Product Adoption Life Cycle of Mobile Wallets in India — an Analysis

10 min readOct 15, 2017

Introduction

In the digital world of today, the last thing anyone would have expected is the hard currency to be replaced by its half-brother, the so called “mobile wallets”, in day to day transactions. But living in the technology era, could we have expected anything better? And while this opens up the whole new discussion on digital currency and the smartphone enabled “mobile wallets”, and, how it might change the way we transact in the future; one can’t help but stare in awe at how there seems to be a flawless, easy to use product which could enable you to stop carrying the (at times bulky) physical wallets!

So what are we talking about? What are “Mobile Wallets”?

A “Mobile Wallet” is nothing but “a virtual wallet that stores payment card information on a mobile device”. These wallets “provide a convenient way for a user to make in-store payments and can be used at merchants listed with the mobile wallet service provider”. [3]

In today’s smartphone infused internet era, new innovative products are ideated to solve a problem and create the value proposition of convenience to consumers. Internet enabled solutions has been the next big thing for some time now, and technologists are leaving no stones unturned to prove this. From the advent of smartphones, to e-commerce platforms, to robo-advisors, businesses are transforming the way they operate to meet the ever-changing needs of the consumers. One such evolution is the emergence of FinTech, which is leveraging technology to transform payments sector, from which the “mobile wallet” has been born.

When Google released the first version of mobile wallet, called “Google Wallet”, in 2011, nobody really knew what or how to use it. The limitations eclipsed usability of the product, and slowly it was discarded. Nevertheless, the idea was never lost. Six years later, we now live in a world where mobile wallets are becoming accepted by the masses; the limitation eclipse has passed, giving way to a more user friendly and convenient mode for doing to day to day transactions. As shown in the picture above, the fish has managed to get out of the small bowl and is ready to take on the larger one. But, are we there yet?

In order to understand this better, we need to get to the fundamentals. The adoption lifecycle of a Product.

Product Adoption Life Cycle

The product adoption lifecycle is a sociological model that describes the adoption or acceptance of a new product or innovation, according to the demographic and psychological characteristics of defined adopter groups. The process of adoption over time is typically illustrated as a classical normal distribution or “bell curve”. [1]

Product Adoption Life Cycle is essentially a set of stages a product passes through, where it encounters consumers of different tastes and preferences. By and large, there are 5 sets of these consumers, namely: the Innovators, the Early Adopters, the Early Majority, the Late Majority, and, The Laggards.

Innovators are those hardcore techies who love to try any new product offering due to their sheer love for technology. They are enthusiasts who believe in a product when they see it and do not mind taking the risk of being a first adopter. In fact, they take pride in this. Innovators comprise around 2.5% of the user base.

Early Adopters are the visionaries who follow the innovators in quickly adopting the new product in the block. They form 13.5% of the user base, and, just like innovators, don’t see any risk in adopting an early stage product.

Innovators and Early Adopters form the elite group of product evangelists can propel the product further ahead into its lifecycle journey.

In between Early Adopters and Early Majority comes the first major test for the product, the Chasm. This is a dark, tricky zone which basically makes/breaks the product. Crossing this zone is largely dependent on the product evangelists, as unless they do not see value in the product, there is no point in the journey ahead. This testing phase builds more life into the product as it gears up to move to the next phase in its lifecycle.

Next comes the Early Majority, who are the pragmatic set of users who need to see it to believe it. They do not accept anything on the face value. Hence, they wait for the initial buzz to pass, and look for feedback from Early Adopters and Innovators to be influenced into adopting the product. They constitute 34% (almost one-third) of the user base. This is the phase where the product gets completely matured, and is ready to be accepted by the ‘mainstream market’.

After this phase come the Late Majority, those conservative late bloomers who are extremely skeptical of any new offering until it has been time tested and proven to be worthwhile. Without this proof, they would not care about the product, no matter how innovative or awesome it is. Once the requisite validation is received, the late majority take the product into the final phase of its life cycle. Just like early majority, the late majority also constitutes 34% of the user base.

Subsequently, the product moves into the final phase to the Laggards. These are folks who are extremely averse to the idea of new products and are usually slow to accepting change. They wait to see if they require the product, at all, and would not buy the product unless they see real value (which in most cases would be a cashback or heavy discounts). The laggards make up the remaining 16% of the user base.

Where is Mobile Wallet on the Product Adoption Life Cycle?

Coming back to the earlier example, Google Wallet, which was an alpha version of the product, brought in the new era of cashless transactions using technology (NFC). As the product (mobile based e-wallets) moved along the Product Adoption lifecycle, it went through immense transformation. Today, with technology and internet at their prime, mobile wallets have been able to substitute the need to carry physical objects like Credit/Debit cards, currency etc., by allowing consumers to easily perform the same transactions from the “safety” of their smartphones. [Notice that I have used quotes to mention safety, but that is a discussion for a later time.]

A mobile wallet is nothing but an app the user needs to install on his/her smartphone. After securely storing his/her card details in the wallet, it is ready to be used. The user can “refill” money into their mobile wallet from anywhere, at any time, and the same can be used to complete any legitimate transaction with any merchant (as long as the merchant is ready to accept the transaction using a suitable means).

It is safe to say today that “mobile wallet” as a product has made its leap of faith from the early stage prototype, to a mature mass market solution. The Early Majority has begun accepting it as a viable solution, but will it make a safe landing?

