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Ankita Rai, Financial Express\n<\/i><\/p>\n
Ankita Rai, Financial Express
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New Delhi, 5 July 2016<\/i><\/p>\n
“Payments\nwork off the network effect. Without an adequate network of both payers\nand payees, the currency — or in this case the wallet — is of limited\nor no value,” says Dutta. Each company has had to build a market for\nitself, both in terms of consumers using mobilewallets and merchants\nwho would accept m-wallet payments.<\/span> At Shoppers Stop, card transactions stand at 56%\nwhile the rest is cash. “The objective is how much of the cash can be\nconverted to wallet. To enable this, we are targeting young customers\nat stores who don’t use cards,” he says .![\"\"](\"..\/images\/mobile-wallet.jpg\")
Think\n‘mobile wallet’ and you will probably think of recharges, DTH\/bill\npayments or at the fringes of your mind, even e-commerce sites. But\npaying for a can of yoghurt at a milk-booth near your home with, say, a\nPaytm? Not an idea to be scoffed at — this is a reality today. In order\nto drive the next phase of revenues, the offline ecosystem poses a\nworld of opportunities as far as m-wallets are concerned.
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\nRanging from the Big Bazaars of the world to the neighbourhood\nmom-and-pop stores, petrol pumps, auto rickshaws and milk-booths,\nmobile wallets are available across most retail formats. Top wallet\ncompanies are investing heavily in changing customer habits and\ncreating as many use cases as possible which include exclusive tie-ups\nwith merchants, co-promotions with brands, cashbacks and so on.
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\nWhile currently a mobile wallet business typically covers fund\ntransfers, services related to e-commerce transactions like utility and\nbill payments, ticketing, and recharges, offline commerce is expected\nto drive good traction. Research firms peg the current market size of\nthe mobile wallet business at R350-400 crore with volumes expected to\ntouch R1200-1500 crore by 2020.
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\n“Offline transactions are an important step to increase mobile payments\npenetration as they offer the ability to operate even in zero\/low\nconnectivity zones. It also speeds up the transaction processing which\nis very important in rapid services like mass transport systems,” says\nKunal Pande, partner, KPMG India.
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\nExperts say a bulk of the big market for wallets resides at the\nmid-to-low-end retailers. Recruitment of offline merchants is crucial\nto the viability of payment solutions, since most consumer transactions\nstill happen offline.<\/span>
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\n“Payment\nproviders that want to win the game will need to focus on usages that\nare frequent,” says Devangshu Dutta, CEO, Third Eyesight. So what is\nthe potential of the offline ecosystem as a revenue generator for\nm-wallets?<\/span><\/span>
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\nThe payment industry must overcome the ‘network effect’ while fighting\ncustomer inertia to boost adoption. <\/p>\n
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\nEach wallet player has made significant investments in technology,\nback-end infrastructure and marketing to boost the adoption of wallets\nin the offline space. And rightly so, as online still constitutes only\n2-3% of total commerce.
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\nThe latest Paytm Karo commercial not only reflects the adoption of\nPaytm across multiple age groups, but also highlights its QR code scan\nfeature for easy payments to offline merchants.
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\nWhile Paytm is spending R50 crore to execute this campaign, which runs\ntill July, its overall marketing budget for this year is R600 crore.\n“There is a massive fight for the ‘real estate’ on the mobile phone. We\nneed to establish ourselves as a viable alternative to cash and give\nmore use cases to create an ecosystem,” says Shankar Nath, senior VP,\nPaytm.
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\nFor Paytm, recharge is an anchor use case, followed by DTH electricity\nbills etc. The idea now is to expand offline as that is where the\ngrowth is. In the offline space, the traction comes from sub-thousand\nrupees transactions and out of three million daily transactions on\nPaytm, offline constitutes 40% according to the company. Paytm\ncurrently has four lakh offline merchants using its platform and 125\nmillion wallet users. The wallet can be used at petrol pumps,\neducational institutes (school\/college fee payments), restaurants and\nlarge format retailers such as More.
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\nClearly, the payment business runs on scale with thin margins. So\nfrequency of transactions is the only way to profitability, even if for\nsmall ticket sizes. Apart from Paytm, mobile wallet player Freecharge\nplans to spend R2,000 crore over the next 18 months on marketing.
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\nFreecharge’s last brand campaign Lo. Do. Khatam Karo was released in\nApril this year during the IPL season to cater to metros and\ntier-I cities. To facilitate payments through wallets at PoS terminals\nand online payment gateways, it has partnered with payment aggregators\nlike ePaisa and CCAvenue.
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\nIt has also forged partnerships with Shoppers Stop, McDonald’s, Caf\ufffd\nCoffee Day, Cleartrip, RedBus and OYO, and claims to have\ncrossed a million transactions in February, witnessing a growth rate of\n15-20% per month.
