Mobile-wallet transactions are set to shoot past the the ₹1-trillion mark mid-2018, even as companies grapple with securing their customers’ Know Your Customer (KYC) requirements as per the Reserve Bank of India’s guidelines.

Accustomed to slick interfaces and rich user experiences, digitally savvy customers are hungry for innovation in the mobile-wallet arena, and spoilt for choice with various mobile applications.

Experts say most electronic-wallet companies tend to be ahead of the curve with their ability to differentiate their offering and meet the unique needs of their consumers in real-time. Retention is key, and artificial intelligence appears to be already disrupting the sector.

Redefining payments

“Customer experience is increasingly being redefined in the emerging platform economy,” S Swaminathan, co-founder and CEO, Hansa Cequity, told BusinessLine. “Many traditional business models must be rewired as more and more consumers adopt and embrace the platform economy.”

Swaminathan says this is all the more evident in banking and financial services, “which have served customers for several decades through different channels and touch points.”

Though potential earning power and disposable incomes have largely been used to categorise and determine customer behaviour, the forces that open and close wallets are undergoing a massive change.

According to data and analytics company GlobalData, the mobile-wallet market in India is poised for significant growth as Indian consumers are increasingly turning away from cash and card.

According to the Consumer Payments Insight Survey by the company, India is one of the top markets globally in terms of mobile-wallet adoption, with 55.4 per cent respondents indicating that they have and use a mobile wallet. India is followed by China and Denmark in terms of usage.

The survey showed adoption levels in India were much higher than many of the developed markets such as the US and the UK, where consumers predominantly use cards.

Mobile-wallet transactions have grown manifold over the past five years, the survey showed, rising from ₹2,400 crore in 2013 to ₹95,500 crore in 2017, and will surpass the ₹1 lakh crore mark in early 2018.

Ravi Sharma, senior analyst at GlobalData’s Payments practice said the “growth in the mobile-wallet market is fuelled by the government’s policies to promote electronic payments, coupled with a rise in smartphone penetration, and improved telecom and payment infrastructure.”

The total value of mobile-wallet transactions grew two-and-half times between 2016 and 2017. The government’s demonetisation move in November 2016 was a game changer, compelling people to switch to an electronic mode of payment, he pointed out.

While medium- to large-value transactions continue to be made through digital banking channels, the low-value day-to-day transactions are carried out through mobile wallets.

More changes ahead

Shailendra Naidu, CEO, Obopay, a mobile payment solutions firm, insists that although demonetisation gave an impetus to digital transactions, this is just the initial phase. Technological ecosystem and digital infrastructure will continue to progress, he adds, and will pave the way for further development of the digital infrastructure in the country.

AI and big data can take payments a step further, Naidu said, adding: “The wallet will not be just a simple stored-value account, and can evolve to be a complete financial-management tool.”

Mobile wallet has already become a mainstream payment instrument in India. GlobalData’s survey showed that the share of cash, cheque or cash-on-delivery options in total e-commerce transaction value declined from 31 per cent in 2013 to 16 per cent in 2017, whereas the mobile-wallet share jumped from 7 per cent to 29 per cent. The use of payment cards dropped from 38 per cent to 32 per cent.

While consumers have benefited from convenient payment option and pricing benefits such as cash-back and discounts, it is the cost-effectiveness that appeals to the merchants, the survey said. This is because the cost associated with mobile-wallet acceptance, including setting-up infrastructure and transaction fees, is much lower than those of traditional card-based payment system.

While many firms have entered the segment in the past few years, Paytm dominates the market, according to GobalData. The firm accounted for 9.9 per cent share in the total e-commerce transaction value in 2017, closely followed by PayPal with 9.8 per cent. MobiKwik and FreeCharge, respectively accounted for 2.8 per cent and 2.7 per cent.