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MUMBAI | 19 SEPTEMBER 2015 DIGITAL MOENY 7 . < Armed with cutting-edge technology, these are changing the way you transact; are trying to catch up, reports Nupur Anand Cashing in on virtual wallets

staggering 96 per cent of all pay- ments, or $2 trillion (~133 lakh crore), in The rise and rise of money on the go are still -based. According to A The total number of transactions on m-wallets surpassed the total number of mobile some studies, this will go up to $8 trillion (~532 lakh crore) in the next few years. banking transactions a year ago. Between 2012-13 and 2014-15, m-wallet transactions For prepaid instrument issuers, popularly grew 180 per cent, compared to 80 per cent growth in transactions known as mobile wallets, retail payments are a (Table 1 & 2). Smartphones played a key role in the growth huge opportunity, as the mobile wallet can replace Transactions through cash and route these transactions through formal Transactions through (In mn) (In mn) channels. Smartphones are paving the way for these MOBILE BANKING MOBILE WALLETS entities to provide transaction facilities for cus- tomers at their fingertips. 172 255 The numbers show an increasing trend. According to Reserve of India data, the total Growth + 80% Growth + 180% 207.91 value of transactions via mobile wallets stood at ~1,000 crore in 2012-13. Within two years, the value 95 87.89 of mobile wallet transactions surged eight times to 108 ~8,200 crore in 2014-15, 53 Though the size of transactions on mobile wal- 33 lets remains smaller than mobile banking, wallets have managed to surpass the latter in number of 2012-13 2013-14 2014-15 2015-16* 2012-13 2013-14 2014-15 2015-16* transactions. In 2014-15, the number of transac- Value Value tions via mobile wallet stood at 255 million, com- (~ crore) 6,000 22,400 1,03,500 84,468 (~ crore) 1,000 2,900 8,200 5,069 pared to 172 million banking transactions on mobile * April-July Source: RBI * April-July Source: RBI phones. The Boston Consulting Group (BCG) believes the rise in mobile wallets is a “disruption” that officer of MobiKwik, ADOPTION OF DIGITAL SERVICES BY GROWTH OF SMARTPHONES cannot be ignored. “The total number of trans- says the one customer BANKING CUSTOMERS (In mn handsets) actions on digital wallets (promoted by non- segment that is emerging 93 Online banking customers 77 banks) has already surpassed the total and banks are not likely to Internet users but not Growth online banking number of mobile banking transactions target are those who have (In %) in 2013- 14. These transactions are debit/ cards but are not 87% growing at a stupendous rate of 180 comfortable with using these per cent per annum, against 80 per online. “This is a big customer 43.9 cent in mobile banking transactions. segment and they are going to be 41.1 32 3532 32 This is clear evidence of the substan- more comfortable using wallets, as 24 tial disruption in Indian banking,” said they don’t have to disclose the details 21 the report. of their card.” MobiKwik has launched Experts say what is interesting is that the a cash pick-up service, allowing cash to be NA opportunity in this space was first tapped by non- directly added to the wallet. Online Mobile Mobile Use mobile shopping banking wallet wallet but not banking players. Not surprisingly, they have the Another area wallet players believe banks mobile banking first-mover advantage. Here is an example. While are unlikely to get into is the “assisted model”, Sources: BCG CCI India Digital Banking Survey 2015; 2013 2014 H1 2015 , claims to have over 100 million users, ICI- Also, since a customer which caters to less digitally savvy customers. World Bank Global Findex, BCG Analysis Source: CMR CI Bank, the country’s largest private sector already has a banking relation- This typically includes the middle of the pyramid lender’s m-wallet, Pockets, has seen only over a ship, they would probably trust a bank’s wal- consumer that needs some assistance in creating LEAPFROGGING million downloads (till August 20). let more.” Last week, launched its and handling a wallet. “These customers can walk COMPOSITION OF TRANSACTIONS IN THE INDIAN The Paytm wallet (the entity was also awarded mobile wallet, LIME. into a retail outlet of ours and get a wallet created. THROUGH DIGITAL a licence by RBI) has been in oper- The BCG report also points out there is a clear Also, the application can work with internet or on ECONOMY CONNECTIVITY ation for over a year, while ICICI Bank’s Pockets opportunity for banks in this space considering text messages. This can again cater to consumers > 90% Cash and was launched in February this year. that a survey revealed that 35 per cent of digital who are not very technologically savvy, or are still Enabling A PwC report points out how m-wallets have banking customers also use mobile wallets from using basic handsets,” explains Naveen Surya, transactions Digital reduced entry barriers in the non-banks. Anand explains that these wallets can managing