Mobile Wallet Industry in India: Are We Asking the Right Questions?

mobile wallet industry india

It is true that ‘nothing changes if nothing changes.’ While the announcement of demonetization left many people stunned, Vijay Shekhar Sharma galvanized paytm into action. Hardly a day had passed since the announcement and people were still coming to terms with what the move heralded for everyone concerned.

Yet, Paytm seized the moment. Publicly lauding the effort of the government, they recognized the opportunity to propel India in the direction of a cashless economy. The logic was impeccable. What could be better than a digital wallet when cash was hard to get?

Within the first fifteen days post demonetization, Paytm acquired 8 million new customers. On the ‘merchant’ side, there were approximately 40,000 new merchant establishments signing up every day. Daily transactions went up by 250% compared to pre- demonetization days. The wallet size too, increased three fold.

The biggest shift however was in the demographics. Prior to 8th Nov – a day immortalized in the history of the nation – cities with population less than one lac accounted a mere 1-2 percent of the overall Paytm transactions. Shortly after demonetization, this number had climbed up to 20 percent. On the other hand, the share of the top ten cities fell from 60 percent to 40 percent.

It wasn’t that Paytm’s competitors were silent spectators with ring side seats. Companies like Mobikwik were as conspicuous as Paytm on the front page of most broadsheets.

The aforementioned stanzas talk about the impact of demonetization on Paytm, India’s largest virtual payment wallet. But, what if the ‘war of the wallets’ had many more radical players? Players who hitherto haven’t traditionally been in this space! That would widen the ring and bring a whole new dimension to the mobile payments space.

Before we get into that, let’s start at the beginning. At the beginning there is nothing or almost nothing except for questions. Everyone has a question, even a child. So what’s the big deal about it? The answer lies in the quote below.

If I had an hour to solve a problem and my life depended on the solution, I would spend the first 55 minutes determining the proper question to ask. – Albert Einstein

The key is to pose the proper questions. WhatsApp started their journey by asking the right question at that time, What’s up? WhatsApp is a pun on ‘What’s Up’ for those who want to hear it plainly. Founded by Cofounders Brian Action & Jan Koum, it was initially launched as an app on the apple app-store to reflect the status of users. Messaging came in later when they probably asked themselves another ‘proper question’ which lead to sharing messages and a variety of media: text, photos, videos, documents, and location, as well as voice calls.

As their site claims, behind every product decision is their desire to let people communicate anywhere in the world without barriers. In the current scheme of things we not only need to communicate, but also transact. If WhatsApp were to ask itself the right question in the Indian context, it would be- What is the next most important thing which would impact the daily life of a person. That could lead them to….. making payments in a digitally pivoted India!

At present, more than 1 billion people in over 180 countries use WhatsApp to stay in touch with their family and friends across time-zones. In India itself they have 200M users. In one fell swoop, traditional mobile wallets would have to contend with renewed competition that already has more customers using their service to start with. Paytm, the largest wallet has 160M users in India. In short, the transition from being a pure social app to incorporating a payments utility would massively shake up the current ecosystem.

WhatsApp has already indicated that it might launch a payments app using the governments UPI system. UPI has been developed by National Payments Corporation of India that allows seamless peer to peer transactions from one bank account to another, using only a virtual payment address linked to the account and a user’s phone.

Incidentally, they are not the only ones that Paytm has to worry about. Truecaller has already launched Truecaller Pay using UPI, where person to person payments can be made. They have partnered with ICICI Bank for the same.

As the lines between social applications and virtual payment wallets is blurring, the emerging new ecosystem is bound to have a new set of rules and challenges to contend with.  Before we get into the Indian scenario, let us look at what has already played out as reality in a market which India is often compared to – the great dragon (China).

Even though the Great Wall of China keeps it insulated from the rest of the world, the war within is of gargantuan proportions. WeChat, the WhatsApp of China emerged in 2011 as a social platform offering free chat, voice messaging, photo sharing and gaming. Its parent company Tencent, is one of the largest Internet companies of China, as well as the largest gaming company in the world. Tencent also holds 15% stake of, one of the largest B2C online retailers in China.

By 2016 WeChat secured its position as the largest messaging app by MAU(monthly active users) of 889M(in China). However, only after two years of inception, in 2013, they launched WeChatPay their payment services arm, which started competing with Alipay in China. All at once, Alipay which held the traditional bastion in mobile payments faced competion from an unexpected social app which incepted a good seven years later.

