Do you ever come across a situation, where you have abruptly realized that you left your wallet at home while purchasing a gift to surprise your dear ones? Have you realized that with just a smartphone, you can make your shopping experience joyful and hassle free? Luckily you got a popup on your smartphone from PayPal app, giving you a cashback of 150 bucks by purchasing through its wallet. Finally, you end up having an amazing experience of your product purchase with surprising discount on top of it. PayPal turned out to be a savior.
We are in an age of cashless economy, and the disruption of physical cash through mobile wallets. Like PayPal, there are a lot of mobile wallets in existence. Most prominent of them are Apple Pay, Samsung Pay, Alipay and Paytm. Mobile wallets are simple digital payment platforms, using smartphone, where one can send and receive money without the need of physical cash. Global adoption rate of mobile wallets took an exponential leap with simple user interface, increased technological advancements, and huge tie ups with merchants making attractive deals for consumers and more accessibility and affordability of smartphones. It was forecasted that by end of 2022, mobile wallet market size will be around 3,140 Billion USD with compound annual growth rate of 31.5 %. Such is the humongous market opportunity for mobile wallet providers, making it as a lucrative market for new player to enter, which is currently dominated by very few players.
Digital payments are witnessing stupendous growth globally, from developed to emerging economies. Interestingly, Asian countries like India, Indonesia, and Thailand are showing promising adoption rate of mobile wallets due to growing internet penetration through increased smartphone adoptions.
In countries like India, the government triggered the adoption of mobile wallets indirectly through its implementation of demonetization of 500 and 1000 currency notes on November 2017, where 86 % of the currency notes in circulation were wiped of out of the system. While the main objective of the Indian government was to cut down on black money, this sweeping mandate helped companies like Paytm and Mobikwik, to increase the user base and transaction volumes. That’s how a government regulation indirectly triggered cashless economy. Moreover, this change in user adoption was also leveraged by other payment wallet providers like Google through its Google pay, Samsung through its Samsung pay, Flipkart through its PhonePe, and also from telecom players like Vodafone through m-pesa and Airtel through its Airtel payment bank etc. Companies like Paytm has evolved its business model recently by not limiting itself to wallet services, by introducing new ecommerce services like Paytm Mall. Simple user interface, time saving and hassle-free transaction process, and attractive cashbacks were found to be main drivers luring consumers to be part of wallet services.
Oxigen wallet, an Indian mobile wallet company, penetrated the rural segment which have dearth of banking services. The company launched Oxigen ATM in the rural pockets, that resembles a mini ATM, capturing unbanked segment. The mobile wallets like Oxigen, are indirectly competing with traditional banks giving them new challenges to grow and retain their customer base. Banks have recently realized the potential of mobile wallets. For instance, SBI has partnered with Google’s “Tez” app and initiated digital payment services. Companies like Paytm have already entered to offer other financial services like Asset Management services, where it has partnered with 12 financial institutions for offering this service. Setting up of traditional bank is a herculean task as it involves huge investment capital and stringent regulations, which is not required in case of mobile wallets.
Mobile wallets are a new mode of monetary transactions, which are built by innovative Fintech companies, which helps in transitioning of cash-based economy to cashless economy. For instance, Samsung Pay uses both NFC (Near Field Communication) technology and MST (Magnetic Strip technology), replacing the usage of plastic money (Cards) as the information is stored digitally in the app. Also, to increase the user adoption, these mobile wallets have partnered with neighborhood shops and are offering cashbacks to consumers for gaining loyalty. Governments are also responding positively with enabling regulations for digital transactions. In India, the present government has made tax exemption for up to INR 2000 for payments done digitally as it enables easy tracking, along with reducing the cost of production of currency.
But like any other sector, there are still few challenges to overcome. The biggest one is the security and trust of consumers in digital transactions. Although these concerns were already addressed by the mobile wallet companies (Apple pay has its own technology of securing the identity though facial ID and finger print scan and Samsung Pay has high end encryption technology where the consumer details cannot be tampered in any manner), still the consumer trust is a major concern for the mobile wallet companies.
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