Why mobile wallets are the future of money

Published: March 1, 2018 4:25 AM

mobile wallets, digital financial transaction, future of transaction, future money, digital moneyIndia is experiencing exponential growth in digital financial transactions. (IE)

India is experiencing exponential growth in digital financial transactions. What began as a convenient mode of payment for booking cabs and ordering meals has expanded into a necessity during post-demonetisation, cash-crunch phase. From bill payments to buying groceries, the country has come a long way in accepting, adapting and, eventually, preferring digital money over cash. The rise of mobile wallets has also brought along several other prepaid instruments like PPI cards (prepaid payment instruments) and paper vouchers. Packed with user-friendly features, simple interfaces and attractive discount offers, they are more secure than carrying actual cash—an attractive appeal for the tech-savvy generation.
In India, the spurt in usage of wallets was heavily triggered by demonetisation. The fire was further fuelled by businesses who doled out various consumer promotions in the form of cash-backs and discounts, which helped the Indian consumer see value in switching to a digital mode of transaction. In an economy like India’s, where cash has always dominated the way people handle money, digital payments are a huge cultural shift: one that has to be induced by various incentives. While a big incentive of digital money is the absence of physical cash, cash-back offers and discounts did a lot of spade work to get users to switch. Along with RBI’s guidelines for payment bank concept, there is a lot of potential for including a previously unbanked section of the population into India’s financial ecosystem.

Rural areas have also had a significant impact on the country’s overall economic progress. Mobile money offers ease of business and transparency in transactions in remote areas. Mobile wallets allow people with zero or limited access to formal banking facilities to use their mobile phones to avail a broad range of financial services. More importantly, these mobile wallet platforms help people to set up bank accounts without having to visit a physical bank branch, which may be inconvenient for those living in remote areas. The mobile and internet penetration is ever increasing in India. This paves way for the adoption of more digital payment solutions in the coming years. Initiatives like Digital India are set to act as catalysts for the transformation. Even financial institutions, lifestyle shops and e-commerce platforms are coming up with their own wallets rather than relying on pre-existing alternatives.

The future of mobile wallets and other mobile payments solutions appears bright. The number of internet users is expected to touch the 650-million mark by 2020. There are enough digitally-savvy customers willing to try new innovations and are preferring the convenience of digital money.
Considering the expansion and growth of fintech companies in the recent past, it is possible that mobile wallet can evolve to be a complete financial management tool, instead of being limited to a simple, stored-value account. There is a lot to be tapped in this area because the digital payments scenario is still in its nascent stage. The demand for p2p payments and e-commerce, among other factors, will continue to grow and encourage the increased use of mobile wallets.

In order to ensure that the potential of mobile payments solution is fully harnessed, major challenges have to be tackled, tactfully. The key lies in creating a sustainable and reliable ecosystem that offers diversity in terms of payments, savings, insurance, credit and more. At the same time, the wallet uptake needs to be pushed further through initiatives that promote education regarding this technological paradigm shift among people who are still unconvinced. Promotion and registration efforts also need a dedicated boost to support the financial inclusion factor. Marketing materials need to be directed at enhancing mobile money awareness in remote places. The challenge in building an understanding of the relevance of mobile wallets in daily life among all people needs to be approached with a multi-pronged effort. And there should be focus on providing more merchants with multichannel payment services.

By: Shailendra Naidu

CEO, Obopay

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