Developments in mobile wallet industry over the years
From making payments through SMS to banking and shopping on your smartphone, the mobile wallet industry has grown significantly. But, it couldn’t have happened without rapid advancements in technology. Take a look at how the digital wallet has evolved over the years.
According to Google-Boston Consulting Group’s 2016 report, 81% of existing digital payment users prefer mobile wallets as their mode of payment. The number of Indian consumers opting for digital payments for online and offline transactions is estimated to grow to a staggering 90% by 2020. The ease of use of these mobile wallets and a large number of incentives are the drivers of popularity of digital wallets in India.
The technology powering mobile wallets has been rapidly evolving to create more efficient and convenient versions. So, take a look at how the mobile wallet industry has leveraged technology to mature over the past 11 years.
The very beginning
It all started over a decade ago, with Wallet365. A Times Group and Yes Bank collaboration, Wallet365 was a nascent beginning. Powered only by 128-bit encryption and VeriSign certification, it allowed you to make transactions and payments to a mere 100 merchants. With the aim of shifting the consumer from credit cards to secure online transactions, Wallet365 only required you to have an email ID. The goal was to overcome credit card fraud, and this wallet prided itself on its secure payment gateway and ease of use.
A year later, Vodafone launched M-Pesa in Africa, which eventually made its way to India in 2013. Essentially a mobile phone-based transfer and financing system, M-Pesa can be considered as a basic version of the digital wallets of today. This system allowed its users to transfer small amounts of money to another person’s mobile, pay bills, or initiate withdrawal of money. While it did cover the basic gamut of services, it most certainly left a lot to be desired, especially in terms of ease of use, scope of use, and safety.
Between 2006 and 2010, the mobile wallet industry established its foothold in India. The RBI approved the usage of closed wallets (that can be used to buy products and services from only one company), and e-wallets such as MobiKwik, Oxigen, and FreeCharge were introduced.
Mobile wallets gain momentum
In 2011, PayTM made an entry. The idea was to overcome the hassle of an internet connection that failed right when you’re paying for a ticket or a bill online. The goal was simple: to do away with the step where a customer is redirected to a bank’s payment page and quicken the process.
In 2012, banks began to launch e-wallets that linked their own debit and/or credit cards to their customer’s mobile phone. An example of this would be the collaboration between HDFC and Movida. The e-wallet allowed you to pay bills, buy flight tickets, and recharge your mobile phone. Driving this e-wallet was a technology known as USSD. Essentially, it is a service used to facilitate mobile-money services along with location-driven content and menu-based content services. Unlike an SMS, the USSD messaging creates a channel that allows simultaneous exchange of data. It was a venture driven by the idea of allowing HDFC customers to carry out basic transactions without needing a high-end handset.
In the same year, Airtel Money, a semi-open digital wallet, was introduced in 300 cities in India. A huge step up from Wallet365’s network of 100 merchants, Airtel Money allowed you to load cash on to your mobile and use it to pay bills, perform recharges, shop at over 7,000 merchant outlets. This platform was powered by Infosys’ WalletEdgeTM and was capable of performing millions of transactions and was very safe.
Quick on Airtel Money’s heels was MobiKwik. It allowed customer-to-store transactions through a semi-closed wallet. The mobile wallet also launched MobiKwik Lite towards the end of 2016, with the aim of extending the benefits of a digital wallet to rural areas. This version runs on 2G data and is less than 1MB in size, thereby countering problems such as poor connectivity and limited phone storage capacity. Moreover, with RBI’s approval, MobiKwik has been able to offer its users the option to store up to Rs. 50,000 on the wallet for various transactions.
The current scenario
In 2014, the RBI allowed the creation of Payment Banks by telecom operators, supermarkets, and electronic wallets. They were given the freedom to accept deposits, basic savings, and provide remittance services. The first such bank was ICICI Bank’s Pockets in 2015, followed by Flipkart Money (now called PhonePe) in 2016 and Airtel Payments Bank in 2017.
However, between 2015 and 2017, there was also a lot of support extended by the government that helped bolster the mobile wallet industry. According to the RBI Data Warehouse, by January 2016, 48 million mobile wallet transactions had taken place. To boost the number of transactions and improve security, National Payments Corporation of India (NPCI) rolled out UPI or Unified Payments Interface in April 2016. The USP of the system was that it featured a single interface to send and receive money through a ‘single identifier’ such as a phone number or email address. This tokenisation eliminated the need to enter important information such as your bank details each time you want to perform a transaction.
Driven by demonetisation
In November 2016, Prime Minister Narendra Modi’s bold demonetisation move further shifted the focus to mobile wallets. The NCPI launched the BHIM app that used UPI to make payments ‘simple, secure, and super-fast’. It is a government-backed application that allows you to send and receive money and make bill payments, regardless of whether you have a smartphone. Driven by the cash crunch, the BHIM app was downloaded 17 million times by January 2017, and the number of mobile wallet transactions increased to a never-seen-before 213 million, according to RBI’s Data Warehouse.
What followed was a flurry of activity that strengthened the mobile wallet industry in India. In January 2017, Airtel launched the Airtel Payment Bank, powered by technology that facilitates digital and paperless banking without any processing fee for online transactions. By mid-2017, Hike introduced a payment wallet, within its messenger app, backed by the Indian government’s UPI. Soon after, Telangana became the first state to launch its own official e-wallet, called T-wallet and Axis Bank launched LIME. LIME allows you to shop, perform banking, and make payments through a mobile wallet—making it an app that is the first of its kind in the country.
As of October 2017, digital transactions backed by UPI multiplied 77-fold and hit the Rs.70.57 billion mark. Government directives such as the one asking banks to reduce fees on online transactions further strengthen the scope of the industry and ease of operation and security for users. This, combined with features such as a multilingual interface has led to digital wallet transactions growing from $1 billion to $9 billion in just one year, from 2016 to 2017.
While Near Field Communication is already a popular payment option in USA, going forward, it is likely to be a sought-after option in Indian markets too. By allowing your phone and a payment terminal to connect wirelessly, often with just a tap, it allows contact-less payment. Samsung Pay is one such NFC player. Since the connection is highly encrypted, it is a secure payment option for consumers looking to go digital.
This year, India became the second-largest smartphone market, with 220 million users. So it comes as no surprise that India’s mobile wallet industry will grow to $4.4 billion by 2022 (according to Capgemini’s World Payment Report 2017). Furthermore, according to BCG Google Digital Payment 2017 report, the number of non-cash transactions will exceed cash transactions in the country by 2023, as internet-enabled smartphone users cross the 650 million mark. With milestones being crossed rapidly, it’s evident that there’s simply no stopping the mobile wallet industry.
So, it’s time that you got on the digital wallet bandwagon with the latest Bajaj Finserv Wallet powered by MobiKwik. It not only allows you to pay merchants and friends, but also buy a host of products on EMI. See more here.