Imagine you are in a store and you are purchasing a phone. Traditionally, you could have paid using cash, debit or credit card. The mobile payments technology allows you to pay using your mobile phone with the help of a virtual wallet.
This can be done in two ways.
1. Create a wallet and store your card details or bank account details and whenever you pay the phone sends out a request to the Bank and based on the authorisation the payment is approved to the merchant
2. You store some amount of cash by creating a prepaid wallet on your phone and pay from the wallet balance
For a consumer, it is the convenience of using his mobile and a PIN to perform the transaction.
Times have now changed and payment methods will see changes with wider adoption of alternate currency under various use-cases. Mobility is becoming by-far the most dynamic ecosystem in Indian technology landscape. The number of customer touch-points that can be addressed due to the availability of mobile technology is so high, that there is a multiplicity of players trying to gain a foothold in the value chain.
The mobile revolution
World over, cash has been the most ubiquitous payment method for a few centuries now. The first attempts to digitise commercial transactions started way back in 1950s when the concept of card payments was introduced. Since then debit, credit and prepaid cards have crept into our wallets and have eased the hassles involved in cash based transactions. However, cash is still the king. According to RBI, 95% of the transactions in our country are done in cash and about 40% of the population does not have a proper bank account.
In the last 10 years, the mobile revolution has overtaken our country, which has created a platonic shift in the way people connect with each other and access information. As per TRAI estimates, about 75% (900 million out of 1.20 billion) of India’s population has a mobile phone. This shows that there are more people in the country with a mobile phone than a bank account. With the proliferation of social platforms such as emails, Facebook, Whatsapp, the mobile has gone beyond simple calling and messaging applications and has become an intrinsic part of our lives.
The number of applications on the mobile has been increasing at a break-neck speed. The most revolutionary application is that of mobile banking, which has the potential to replace the entire financial services infrastructure with suitable applications on the mobile.
Mobile payment ecosystem
The mobile wallet ecosystem has broadly four participants:
Wallet issuer: This is the entity which issues the mobile wallet to the customer, be it a bank or a company authorised by the RBI to provide such services. The customer loads the mobile wallet using cash at a retail outlet of the issuer or electronically through Net banking.
The wallet issuer owns the technology and is responsible for providing the payment service to the customer through the mobile wallet. Some key wallet issuers include mRUPEE, PayTM and Citrus. The total commission paid for a transaction undertaken is shared across the ecosystem by the issuer, merchant, aggregator and the custodian (explained below).
Merchant: This includes a wide array of companies—telecom, utilities, e-commerce— which accept payments from the mobile wallet against purchase of their products .
Aggregator: These include players such as BillDesk, CC Avenue, PayU and DirecPay which bring together merchants and wallet issuers.
Custodian: The role of custodian is played by a scheduled commercial bank like HDFC and ICICI and enables settlements between merchants and the wallet issuers. The custodian ensures that the money loaded by customers in their mobile wallets is safe through an escrow arrangement with the wallet issuer.
To conclude, I would like to stress that we are very close to the tipping point and the day is not far when the customer regularly tops up his mobile wallet to perform some of the transactions mentioned above.
The writer is COO at MMP Mobiwallet Payment Systems (a fully owned subsidiary of Tata Teleservices)