets evolve, they have the following options:
Integrate forwards and backwards:
Paytm, with a lion’s share of the market at 126 million users, has grown from a pure-play wallet to an ecommerce player and will start a Payment Bank in coming months. The CEO clearly articulates the company’s goal to spread financial inclusion by onboarding a total of 500 million users across its services. Future plans include a facility to enable customers to withdraw money at a variety of retail outlets, debit cards with QR codes for those without smartphones, and further integration with partner, Alipay. Paytm has clearly recognized the need to build a sustainable model over the long term.
At present, the digital wallets operating in India are largely about cashless payment and cashback incentive. Providers should look at integrating various loyalty programs from credit cards and retailers, for example, into the wallet so that customers also have the option to pay for purchases with reward points. This would enable customers to optimize their purchases, and increase their loyalty to their wallet providers. It would also allow merchants to influence the behavior of customers and engage with them better.
The United States market, which had more than 3 billion loyalty program memberships in 2015, has made some progress in including a loyalty element into mobile wallets. Apple, Android and Samsung all enable customers to store loyalty cards on their mobile wallet apps.
Besides consolidating their loyalty programs, digital wallets could also enable consumers to redeem offers, deals and location-based promotions, and further optimize their shopping by comparing prices across merchants and brands. In a survey conducted three years ago, 54 percent of smartphone users said that the alerts sent by the mobile wallet – about coupon expiry, for example – was one of its best features.
Put data to work:
Mobile wallets are a great source of consumer spending data. They also track events, such as redemption and “check-in”, for instance. Product companies, resellers, banks and other members of the commerce ecosystem can mine wallet data using a number of analytical and statistical tools and use its insights to create personalized, relevant and targeted offers and experiences. Finally, they can close the loop by pushing those offers directly into their customers’ wallets.
Target the right market:
All digital wallets in India are eyeing the same urban, tech-savvy, high-income customers. While that market is far from saturated, wallet providers could seize early advantage by venturing into other markets where there is limited competition. Paytm has already announced its intention to look at the inclusion segments. Perhaps providers could look at targeting customers in the SME and corporate segment, or based on other factors, such as life stage, and spending preferences.
Improve customer confidence:
Fraud is one of the biggest challenges for digital wallets in India. Around September-October 2015, mobile wallet fraud touched a high of between 3 and 3.5 percent of transaction value, making wallets 15 to 20 times riskier than ecommerce. With the Indian consumer being more gullible than his counterpart in other countries, wallet operators have to take extra precautions.
These include measures such as biometric recognition of users, card and device ID checks, and tracking of user behavior to detect suspicious patterns. Wallet providers have also disbarred a very large number of merchants and customers indulging in fraud.
As wallet usage increases, so will the risk of fraud. Digital wallet providers have to necessarily strengthen their security systems and processes to retain customer confidence. This is arguably one of the most important factor in spurring wallet adoption in the country.
The article was originally published in The First Post