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\n“Freecharge features such as on-the-go-pin and chat-n-pay are for\npeer-to-peer transfer and person-to-merchant payment. It is meant for\nmerchants in the unorganised space who do not have the means to accept\nthe payment,” says Sudeep Tandon, chief business officer, Freecharge.\n“The chat-n-pay feature is finding wide acceptance among taxi drivers,\nsalons and kirana stores with almost 45% of our customer base using\nit.”At Freecharge, 85% of the transactions take place through the app\nand 15% through desktop and web. Currently the wallet can be used to\npay at over one lakh merchants, including both online and offline\nsegments. About 50% transactions are from tier-I cities and rest from\ntier-II and tier-III.
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\nOr take MobiKwik, whose offline journey started about a year back with\nan association with Future Group’s Big Bazaar. It has top-down strategy\nfor offline expansion starting first with large brick-and-mortar retail\nand then moving on to unorganised merchants. It has an over 30 million\nuser base, of which 50% is active monthly users.
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\n“Since last July, the biggest focus area has been offline merchants.\nThe MobiKwik wallet is currently accepted at 25,000 retail outlets. The\nnext big use case is unorganised grocery stores,” informs Akash Gupta,\nGM, marketing, MobiKwik.
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\nTo enable expansion, it has also launched cash pick up and loading to\nsupport offline consumers in tier-II and tier-III cities. Offline today\ncontributes to 20% of its GMV. The wallet is available at Relaxo\nshowrooms, Burger King outlets and Domino’s’ 1,000 stores, among\nothers. It has also tied up with Madura Garments for its Van Heusen and\nPeter England stores.
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\nPartnering\nwith large retailers<\/span>
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\nTo be really accepted as a currency and an alternative to debit and\ncredit cards, mobile wallets must evolve from small transactions to\nlarger transactions, thus, also increasing the average ticket size. For\nexample, Future Group has an exclusive tie-up with MobiKwik. Currently,\n320 Future Group stores across Biz Bazaar and Central malls accept\nMobiKwik wallet for payments.
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\n“Mobile wallets bring incremental traffic to the store as consumers\ntend to use the store connected to their wallets, and we also benefit\nfrom the promotions run by MobiKwik,” says Vinay Bhatia, CEO, analytics\nand loyalty, Future Group.
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\nBig Bazaar is also working with Oxigen for a co-branded wallet to\ncreate customer loyalty. Pramod Saxena, founder and chairman, Oxigen\nServices, says, “This solution is specifically designed for big\nmerchants like Big Bazaar and airlines.”
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\nOxigen plans to spend Rs. 100 crore on marketing and branding this\nyear. Currently, 150 million customers are transacting at Oxigen retail\npoints and online which includes 25 million wallet users.
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\nThe company says it is adding 2-3 million wallet users every month.\nThen there is Shoppers Stop which entered into an exclusive one-year\ntie-up with the wallet company Freecharge last year across its 230\nstores including Shoppers Stop, Crossword and Hypercity.
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\n“The big advantage is convenience of payment. I see this is a great way\nahead for people who don’t have credit cards,” says Govind Shrikhande,\ncustomer care associate and managing director, Shoppers Stop.
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\nShoppers Stop is also leveraging wallet data for targeted and\npersonalised promotions. “We are using our physical space to promote\nFreecharge while Freecharge is using digital to drive traffic at our\nstores. Therefore, it’s a win-win,” Shrikhande adds.
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\nCaf\ufffd Coffee Day (CCD) accepts multiple mobile wallets such as Paytm,\nMobikwik and Oxigen. “On the business side, wallets help in reducing\nthe operational cost of handling cash,” says Bidisha Nagaraj, group\npresident, marketing, Coffee Day. CCD has recently launched its mobile\napp in Bengaluru, Mumbai and Pune with an integrated mobile wallet\nfeature.
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\nCurrently, RBI regulations limit digital wallets to transactions worth\nR10,000 without a KYC. However, a full KYC increases the limit on\ndigital wallets to R1 lakh per month. This can enable high value\ntransactions for customers. MobiKwik has launched Aadhaar-verified eKYC\nto enable upgrades in real-time.
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\nHowever, the mobile wallet ecosystem is fragmented with each player\noperating in a silo. Most non-banks currently offer semi-closed wallets\nwhich pose a limitation to the usability of wallets primarily to the\necosystem built by the wallet operator.
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\nDutta says\nthe Unified Payment Interface (UPI) should boost growth as the backend\nwould be more seamless. “The key for the wallet companies will then be\nto differentiate themselves in terms of service and to more intensively\ncraft the market for small merchants,” he surmises.<\/span>
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