Analyze the product adoption lifecycle for Mobile wallets in India

Introduction

The Indian economy has traditionally been dominated by cash. However, the increased adoption of smartphones together with a favorable regulatory environment is pushing the economy to a less cash-dependent state and is promoting the usage of digital payments. Demonetization of Rs500 and Rs 1,000 currency notes, and the subsequent policy measures taken by the Government of India (GOI) and the Reserve Bank of India (RBI) have provided further impetus to digital payments. Although there have been many options to do a cashless transaction in India, none of them were widely adopted for various reasons. A mobile wallet, a convenient way to do a cashless transaction, is gaining huge acceptability across India.

A mobile wallet is a way of carrying cash or card information in a digital form on a mobile device. To make purchases, people can pay with their mobile device connected to the internet. Normally, a mobile wallet is a payment service through which individuals and businesses can send and receive money through a mobile device. It is a type of e-commerce mode that is intended to be used with mobile devices owing to their easy access and convenience. It is also known as a mobile money transfer or mobile money. Primarily, a mobile wallet allows an individual to receive payments as well as pay using a mobile device.

The mobile wallet industry has been on a strong growth trajectory in the past five years. Following are the reasons for the phenomenal growth of the mobile wallet industry:

1. Increased technology adoption
2. E-Commerce growth
3. Consumer need for convenience
4. Availability of affordable high-speed internet

The mobile wallet market in India can be divided into four distinct types depending upon factors such as the party that can operate the wallet, limits on the transaction amount, and the purpose of wallet. The four types of wallets prevalent in the Indian market are summarized in the table below:

Open: These type of e-wallets are operated by banks. They require complete KYC. They allow for both cash withdrawal and fund transfer. examples include SBI Buddy,

Semi-Open: These are also operated by banks and require complete KYC. They do not allow cash withdrawal. A transaction is allowed with merchants registered with the bank. Example Axis Bank gift card, Yes Bank meal card.

Closed: These can be operated by Banks, NBFC or other entities. They do not allow cash withdrawal. The only transaction is with the operator. Example include Amazon Pay, Metro Card, Make My Trip Wallet.

Semi-Closed: These are also operated by Banks, NBFC or other entities. They do not allow cash withdrawal. They allow for a transaction with registered merchants. They also support transfer to other wallets thus enabling Person to Person (P2P). The example includes PayTM, MobiKwik

E-Wallets can also be classified based on the types of provider:

1. Telecom Backed Wallets
2. Independent Wallets
3. Wallets from Bank

Types of e-Wallet active in India

Product adoption lifecycle for E-Wallets

Following are the types of users based on the stage where they are ready to use the product.

Innovators: Innovators are the beta users for the product. They are the early adopters and evangelists. They are OK with the initial bugs and other hiccups with the product. They provide useful feedback which is very useful for the product. They are the young, tech-savvy and risk takers. They form ~2.5% of all the user base.

For E-Wallet industry in India, innovators were the tech-savvy professionals looking to simplify the transactions. They were already using net banking and credit cards and when the e-commerce industry and mobile taxi booking services started growing, they found E-Wallet a convenient and fast way to make the payment.

Early Adopters: These are the group of users who are ready to use the product when it's still new and have not reached the masses. Just like innovators they are OK with the risk associated with early adoption. They provide valuable feedback and if they are satisfied with the progress they become the preacher of your product. They form ~13.5% of the user base.

For E-Wallet industry, the early adopters were the working professional comfortable to use smartphones. They found it very convenient to do shopping, book tickets or book a taxi using mobile applications using E-Wallet. They were also attracted by the sign-up gifts, referral bonus offered by the E-Wallet companies. These users provide feedback for the Wallet on e-stores and were updating the E-Wallet App regularly. This helped E-Wallet companies to fix the majority of the issue in initial stages.

After this lies the true test of the product. Most of the product not able to cross this valley, that Chasm.

Chasm: The chasm is the phase of the product when the early adopters have used the product and if they see value in the product they start evangelizing the product. It's very important to keep on adding value at this stage, if early adopters get disinterested then the product can not cross the Chasm valley. On the other hand, if early adopters see the value and see the benefits from this product then the product can easily cross the chasm.

For E-Wallet industry in India, the chasm valley was crossed using the bridge created by the demonetization. The innovators and early adopters have already tested the E-Wallets in different conditions in India and then came the demonetization. The Indian business which was mostly using cash before demonetization has no option but to switch to E-Wallets to continue business. The difference before and after demonetization can be easily felt. Earlier it was very difficult to find a local shop or roadside vendor accepting the cashless transaction option. Nowadays it's pretty common to find small shops and vendors accepting E-Wallets (mostly Paytm).

Early Majority: The Early majority are the users who are ready to adopt the product when is well established. There is a lot of positive news and euphoria around the product. They are influenced by the early adopters. They do some research and if satisfied adopt the product. They make ~34% of the user base. This is the phase when the product is really established in the market. It has passed the chasm phase and is set to grow.

For E-Wallet industry in India, because of demonization, widespread use of smartphones and affordable internet early majority users adopted E-Wallet pretty fast. Now E-Wallets are pretty ubiquitous in Indian urban and semi-urban areas.

E-Wallet companies provide cash back and other discounts which attract more users to try E-Wallet. Indian E-Wallet industry is currently at this stage of Product Lifecycle.

Late Majority: After early adopters come the Late Majority users. They are conservative and are extremely skeptical of any new offering until it has been time-tested and proven to be worthwhile. Without this, they would not care about the product, no matter how innovative or awesome it is. The late majority also constitutes 34% of the user base.

