In India, mobile wallets have proved hugely popular to the point where even the simplest service can be paid for via a mobile phone.
Take an auto-rickshaw ride. In many cases, when the passenger finishes their ride the driver will offer them the option of paying via their mobile wallet even though the fare might be only a few rupees.
It speaks of the rapid take up of smart phones in India as well as the evolution of the payments and banking infrastructure.
By some estimates there are as many as 200 million mobile wallets in India
By some estimates there are as many as 200 million mobile wallets in India, although Venugopal Venkata, Senior Manager in Capgemini’s global payments practice, says that estimate might be a little high and might include some double counting by banks and telcos.
Take up of mobile wallets in India is being driven by banks, telcos and non-bank payment start-ups such as P
aytm, Freecharge, Mobikwik and Oxigen. Players are constantly pursuing active users and balances.
Mobile phone penetration is higher than the penetration of credit cards (22 million) and debit cards (642 million) in India, creating conditions ripe for a mobile wallet, says Venkata. Further, a government push for financial inclusion has led to many Indians opening bank accounts for the first time.
Balaji Natarajan, Principal of Capgemini’s global payments practice and also one of the authors of Capgemini’s well-regarded annual World Payments Report, cites multiple reports to estimate the mobile wallet market size to be about 5-6bn USD by 2020.
Mobile wallets are currently used for many forms of payment, with popular uses including train tickets, micropayments for video on demand, person-to-person payments, bill payments, mobile recharges and taxi rides, says Venugopal Venkata.
Underpinning all of this is an upgrading of India’s payments infrastructure, and the emergence recently of Payments Banks, banks which aim to increase financial inclusion by providing small savings accounts and payments/remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector entities and other users.
The Immediate Payment Services (IMPS) offers an instant, 24-hour seven-day interbank electronic fund transfer service that can be accessed through mobile phones and allows customers to access their bank accounts.
With the recent launch of UPI (unified payments interface) that supports tokenised IDs and two factor authentication, interoperability between wallets will add to the adoption tail winds. Venkata says further uptake will be driven by the introduction of the Bharat Bill Payment System (BBPS) later this year or in early 2017. This is a unified bill payment system that will enable multiple payment modes and provide instant confirmation of payment.
India has also adopted biometric identification for payments and government transfers.
The government is trying to assign every citizen a unique 12-digit ID number, associated with each individual’s iris, fingerprint or facial features. More than 80 per cent of citizens are already enrolled into the scheme, known as the Aadhaar
This will make Know Your Customer (KYC) much easier for banks. This in turn will help drive the increased usage of mobile wallets, says Venkata. Currently there is a recharge limit of 10,000 rupees (about A$200) per month on mobile wallets without KYC, but the limit is 100,000 rupees with KYC.
The AEPS payment system also uses fingerprints for authentication. For instance, payers can enter their Aadhaar number and their fingerprint into a terminal in a shop to make a payment. Others can use their fingerprint to access a micro ATM to withdraw cash or collect their government payments.
The micro payments market is exploding in India, with many previously unbanked customers, now entering directly into the world of electronic payments, all activated via their mobile phone.
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