director, ItzCash. connectivity sector making it easier for players from other sec- also end up working as a customer acquisition tool Some other wallet players have been tapping Broadening the network tors to enter the banking value chain. “Digital wal- for banks. the unbanked population that is not on the radar 80% let is a prime example of non-financial services ICICI Bank’s Pockets allows wallet users to open of banks for their wallet growth. and access players entering the fray and challenging the sta- an account using their mobile phone. State Bank of Oxigen are some of the players in this category. in 2032 tus quo through differentiated offerings. India’s SBI Buddy can be accessed by non-bank With about 30 active players in this space, 2014 15% access Traditional banks are therefore being forced to customers. HDFC Bank’s Payzapp, which has the competition has been heating and as a result, alter their strategy and focus on innovation in the mobile wallet feature, is currently available only to players are luring customers with cashbacks, Electronic transactions digital space to remain relevant and competitive,” bank customers but the lender has said it will allow discounts, exclusive services, etc. Experts believe Transitioning PwC said. non-bank customers to also access it. it is too early to say who could emerge the winner <10% 3G connectivity Banks are trying to catch up. Though late Non-banking wallet players, however, are in the long run but agree it will be a long time Expected to grow rapidly entrants into the wallet space, they are confident unfazed by rising competition. They believe there before digital money is able to replace cash fully. High internet speed to aid of faring well in the game. Rajiv Anand, group is going to be space for both banks and non-bank The opportunity is huge considering that India is faster data transmission executive – , explains banks have a players considering the huge opportunity. As per among the most cash-intensive economies in the 11.2 bn 74% 2016 ready user base that can provide them an edge the PwC report, about 90 per cent of transactions world. The cash to GDP ratio of 13 per cent in of electronic 266 over wallet players. “Moreover, as a bank, we can still take place through cash or cheque and only 10 2013-14, way more than countries such as the UK electronic million offer more services – a customer can open a recur- per cent are via the digital medium. (3.36 per cent), the US (7.46 per cent) and China transactions transactions by debit 2012 23 million ring deposit or view all their past transactions. Bipin Preet Singh, founder & chief executive (9.47 per cent). annually and credit cards Fostering growth 109% Number of electronic Smartphone KEY PLAYERS CAGR transactions carried penetration prepaid instruments out by cards Expanding access to volume growth in the through ATMs: sophisticated technologies past 3 years 2016 to over 6.9 bn 382 33 mn million 2012 29 million

Sources: RBI, Ministry of , , Planning Commission, PwC analysis Source: PwC India KEY INNOVATIONS | Atom: Allows organisations to tie-up for corporate gifting via wallet VIJAY SHEKHAR SHARMA BIPIN PREET SINGH NITIN GUPTA NAVEEN SURYA | CITRUS/HOTREMIT: Permits transfer of money even via email Founder & CEO, Paytm Founder & CEO, MobiKwik CEO, PayUMoney MD, ItzCash ID/Facebook/Blackberry Messenger In August this year, Paytm MobiKwik has 25 million PayUMoney was set up in 2013 by Pre-paid card issuer ItzCash was | HOTREMIT: Donation to charities allowed via the wallet crossed the 100-million wallet customers and has tied up with the Naspers group, a $25-billion the first to offer pre- loaded | mPURSE: Allows linking different loyalty/rewards programmes to the wallet user base and is planning to 50,000 retailers. The wallet internet and media company, cards in 2006. According to cross the 150-million mark by player recently raised close to $25 listed on the London and reports, it recorded payments | LIME: Launched by Axis Bank, a customer can open recurring deposits and also March 2016. Despite having the million (~166 crore) in a Series-B Johannesburg exchanges. volumes of ~7,100 crore and a track expenses largest wallet user base in the funding from Sequoia Capital, Currently, the gross income of ~150 crore country, Paytm is yet to break American Express, Cisco player has a user base of five in FY15. Apart from offering DIFFERENT TYPES OF WALLETS even. It was recently granted a Investments and Tree Asia. million, which it plans to take to wallet services, it also provides payments banks licence and is The company also plans to raise 20 million by the end of this prepaid cards, online gifting | Closed wallet: This is typically issued by an e-commerce player and allows looking at starting operations by an additional $100 million (~663 financial year. Last year, it solutions and money transfer consumer to use the wallet only for that company/website March 2016. Earlier this year, Ant crore ) by the end of this year acquired mobile-based services. It also offers offline | Semi-closed wallet: Using this, you can shop or pay at even other Financial Services Group, an and plans to scale up the total payment application start-up services for the less merchants/sites but you cannot withdraw money affiliate of Alibaba had picked number of merchants to a Eashmart. To woo customers, it technologically advanced up a 25 per cent stake in One97 million by the end of 2016. Prior offers an additional discount of customers. ItzCash has a strong | Open wallet: This allows you to shop at any merchant of your choice and Communications, the parent of to this, the firm had raised $30 one per cent on every franchise network in over also permits withdrawal of money. These can only be issued by banks or in Paytm, for ~1,326 crore. million (~199 crore). transaction. 3,000 Tier-I and Tier-II cities. association with banks Digital wallets have overtaken use of credit cards online

account created through a merce merchants enabling there in cards and net bank- Today, a mobile wallet can August 2015. These figures the number, the amount of where one will be able to pay GUEST COLUMN service provider, where the payments on their sites ing. So, as the adoption of and be used to pay for a cab to illustrate the potential and money to be transferred and through digital wallets. user loads a certain amount through mobile wallets with awareness around digital wal- work, buy coffee, pick up the high rate of acceptance of a one-time password. With Beyond the consumers who VIJAY SHEKHAR SHARMA of money. This amount can a single touch or tap. lets grew, so did the range of a quick lunch or shop for this form of cashless pay- such innovations, digital possess cards, retailers who then be used to make quick Consumers began to make a payments you could make clothes. The entire ambit ment. wallets are not only elimi- accept these are even small- India has traditionally been purchases and payments behavioural switch in favour with these. Today, a mobile of offline and online India’s banked popula- nating the concerns related er. With digital wallets, the a cash economy. With low without the hassle of carrying of digital wallets as a quick, wallet can be used to pay for a transactions that one tion is approximately 500 to carrying large sums of time consumed will be less financial inclusion and limit- cash, remembering multiple safe and hassle-free means of cab to work, buy coffee, pick needs to make in a regular million. This means another cash around. They are also than that taken to pay ed penetration of banking passwords or worrying about transacting online. up a quick lunch or shop for week can now be covered 500 million who live on cash, making immense in roads in through credit or debit cards, services, 95 per cent of pay- card frauds, etc. The money credited in a clothes. The entire ambit of under this cashless form don’t have access to basic tier- II and III, cities where and will be far more conven- ments in the country are In India, 230 million peo- digital wallet is stored in an offline and online transac- of payment services like sending money. traditional banking services ient than paying by cash made in cash. There is signif- ple with an account pay utili- escrow account and is secure, tions which one needs to To address the issue of finan- are still out of reach for which often involves risk and icant cost involved in print- ties or school fees in cash. according to strict Reserve make in a regular week can According to RBI, in March cial inclusion, players such many. running around for change. ing the currency notes and Digital wallets made their way (RBI) norms. be covered under this cash- this year, 21.5 million credit as Paytm have also intro- As the use of these digital Enhanced loyalty pro- keeping them in circulation. into the economy as a means Also, because the consumer less form of payment. cards had been issued by var- duced a person-to-person wallets becomes widespread, grammes can also be expect- However, of late the paradigm to pay utility bills, recharge decides how much money to In fact, in India, even the ious banks in the country. money transfer facility, the consumer stands to gain ed, as there will be a tussle in is changing and the agent of mobile phones and DTH store in a digital wallet, the use of credit cards online has Paytm, India’s largest mobile which allows users to send even more. The most obvious the market to retain users. this evolution is the mobile plans in a safe and convenient risk of losing one’s entire sav- been overtaken by digital commerce firm and the lead- money from their Paytm wal- advantage will be the digital wallet. Simply put, the manner. The top players then ings due to a fraud is not wallets, almost leapfrogging ing digital wallet, recorded lets to the beneficiaries’ wal- increase in the number of The author is Founder and CEO, digital wallet is a virtual tied up with leading e-com- there, an exposure which is the card era completely. 100 million accounts in lets in a few easy steps: Enter brick and mortar stores Paytm