Is mobile money set to transform the Indian market ?

Is mobile money set to transform the Indian market ?

The mobile industry in India has experienced some exciting development during the last couple of years, prompting belief that significant growth is a strong possibility under the RBI’s renewed regulatory framework.

Yet as recently as 2013, the region’s mobile money landscape didn’t seem so promising. Despite Kenya and Tanzania’s success with Vodafone’s M-Pesa product, it faced fierce opposition in the Indian market. Stringent regulations enforced operators to work with banks in order to provide payment services, prohibiting their sales outlets from acting as independent financial agents. Despite much of the infrastructure already in place, operators weren’t empowered to offer these services, and the banks had no interest in attracting less profitable customers. Nevertheless, given M-Pesa’s proven economic power in Africa, plans were in the pipeline and optimism was surfacing.

“There is a glimmer of hope that things might change. The central bank’s report recommends the creation of “payment banks,” which can offer payments and remittances but not loans.”

And so in 2014 Payments Banks were created, along with fundamental changes that would enable a viable mobile money system. In November, the RBI issued Payments Bank guidelines, enabling companies with significant distribution capabilities to offer certain financial services independently from the banking system. This alone created the much needed catalyst to spur mobile money efforts, but also boosted other areas of financial inclusion too.

According to RBI data, transactions from m-wallets since then, have surged three-fold to Rs 8,180 crore in 2014-15 from the previous year, whilst the number of transactions rose from 106 to 255 million.

“The mobile industry in India has scaled dramatically over recent years to become one of the country’s biggest success stories. With over half a billion mobile subscribers, the Indian market is already the second largest in the world.”

However, the main player Vodafone who, as well as owning the M-Pesa concept also leases it out to others, is yet to see any major impact to it’s Indian customer base despite the huge potential. In March 2015 it is reported that M-Pesa had 378,000 active users in India out of 3.1 million registered customers.

A recent interview by the BBC with Vijay Shekhar Sharma, the chief executive of PayTM in India explored the notion that many retailers in India are adverse to non-cash payment methods, having shown resistance in the past to adopting even the use of debit or credit cards.

Vijay suggests that it’s a consequence of the Indian cost-conservative mind-set, as the POS machine needed in order to use the cards can be expensive, which discourages retailers from the outset. He points out that mobile money is accessible via a downloadable app which is a more cost-effective solution.

As both CSO at Snapdeal, and COO at FreeCharge, Govind Rajan believes that the mind-set is changing naturally.

“We are witnessing a drastic shift in consumer behaviour and believe that the digital wallet will transform not just payments, but commerce by connecting consumers and merchants in one click.”

With reports that indicate worldwide mobile payments will account for $1 trillion USD in 2017, of which Asia/Pacific markets are anticipated to greatly contribute, will India achieve it’s expected share of the value?

Do you think that India will see the same mobile money success as in Kenya and Tanzania?

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