India is among the top countries where number of smart phone owners, users is very high. With such penetration in the market, various innovative applications of smart phone to solve day to day problems faced by citizens have sprung up off late. One of them is payment for your purchases through mobile wallets. Companies such as Paytm has been pioneer into this space. Indian government also has been working steadily in the background to build ecosystem for banks to provide cashless options(such as Unified Payment Interface-UPI) to customers, which I had discussed in another article on something called India Stack in the past on my blog. In this article, let’s try to understand where does this space stand in terms of adoption.
What is the state today?
In case of mobile wallets in India, it is very interesting case study, if you look at it. When services such as Paytm and others were launched, they, of course, had their own challenges in spreading this to masses. Towards end of 2017 when Indian government decided to implement demonetization, there was a period when cash available in the market was scarce. This forced vendors, customers switch to other methods of paying for daily needs and purchases. This saw a big impetus and push for mobile wallets products in those months. The adoption sky-rocketed and zoomed beyond expectations. One started seeing sign boards, even at small, street side petty vendors such as tea shops, snacks shops, fruit vendor, saying ‘Paytm Accepted’ . This was unprecedented and there was revolution in making. Paytm went through the life-cycle of adoption very rapidly. Before we go further, let’s understand what is product adoption life cycle.
What is product adoption life cycle?
Acceptance of any new product, service or innovation(let’s call it collectively as product for simplicity) in the market, goes through various phases. This depends on demographic, social/cultural aspects, psychological and even political aspects of the user/customer base. This is illustrated by Roger’s bell curve as shown below.
For any given product, you will typically find very few adopters at the beginning. Those who are the first ones are called innovators as they see ahead of others the need of the product and benefits it can bring. The next ones are early which is slightly larger chunk of the society who are willing to try out the product-they are early adopters. The laggards are the last ones which also constitute similar percentage of the society who typically are averse to change, apprehensive about technology etc. The middle part of the bell curve where majority of the adoption happens. And this can take time, and one needs to devise strategies to reach there. Now Let’s dig down further to understand what happened actually.
Mobile wallets adoption phases
Money matters, and especially, when one does not see it. We, in India, feel most comfortable dealing in cash, as we can touch and feel it. With advent of credit cards and debit cards few decades back in India, this habit of cash started slowly reducing. In the last decade, the wide spread of mobile technologies and customers feeling comfortable using smart phones, this created opportunities for companies such as Paytm to come out with payment products such as mobile wallets. It obviously faced challenge at the beginning, finally it is money. The security was major concern. Technically savvy and young population who are comfortable with smart phones were the ones who quickly got into it(innovators). Later, with promotional offers such as rewards, cash backs, discounts etc, users started getting little open with it and started experiencing the convenience of using it(early adopters). And finally, the adoption reached mass scale(majority adopters) very fast, due to government regulation. There are still some who sailed through note ban, demonetization and population who is still not comfortable with smart phones, who are still yet to adopt. This population is generally elderly citizens(for example, my mother) and not savvy with English enough yet. These constitute laggards in terms of adopters for this product.
Mobile wallets and other payment methods
In the market segment of payments, especially, cashless payments, mobile wallets is the not the only option. Let’s look at other options are there, and how they impact the adoption and penetration in the market. Apart from traditional cash less options such as credit card, debit card, we have these days UPI enabled BHIM app provided by Government of India, which works with any bank which smart phone user may have account with. The banks also have their own apps for cash less payments as well. The other ones which has come up is Near Field Communication(NFC) method. Mobile wallets market itself is now crowded with multiple mobile wallet providers(direct competitors), which is anyway another topic. One of the factors impacting growth of mobile wallet products is also government regulations well to protect consumer’s interests. Right now, there is a limit on how much you can load in wallets. Other regulations include stricter Know Your Customer(KYC) norms. Despite these hurdles, mobile wallets has a huge potential to grow. As per one industry report, mobile wallets transactions are set to cross 1 trillion INR in 2018. Let’s look at some of the user acquisition and growth strategies followed by mobile wallet companies.
In the consumer and retail space, especially with mobile, and online presence, due to social media connection, one can really get viral growth. And the growth typically means here user acquisition. One the biggest user acquisition tactics used here is cash backs. Other one which used often is first user service is free of charges to consumers. For example, if you pay first recharge for the mobile, using mobile wallet such as Paytm, first recharge is free. It entices the young generation and pulls them in using the product. Other is tie ups with various other service providers such as cab aggregators such as Uber or Ola. Consumers end up enjoying discounts and benefits on both sides. References and likes on social media adds viral angle for quick growth, if done correctly. Connecting with consumers emotions is also very common tactic used. In case of Paytm, their tag line “Handcrafted in India” is very catchy.
Mobile wallets is a big business in India, due to sheer demographic considerations and mobile penetration. The last year’s demonetization has given a big push towards adoption to it already. The most innovative vendors are already over the hump. There is definitely lot of direct and indirect competition in the market. Those vendors with safe, secure, ease of use features, multiple options for other service providers, frequent discounts for loyal consumers, will make vendors to retain their consumer base. After which, to monetize the user base further, this also will enable mobile wallet providers to venture into various other value added services such mobile bank and others. Nonetheless, this market segment round digital payments will see huge growth in coming years for sure, despite the fact that cash will continue to rule.