Digital Wallets – Disrupting the Traditional Payment System

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After change of the century, the time machine moved so fast bringing technology revolution with i-pods, smart-phones, handy laptops, Mpos, e-commerce, e-payments and significantly changed our lives forever. The race still continues with the birth of new age of digital innovations and breakthroughs disrupting the traditional methodologies of commerce and trade. Start-ups like Paytm, Freecharge, Oxigen, LIME, JioMoney, BHIM, RuPay, MobiKwik, etc gave a path to experience the commerce with a Scan and click of the button. It is indeed worth applauding. Isn’t it? So much have changed since 2007 and we are today in another era of shift carrying HD cameras in iPhone 7, listening music from smartphones, Storing data on the iCloud, making payments from the smart phones, watching movies with 4G on smart phones and the list goes on. Our lifestyle revolves around digital needs and smartphones.

Picking on digital wallets, I interviewed some people and asked, Isn’t it convenient to pay when you do not have cash in the pocket?

The crux is – It matters certainly and especially in a country where population is 1.6+Billion. In a country like India, the resources, systems and processes to support the transactional tasks/ activities are always limited and the birth of digital wallets to streamline it was the ‘NEED’. Digital wallets are indispensable for development and to achieve it, it is imperative to streamline the areas which involve billions of transactions. When I say streamline, it is streamline across value chain and not just one process or system.

We have landed in the era where the preferences have changed to ease and convenience. The preference of standing in the queues of ATM to withdraw cash, carrying cheques to pay and using plastic money seems to change to ‘Apple pay’ or ‘Scanning QR Codes’ from the mobile phone. Today, Phone is smart to be the new Wallet. It would be wise if companies digest this early. On a lighter note, it’s time for leather companies to think on shifting from making wallet to making cases for mobile wallets.

How does it work?

In order to use the Paytm Wallet and transact cash-free, follow the steps below:
1. Set up a Paytm account using your mobile number and email ID
2. Add some money to your Paytm Wallet using net banking, debit card, or credit card
3. To transfer money to someone else, select the ‘Pay or Send’ option
a. You can make payments to others or to bank accounts on Paytm by scanning a QR code
b. Alternatively, you can send money to another Paytm user via their phone number

How it is moving in India?

In addition of shopping online, People are now actively paying their utility bills, electricity bills, phone bills, etc using various digital wallets like Paytm, Freecharge, Oxigen, LIME, JioMoney, BHIM, RuPay, MobiKwik, etc. To attract the consumers, digital wallet companies are offering huge discounts, gift vouchers, cash-backs, etc to the users. Further, the government is supporting majorly to these companies with its own motive to make Indian a Cashless Economy.

Digital wallets not only give its users an ease of making payments, but also a service wherein they can easily save all the confidential data like credit/debit card information, aadhar card, PAN card, etc. which helps the user to make payments in one go. While people are little hesitant in sharing their credit card details, at the same time it is picking up looking at each other consumers. As a part of one marketing mantra, users find to be least likely to obtain information from a sales person and most likely to get it from fellow consumers while making buying decisions.

Fuel to the Fire- How it picked up?

Online payments were growth in India and it picked up significantly especially from the time of demonetization. With limited cash flowing in the economy, the easy option available at the demonetization was scan and pay. Digital Wallets companies has seen three times growth in the usage of mobile and online transactions.

Paytm currently has more than 100 million subscribers and maintains the market leader position among all digital wallets in India. At the time of demonetization, the buzz word used all over the country was “Paytm karo” or “use Paytm”. It was during this time that the Individuals/ sectors using only cash for transactions like Mom & Pop Store, Public transport, Parking, Taxis, Auto rickshaws, Flea Markets etc. traditionally, started accepting Paytm.
Such was a stardom of Paytm that it featured in a Harvard Business School case study of the company’s transformation from online recharge platform to India’s largest mobile payments platform. Paytm recently launched Paytm mall, offering their customers to select the products and shop via Paytm. The company is doing significant efforts to make sure its users have great experience and hence it maintains the leading position.

What’s in it in Future?

The value proposition of a mobile wallet is more than just the payment and includes the value-added services that can be offered across a mobile-enabled environment. As it’s the start, companies are in the race of acquiring ‘customers’ in a competitive environment by offering attractive offers and unrealistic discounts. Paytm has incurred huge losses of INR 1,549 Crore for the year ended March 31, 2016 and are using retaining methods by offering huge discounts, cash-backs, vouchers, etc. its customers.

The important question remains of Sustainability.

Considering the huge area of opportunity and growth, digital wallets have seen many investors in the recent past. To name some – Chinese internet major Alibaba is leading a $200-million (Rs 1,320-crore) round in the recently demerged entity of Paytm’s e- commerce business along with the multi-stage investment fund SAIF Partners. Investors are hopeful for good returns in the long term and are considering taking the wallets to next level so that people start preferring digi-payments over cash even in the semi urban areas.

To overcome these, some of the main challenges that need focus are good internet connectivity, usage of smart phone in the rural areas, literacy levels and awareness to use smart-phones.

Not every digital wallet company is accepted by the users. It takes huge investment and time to build up the brand along with the trust in the minds of the users.

The Publisher of this newsletter is Elargir Solutions Private Limited – India and Singapore. Elargir Solutions is a Retail COnsulting and marketing company, specialising in new market entry, research branding and content marketing. Need a business advisory? Write to us at business@elargirindia.com or message us at +917506838052 or Whatsapp us at +6598501106

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