To put things in perspective, Alipay is owned by the Alibaba group and was launched in China in 2004. Alibaba is the leading e-commerce platform in China through its suite of online marketplaces. Alibaba owns Taobao, the largest C to C online marketplace in China (in GMV) and Tmall, the largest B to C platform for retailers and brands. It’s but natural for Alipay to be the official payments provider for the entire ecosystem.

So, how was WeChat able to extend its services from the traditional chat to payments? It simply leveraged on the number of loyal users. By the third quarter of 2016, WeChatPay had almost 38% market share as compared to 50% of Alipay.

In terms of number of users, in 2016 WeChat claimed to have approximately 800M as compared to 450M of Alipay. This means the chances of many more loyal users of WeChat adopting WeChatPay is highly probable which will steadily reduce the gap between themselves and Alipay. Alipay has no choice but to look over its shoulder to the close second catching up with a burst of energy, in the marathon.

However, introducing a new service to a loyal set of users is not the only thing that has contributed to its popularity. WeChatPay effectively reached out to them at a whole new level, an emotional one, when they launched a new feature for the traditional Chinese New Year in 2016 – the ‘virtual red envelopes’. Red envelopes are traditionally used in China to gift money on special occasions.

Alipay was completely caught by surprise when WeChat introduced this feature in 2014 (just a year after launching WeChatPay). Millions of WeChat users sent the virtual red envelopes by linking their cards in WeChatPay.

It was so successful in acquiring users that by 2016, almost 8 billion digital envelopes exchanged hands… or shall we say accounts. A brilliant move to nudge their users to start using this service. A few years ago, Alipay could not have imagined a social app intruding on their payments space.

Given the above scenario, let us connect the dots to the Indian landscape. Alibaba and its affiliate Ant Financial are the largest stakeholders in One97 the parent company of Paytm. While demonetization offered a great boost to Paytm, it is only a matter of time before Whatsapp and other social apps like Facebook could catch up with it.

History could replay itself for the Alibaba group. Just as WeChat emerged as the new kid on the block and shook up Alipay in China, so could WhatsApp do that to Paytm in India. Facebook is in a unique position where it has two contenders in its pocket- WhatsApp and Facebook Messenger.

Incidently, Facebook Messenger launched person to person payments in the year 2015 in the US. Hence, online and mobile payments is actually not a new scenario for Facebook/WhatsApp.

From Paytm’s perspective, apart from social apps, the top two e-retailers in India, Amazon and Flipkart are also vying for a piece of the mobile payments pie. Amazon has already been granted the Prepaid Payment Instrument license (PPI) which will allow it to step up from the current ‘Pay with Amazon’ that was limited only for amazon transactions.

It’s rival Flipkart has PhonePe which was launched last year. However, without digressing, let us get back to social apps extending to payment apps, which is the core subject of this article.

When the lines blur between apps that started off with radically different objectives, the new emerging battleground in the payments space would certainly carve out new rules and realities.  The race for supremacy in India will be won by the organization who understands the indian culture the most.

Like WeChat struck a chord with the Chinese on introducing the ‘digital red envelopes’ for their New year, Indians too, being an emotional race will probably go with the player that relates to them at that level, assuming that it is an easy to use efficient solution.

As of now, India is the largest market for WhatsApp. It is more popular here than Facebook itself. It’s true that sometimes people wakeup and check their messages on WhatsApp before even brushing their teeth. As mentioned earlier, WhatsApp became the driving force that they are when they asked the right question; some might say that they owe their very genesis to it.

The questions that beg an answer therefore, are: Will WhatsApp ask themselves yet another proper question? And if they do, where does that leave the current market leader Paytm, and the other traditional players in the payments space?

(Disclaimer: This is a guest post submitted on Techstory by the mentioned authors.All the contents and images in the article have been provided to Techstory by the authors of the article. Techstory is not responsible or liable for any content in this article.)

About The Author:

A management graduate, Komal Bhanver began her career in the IT industry. After working for a decade, she decided to take a brief sabbatical to raise her children. Post that, she worked in management consulting as a Director with PeopleFirst. She is the co-founder of ‘The Next Milestone Technologies’, an organization with a vision to enhance employability.

The author in her awakened quite accidently but, to her delight, she immensely enjoyed the process of weaving stories. Click! a story of India’s e-commerce boom is co-authored by her, along with Jagmohan Bhanver. Her debut novel – The Mauryan – published by Hachette marks the advent of Indian writing in the historical fiction genre. She lives in Mumbai with her husband, two children and a pet Labrador. Interact with her on facebook using @Author Komal Bhanver or her LinkedIn profile.