1. Mobile Payments in India
The Next Wave of Growth
Abhinav Sharma
MBA (Finance) Candidate, Class of 2017
SPJIMR, Mumbai
Email: abhinavsharma90@gmail.com
+91-9873373751
2. India : A growing but cash rich economy has a significant opportunity for
mobile payments
US$
90Mn
US$
1.15Bn
FY’12
FY’16
In India, 78 of every 100 inhabitants have a mobile phone while only
roughly 50% have a bank account. – World Bank
3 segments that will lead mobile payments in India:
• Proximity Payments
• Mobile Commerce
• Mobile Peer-to-Peer (P2P) remittances
Massive support from the government to use mobile payments for
financial inclusion
Key Drivers
Availability of affordable handsets
Low mobile tariffs
Increasing voice and data network coverage across the country
Lack of adequate banking infrastructure
Low PC penetration
Mobile Phone Penetration in India
M-Payment Industry in India
3. Currently, Mobile Payments in India are at a nascent stage ready for growthAdoption
Mobile Banking
IMPS set up in 2010
Select Telco/NBFI initiatives
Mobile payments have just
started to pick up
Internet Banking
Launched in 1996
~ 8-9% of the population uses internet in India
Internet banking primarily restricted to urban India
ATMs
Launched in 1987
1,00,000+ ATMs in India
Brown label and white label
fuelling next wave of adoption
Branches
Primary and oldest banking channel
~1,00,000+ branches
Incremental innovation with expansion of
low cost ‘ultra small branches’.
Cards
Launched in early 1990s
~13% of the population has debit cards, ~2% has credit cards
Innovation through third party PoS deployment, prepaid cards,
new card networks such as RuPay
Business Correspondents
Launched in 2006; financial services
through handheld devices
Innovation through delivery model and
bringing in multiple services
Adoption and Maturity of Financial Services Technologies in India
a
a
a
Introduction Growth Maturity
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*
*
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4. India’s Mobile Payment Industry is divided into four segments
Acts as a storage device to
electronically load all physical
payment forms (credit card,
bank account info, gift cards
etc.)
Wallet based
Description
Advantages
Disadvantages
SMS allows transactions
through mobile data network
and mobile device
SMS
Unstructured Supplementary
Service Data (USSD) uses a
communication between the
telecom provider and bank for
mobile payment transactions.
USSD
Mobile application allows
consumers to access and
purchase goods and services
through mobile web-based
applications
Application
• Users can consolidate all
payment mechanisms and
remotely lock wallet
• Easy to load with multiple
top-up options
• Conveniently tap to pay
purchases with certain
merchants
• Users only need basic mobile
device with SMS facility
• Easy to use for basic
transactions
• Connection remains open
(often more responsive and
faster than SMS
• Relatively more secure than
SMS
• Works on all GSM handsets
• Mobile banking accounts can
be linked through payment
solutions to expedite the
online payment process
• Very interactive and user
friendly
• Limited merchants have tap
to pay purchase capability
• Only work on smart phones
• Risk of theft of phone
• Transaction security
• Dependent on cell service and
connectivity that can create
delays
• Syntax to transact is complex
• Not end to end encrypted.
Hence, transaction limits are
lower
• Takes slightly longer than SMS
to complete the transaction
• Till now, limited enrollment
from telecom operators
• Need data services to operate
• Limited to the merchants that
build and maintain
applications
5. m-Wallets are expected to lead the mobile payments revolution in India
The variety of purposes for which mobile wallets can now be used, and the pace of their adoption, suggests that
they could replace credit cards as the primary non-cash payment model.
Mobile wallets will be to India what credit cards are to the West
33
108
255
0
50
100
150
200
250
300
2012-13 2013-14 2014-15
Mobile Wallets
Number of transactions (millions)
Initially, mobile recharges used to dominate transactions through
such wallets.
1
Then, most wallets added on categories like DTH TV and data plan
recharges, utility bill payments, cab payments, train and bus ticket
bookings, and e-commerce payments.
2
Now, mobile wallet players are partnering with brick-and-mortar
stores to enable payments through mobile wallets.
3
6. PayTM appears to be the most popular mobile wallet and people are willing
to use credit while shopping through mobile wallets
71%
66%
65%
61%
56% 58% 60% 62% 64% 66% 68% 70% 72%
Mobile Wallet
In-Store Digital Payment
Mobile checkout deviceassisted by store associate
Retailer's app
PayTM
MobiKwik
Oxigen
Citrus
m-Pesa
Yes
No
Yes, 86%No, 14%
Have you ever made a payment digitally? If yes, how did you make the payment?
A survey was conducted last week amongst 300 people aged 21- 26 years from different parts of the country and following are some of the key results:
What is the first name that comes to your mind when you think of m-wallet?