For E-Wallet Industry in India, they are the people older than 55Years in urban areas. In rural areas, even a person of age above 45 may not be comfortable using E-Wallets. These people are not comfortable using smartphones and especially doing the financial transaction on the smartphone. They are afraid because of the news related to financial frauds and fear of getting cheated.

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 really require the product, at all, and would not buy the product unless they see the real value. They would adopt only if no other option is left. The laggards make up the remaining 16% of the user base. This is the final phase of the product lifecycle. It's very difficult to convince these people to use the product

For E-Wallet Industry in India, these are the people who are illiterate and cannot use smartphones. Most of them do not have a bank account and are the daily wage earners. They cannot adopt E-Wallet unless their basic needs are satisfied and they start seeing the value in it.

Factors affecting the rate of mobile wallet adoption

Mobile wallet industry was moving at a very slow pace and was only targeting the urban tech-savvy professional. Then came the decision of demonetization. This changed the landscape for Indian E-Wallet company. The other tech innovation that impacted positively was the spread of e-commerce (Amazon, Flipkart, etc) and affordable internet from Reliance Jio.

Suddenly a lot of new startups and innovation started in this industry. Government policies also favored the cashless transaction. The government came up with BHIM App, UPI, Bharat QR and much more innovative steps to boost this industry. At the same time, the FinTech industry was picking up in the world. The new technologies like Blockchain, Bitcoin and other cryptocurrencies attracted many innovators to this industry.

Within a short span of time, Indian E-payment system has a lot of players.

Indian E-Wallet Industry

Competitors to E-Wallet

Although E-Wallet Industry is growing at a fast rate in India, it faces many challenges. As the Industry was growing, a lot of regulations were put in place by RBI to check the misuse of these wallets. RBI made KYC mandatory making it not so easy for E-Wallet companies to enroll users fast. With the adoption of Aadhaar number the KYC can be done faster, but with a recent ruling from the Supreme Court of India regarding preventing Aadhaar card data usage by a private player, this could again slow the process of new user acquisition. Apart from this, there are other challenges to the E-Wallet.

Mobile Wallet vs Cash: Few months after demonetization the cash in the market is at the same level as it was before demonetization. This shows the love for cash by Indian business. Although it is easier and safe to do business using cashless mode still business prefer to use cash mostly to avoid paying correct tax.

Mobile Wallet vs Plastic Card: E-Wallet and Cards are almost similar. The higher setup cost to have a card POS prevented many businesses to use the card. But recently with new innovation, the compact POS is easy and cheap to set up. With the reduced cost to set up business in India have started using card payments. This could present a challenge to the E-Wallet Industry. But current both coexist and many E-wallets use these cards to make the payment.

Mobile Wallet vs UPI: As a part of the cashless economy initiative, Government of India also introduced BHIM App, UPI, Bharat QR, targeting a mobile commerce with possible integrations with all major available platforms. These are new but has the backing of Government and RBI. Many E-Wallets have already integrated these new methods.

Challenges to E-Wallets

Even though have a great growth run in the last few years the E-Wallet industry still has a lot of skepticism around the security and longevity of mobile wallets. Many factors contribute to this:

• Cybersecurity: The E-Wallet companies have heavily invested in cybersecurity. But the technology is evolving so are the cyber attackers. Not with real money in E-Wallets, it's even more rewarding for cyber attackers to attack and find loopholes. We hear daily news about data breach by these cyber attackers. These make people skeptic about E-Wallet.
• Mass Market coverage: Despite seeing the huge success in recent years, there is still a vast untouched segment of people residing in areas where even today internet penetration is negligible. Making reliable internet available in all areas would be difficult and is not in the hands of E-Wallet companies. They depend on Internet Service Providers (ISP) to provide reliable Internet. Even if the Internet is provided, it would be difficult to educate the people to start using E-Wallet who do not even have the traditional bank accounts.
• Peer Competition: With so many new E-Wallets and sign up offers it's very difficult to retain the customers. Indian customers are very cost sensitive. If they find other wallet offering more discount they will switch immediately. Many e-commerce platforms are coming up with there own wallet making it difficult for Independent wallets to use them on their platform.

Growth hacks used

With online payments on the rise, companies and service providers are doing everything that they can do to stay ahead or gain a share market share. India being a big market has attracted many players in this industry. E-Wallet industry is using lot of options to acquire new customers.

• Sign up cashbacks\points: Customers are being offered cash back on sign up. This is encouraging many first time users to try E-Wallet
• Loyalty/Rewards points: Customers are being offered cash back and regards based on the amount of transaction they do. More the transaction more the rewards.
• Cashback: One of the most effective strategies used where a customer is forced to use up available coupons to receive more cashback offers.
• Referral bonus: Customers are being offered for referring their friend and acquaintances. Both the referrer and the referee gets cashback if referee signup with E-Wallet.
• Tie up with eCommerce: E-Wallet companies tie up with e-commerce companies to offer a huge discount in form of cashback which they can use again to buy new stuff and get more cash back.

SUMMARY

Mobile Wallets have begun a new chapter in the area of FinTech and payments especially. E-wallets in India are growing rapidly but still, a lot to accomplish to reach its full potential. Need to educate and create awareness among masses would be required. Use of technology that can work with low bandwidth.RBI needs to relax the policy related to E-Wallet and come up with transparent, forward-looking regulation to manage this industry. Investment in cybersecurity to generate confidence in people to put hard earned money in wallets.