The Gold Fish (Product) has made its leap to cross the CHASM

The Great Indian ‘Mobile Wallet’ Revolution

On 8 November 2016, Indian PM Narendra Modi made a bold, out -of-the-blue announcement regarding the DEMONETIZATION of Rs.500 & Rs.1000 currency notes, stopping it from circulation on immediate basis. All of a sudden, there were no currency notes for the general public to use. While Indian public scampered around for cash, the mobile wallet vendors had a hearty laugh. It was time for the once sidelined product to take the main stage.

With vendors such as PayTM, Mobiqwik etc. ruling the roost with their easy to use (app based) wallets, the whole of India plunged into the world of cashless economy. A short while after this came the next big shockwave. Mukesh Ambani delivered on his long time promise of bringing 4G to the Indian masses at affordable rates. This opened up a whole new era of accessible internet like never before. Indians now had high speed internet it their disposal, and struggling to cope up with unreasonable data rates (and slow speed) seemed to have become history. This further boosted India’s internet consumption, especially in the e-commerce space (since Indians apparently love shopping!). The obvious choice of payment now seemed to become online transactions, with consistent growth in usage of mobile wallets.

Rise and Rise of Mobile Wallets

As the year 2016 came to a close, two majors things had happened

Indians had found their new found need to spend
Indians also realized that they no longer needed to carry any cash around with them, all they needed was their smartphone

The seemingly dull space of online payments suddenly looked like this:

As seen in the above image, a level playing field has been home grown over the years. Barring a few (international) veterans in the domain, a dearth of new startups emerged providing innovative solutions in FinTech. Our Star Performer (aka ‘Mobile Wallet’) now had a number of competitors.

Mobile Wallet vs Cash — Although this seems to be a no brainer, there are still sections of Indian society which works only on cash basis. Yet, the impact of mobile wallet was such that even a road side chai-wala was now ready to accept digital money(called PayTM colloquially). There is indeed a shift in gear. It only remains to be seen who wins this battle in the end. Digital money is still not a government accepted currency. (Did I hear Bitcoins are waiting eagerly around the corner?)

Mobile Wallet vs Plastic Card (Credit/Debit) — Although being close cousins, they work very different from one another. From an end user perspective, it is way easier to not carry these innumerable number of plastic cards (offered somehow like hot cakes by their issuers, aka Banks). All the user needs to do is refill money into the wallet. Plus, with the proliferation of internet, shopping has turned into an online activity. But major purchases still need the user to visit the store and choose. Hence, both seem to be coexisting at present.

Mobile Wallet vs UPI — As a part of the cashless economy initiative, Government of India also introduced their version called Unified Payment Interface (UPI), targeting a mobile commerce oriented market with possible integrations with all major available platforms. Although the technology is pretty nascent, UPI could be a strong competitor to the mobile wallets, which are yet to be authorized as legal monetary transaction by the government. This space would be an exciting watch!

Everything ain’t as rosy as it seems

Despite being a life changing product for its consumers, there is still a lot of skepticism circling around the security and longevity of mobile wallets. Many factors contribute to this:

Increase in data-breaches and lack of cybersecurity — it goes without saying that for every high there is always a low point. With technology leap frogging every few years, so is the risk associated with Cyberspace, which is at all time exposed state. Unless some stringent measures are taken for securing the payment channels online, it would be very difficult for mobile wallets to survive, as it remains unregulated and open.
Mass Market coverage — Despite seeing the unprecedented success of the likes of PayTM, there is still a vast untouched segment of people residing in areas where even today internet penetration is negligible (if not nonexistent). This would be a tough battle as the work wont stop with providing internet access only. There is also an uphill task of educating the people and making them cognizant of technology. Till then, the Indian rural segment would be an unreachable market.
Customer Loyalty — A customer is loyal only as long as the last discount coupon received. Especially with the number of players existing in the market today, it would be a tough call on whom to place bets. But one thing is for sure, it is as impossible to gain the customer’s blind trust as acquiring them in the first place, if not more. The sooner service providers realize this and take necessary action, the better

A Tale of Growth Hacks

“The journey to capturing market share is filled with cashbacks and discount coupons” — Unknown

With mobile commerce and online payments on the rise, companies and service providers are at loggerheads to do everything at their disposal to gain an edge and inch ahead with market share. There are large scale efforts being deployed in Customer Acquisition, mainly through,

Loyalty/Rewards points — The effort to keep a customer loyal has reached such a state that the main way customers remember the service providers is through their spam messages declaring “flash sale” and “mega rewards”.
Discount coupons and cashbacks — One of the most efficient strategies used where customer is forced to use up available coupons to receive more cashback offers.
Digital Marketing Campaigns — The world moving to social media has become both a boon and bane for service providers. Not only are they spending insane amounts of hard cash in stalking customer profiles in an attempt at “targeted campaigns”, they are losing at their own game with a new entrant coming with a same/similar strategy every other day.
Psychological factors — Many Indians are still reluctant to embrace the internet wave and spend money on online transactions. Those who are in favour of this have already had multiple benefits reaped at the hands of the service providers.

Of all the “innovative” methods being devised to attract customers with the sweet bait of more-for-less, the need for proper value proposition to build brand loyalty seems to be largely an ignored fact.

Summary

Mobile wallets have received a jetpack upgrade (in the form on newfound awareness and interest) to help it land safely and snuggly in the Early Majority phase of the Product Adoption Lifecycle. There is enough fire power to see the technology through to its Laggard phase, by then maybe something new might come up. Mobile Wallets have begun a new chapter in the area of FinTech and payments specially. If managed effectively, it has the potential to make end user’s life heaven.

“Its always worth the wait, and wait is what we do” — Unknown