67%
20%
9%
62%
34%
4%
0%
10%
20%
30%
40%
50%
60%
70%
Yes No Don't Know
Would you like to take an instant credit/offer at a shop while
making purchase?
7. The general sentiment among the youth in India is growing strongly in favor
of mobile wallets
“I think mobile wallets can do everything that cash or card can do and way better than it.”
“It would be great if I can get money in my wallet as credit which I can repay later. It’s like Diwali.”
“With Ratan Tata investing in PayTM, I think that I can trust the company with my money.”
“I like to shop online and earn discounts through mobile wallets.”
8. PayTM and MobiKwik are the current leaders in the mobile wallet segment in
India
Parameters PayTM MobiKwik Oxigen mPesa
Type of Wallet Semi-closed Semi-closed Semi-closed Open
Number of registered
users
100 Mn 17 Mn 6 Mn 3.1 Mn (March’15)
Started in 2009 2009 2014 2013
Revenues ~ 6000 crore ~1500 crore Not Available Not Available
Investors Alibaba group – 40%,
Ant Financial – 20%,
SAIF Partners – 30%,
Vijay Shekhar
Sharma,Founder –
21%
Tree Line Asia,
American Express,
Cisco, Sequoia Capital
Payment Bank License Yes No No Yes
Given their size, current reach and some smart tie-ups, PayTM and MobiKwik look promising to capture the maximum
value out of the Mobile Payments growth in India. Also, the general sentiment in India is in favor of these two mobile
wallets.
9. A closer look at PayTM and MobiKwik provides more details
Average number of transactions per day
MobiKwik PayTM
0.4 Mn 2 Mn
Number of merchant tie-ups
50,000 80,000
Alexa India Rank 402 21
• PayTM is the biggest mobile
payment provider in India ,
whether on the basis of
revenues, or number of
transactions, or tie-ups
• PayTM’s priority target market
is urban consumers, where as
MobiKwik is targeting more
towards semi-urban and rural
consumers.
• PayTM in comparison with
MobiKwik has tie-ups with all
the leading portals in India.
The number of users registered with PayTM is 5 times the number of credit card users in India
Paytm is aggressive about growth and far more about breakeven and that’s why they have an
asset light model on marketplace
Paytm is targeting to be the first major ecommerce company to be profitable and has set a
goal of 2017 to do so
10. However, there are certain gaps which need to be addressed to speed up
mobile payment adoption
Lack of Technological Know How
People in India are not very tech savvy
They need to be trained to use the technology
People in India believe that the risk factor is a bit high in
mobile payments
Lack of enrichment of consumer experience
Current payment options available in India do not target
towards enriching consumer experience
They target more on the convenience factor
This focus on consumer experience will differentiate the
winner from all others
• Loyalty Management
• Geo Location Discounts, Credits and EMIs
• Comparison Shopping
• Product Reviews
• Faster transaction time, less number of taps
This gap can be addressed by:
This is where a bank can
come in and change the
Indian payment ecosystem
11. How a US Bank can enter India with geo location discounts, credits and EMIs
(1/2)
• Buy stake in a leading mobile payment provider in India like Paytm or MobiKwik.
• Paytm appears to be overvalued right now, but gives a huge customer base that helps the
strategy
• MobiKwik appears to be undervalued as of now, but the custimer base is 1/5th of that of Paytm
currently.
1
• Use the huge customer database of the mobile wallet provider and invest in a technology
that can use the customer payment patterns, browsing history, customer location etc. to
come up with instant EMIs, Loans and Discounts for customers
• In addition, can provide loans to small to medium merchants that are associating themselves
with these mobile wallets and help them scale up.
• Based on consumer credit worthiness, provide credit in their mobile wallets to help them
purchase products.
2
12. How a US Bank can enter India with geo location discounts, credits and EMIs
(2/2)
Customer
Acquisition
Improving
Profitability
Running the day-to-
day business
New Tie-ups
Mobile Wallet
Provider
Will perform its business as usual and try to improve
profitability
Focus on customer acquisition and merchant tie-ups
US Bank
Will play a major role in the growth of the mobile wallet
provider
• Provide geo-location EMIs, Discounts and credits to
customers which will increase sales
• Provide loans to merchants who tie-up with the wallet
provider to help him scale up. Will result in more merchant
tie-ups
Most importantly, the bank will depend on the credit scores
provided by the financial technology firms like Keditech etc. for
offering instant loans and EMIs
Financial
Technology
Firm
Will use the customer database and other social and
commerce data to com up with real-time credit scores for
customers, which in turn will be used by the US Bank to make
instant offers
The most prominent firm which can be partnered with is
Germany based firm Kreditech
