Analysis of the product adoption life cycle for mobile wallets in India:
Introduction:
During the last summers of 2017, I relocated from the UK to India. I was visiting Asansol which is a town located West Bengal. Asansol is famous for its coal belt and offers all the amenities of a modern Indian town. I was out for my first shopping mall experience in Asansol with my wife and toddler in the March evenings. Toddlers, as you know, can be very moody and my son picked a toy car from a second-floor toy store. I gladly went up to the counter and offered my debit card to pay for the toy and the young (some early 20’s) owner replied that only have Paytm.
Long story made short, that evening I had to walk down to get some cash withdrawn to pay for the toy. No guess, the first thing I did after I returned home was to download Paytm.
So what is actually a mobile wallet?
A mobile wallet is a virtual wallet, which can be created and managed using a mobile application installed on your smartphone. The word “virtual” is used because instead of using your physical plastic card, such as Credit card/Debit card etc., to make purchases, you can pay with your smartphone, tablet, or smart watch.
What are the types of mobile wallets available?
There are three types of the mobile wallet. They are often referred as open, semi closed and closed.
Closed wallet: There are vendor locked wallets which mean you can only use them to transact at that particular vendor only. Amazon, Flipkart and Go daddy are great examples for closed wallets in India. When there is a refund often the money gets locked in the wallet which can be used to buy items on the merchant’s site at a later point in time. Currently, RBI approval is not needed for closed wallets in India but RBI has to be informed.
Semi closed: These wallets are most common as they offer goodies like cash backs and deals. These wallets have signed up with various merchants and outlets which can be used for transactions and deals. Examples here are PayTM and MobiKwik. Semi closed needs RBI approval.
Open: These wallets are from the bank and Mobile and you can link your bank account with the wallet to transact online, locally or even withdraw cash. Open wallets need RBI approval.
Product adoption life cycle model:
Product adoption life cycle is based on a model that divides the user market of a technology into 5 stages as Innovators, Early adopters, early majority, Late Majority, Laggards. (Also known as Rogers bell curve)
User profile analysis as per Product adoption life cycle model in India for the mobile wallet:
The user profile analysis is very interesting and a user analysis would break the segment as below.
Innovators: These segment forms 2.5% of the user base and would be high school students and college students. This segment is experimental and deals seekers. The cash back and deals offered was the first to be taken up by this group. This group will not be so vocal about the mobile wallet other than within the closed group. One thing to watch out is that this group may jump to another option if better deal and features are offered.
Early adopters: This segment is the user base which moved from innovators and forms a 13.5% of the user base. The mobile wallet user in India in early adopters would be the young professional in 20’s and early 30’s who are open to digital payments and seek at having another option other than plastic cards. They may use the wallet for utility payments and in premise shopping experience. They may also go the extra mile to get KYC completed to increase the limit of spending allocated to the wallet. Since they are earners they would also use the wallet to send small money to family members during festivals as Diwali and New Year. This group may talk about the product and also enrol from peer discussions.
Early majority: The forms a large base of 34% of users who will wait for the innovators and early adopters to recommend and show the benefits of using the product in India. This segment would form the Tier 2/3 cities in India and would come from the more traditional form of income like Government jobs, small traders, teachers and self-employed. They may also be motivated by TV commercials or celebrity endorsements. This segment may not have opened totally in India for mobile wallet products.
Late majority: This is the next 34% of the who are yet to make a start in the space of mobile wallet. This segment would wait till it becomes a need for it and a wide majority has started using the product. This segment is the hardest to penetrate for the mobile wallet providers in India.
Laggards: Laggard is the remaining 16% of the population and would have senior citizens and deep rural Indian population. This segment will never get converted unless there is a mandate like linking of a wallet with Aaadhar. This segment always would take the most time to accept a new product.
Product bench marking:
So how does mobile wallet compare to other payments options like the cards in India?
According to a 2016, article in Scroll based on the numbers put out by RBI and it turns out that the value of transactions carried out through mobile wallets has grown by a humongous 500% between 2014-’16. By comparison, the number of debit and credit cards transactions grew by 25%-50% in the same period. On the other hand, the value of transactions done through plastic money grew by a modest 25%.
This is illustrated by the two figures below.
India is a major cash based economy and the recent demonetization has accelerated the market segment of mobile wallet although plastic cards are here to stay for a long time.
There are other options like the micro atm which is targeted at rural India as a modified point of sales and works as an ATM with finger print scanner. But this segment operates for a different target space and has not truly caught up with the mobile wallet.
The main dependency of a mobile wallet is that it needs an internet enabled smart phone and this is where the Unified Payments Interface (UPI) and USSD may pay a hard competition to mobile wallet. Also, as we talked earlier mobile wallets are not interoperable. This is where the UPI and USSD may also feature better than mobile wallets.
UPI is a mobile payments system that allows users to transfer money across banks using their smartphones. Users need to enter minimal details in the mobile application to transfer money. Whereas, Unstructured Supplementary Service Data (USSD), customers can perform mobile banking transactions using basic feature mobile phone. There is no need to have mobile internet data facility for using USSD based mobile banking. USSD combined with UPI may challenge mobile wallet in the near future.
Factors and challenges for adoption for mobile wallets in India:
The factors which have accounted for the adoption of mobile wallets in India are cash backs & deals, demonetization, the growth of smartphones users and Digital India movement.
Mobile wallets provide cash back and deals which are very lucrative for users. A quick look at PayTM website showed me that various cash back in wide ranges from cars to pens. Various such offers have attributed towards the wallet growth.
Demonetization had an impact where many people moved to the wallet to get daily needs addressed as ATM’s had the long queue. Users see no harm in keeping a small pocket of money in the wallet for frequent shopping experience post demonetization.
The reducing smart phone prices and internet costs have also propelled a recent huge base for mobile wallets.
Finally, the digital movement is supported by the mobile wallet. Hence, bookings saw a surge with wallets, especially in railways.
In terms of challenges, the main are security, interoperability and smart phone are the main challenges.
Security: A mobile lost can be used for fraud transactions. Also, since the card details are stored in the wallet a hacker may actually hack into the wallet. Companies are coming up with more security features and also options as insurance up to 20,000 for the wallet on mobile lost.
Interoperability: This is the main challenge which UPI is providing to wallets. Currently, some deals are locked to some wallet providers and you can not perform a transaction across multiple wallets. Also, a combination of wallets for more expensive products is also not possible.
Only smart phone supported: Mobile wallet is not supported in normal mobiles and needs a smart phone with internet. This is a challenge for users who do not have a smart phone with internet.
Growth hack analysis:
Mobile wallet providers are using multiple growth hacks as:
Marketing: Investment in traditional marketing as IPL sponsorship.
Digital Marketing: Using YouTube films and serials as a platform to promote wallets especially after Reliance Jio offer of the 4G internet. This is targeted ads to the young audience who spend a lot of time online watching videos.
Deals and cash back: This is a key area of a hack. Most first time users sign up due to a lucrative cash back offer.
Insurance: Some wallets provide insurance against the wallet for mobile lost.
Conclusion:
Although mobile wallets have started and grown, I personally feel that it has a long way before it becomes a main stream option. Plastic payments will continue in years to come but if wallet providers are able to address the interoperability and security concerns then it could be the next Big point in Digital India movement.Also, Indian Government drive for digital India would provide the needed momentum for growth of mobile wallets in the days to come.
References:
https://productcoalition.com/mobile-wallets-adoption-in-india-576e836f5327
