Demonetization: A Game Changer for the Indian Mobile Wallet Market

Tue, 21 May 2019 6:37

Growth in e-commerce and m-commerce sectors has escalated the demand for integrated digital payment methods, which has compelled payment firms such as card networks and payment service providers to develop mobile wallet technology individually or in alliance. For instance, an alliance of U.S. banks launched Zelle, a real-time person-to-person (P2P) wallet that processed about 247 Million payments in 2017 with a year-on-year growth of more than 40-45%. Additionally, global card network companies, Visa and Mastercard have introduced digital wallet services, Visa Checkout, and Masterpass respectively.

Additionally, the adoption of certain policies such as Payment Service Directive (PSD2), open banking and others, which primarily focus on the acceleration of digital payment services as a suitable alternative for cards.

Segmentation Insights

The global mobile wallet market can be segmented on the basis of wallet type, payment mode, and application.

Based on wallet type, the market can be segmented into device-centric, merchant-centric, network-centric and others. A device-centric mobile wallet stores payment credentials in the mobile device. The dominant technologies in the market associated with device-centric wallets are Near Field Communication (NFC), Magnetic Secure Transmission (MST), Host Card Emulation (HCE), and digital check-out processes. Certain technologies are specific to the operating system integrated with the smartphone; for instance, Apple Pay works only on Apple devices whereas Samsung Pay and Android Pay work only with eligible Samsung and Android mobile devices.  

On the basis of payment mode, the market can be segmented into near field communication (NFC) and remote payment. Remote payments are conceptually close to e-payments. They help secure data storage of payment and user related information. A remote wallet is majorly used for payment transactions within m-commerce and e-Commerce and is equipped with a central stored-value account (SVA) that permits end-users to receive and make payments using various enabled payment methods. 

Based on application, the market can be segmented into mobile commerce, mobile transfers, micropayments, and others. The current technological landscape promotes mobile commerce majorly because of shopping experiences directed towards smartphones. The presence of e-retail markets such as Flipkart, Amazon, Myntra, and others has driven consumers to opt for online shopping over conventional methods. This shift has significantly widened the scope of the mobile commerce market.

Regional Insights

Asia Pacific is estimated to emerge as the fastest growing region, owing to the rapid adoption of mobile wallets in the e-Commerce sector, which has led to the availability of huge cashback and discount, thereby attracting the customers. For instance, a large number of consumers in India have started adopting mobile wallet services as companies offer coupons and exciting offers on every transaction. Moreover, e-Commerce-based companies in India, such as Flipkart, Amazon, and others provide a 10-20% discount if a payment is processed through mobile wallets. Demonetization paved way for colossal growth in the mobile wallet industry and boosted it with an exponential growth rate of about 81% during the fourth quarter of 2016. Below figure shows an analysis of the Indian mobile wallet market share during the period 2013—2016.

China is one of the largest e-commerce markets in the region and possesses various e-commerce platforms that offer their own payment methods in terms of e-wallets. For instance, Alipay, an associate of Alibaba, is the largest e-wallet in China. Additionally, another e-wallet witnessing rapid growth in the China market is WeChat Pay, a subsidiary of the WeChat social network. Presently, e-wallets account for about 60% of all online transactions in China. Moreover, growth in China’s middle-class population has resulted in an upsurge in the number of Chinese tourists in the west, which in turn is leading to high demand for mobile wallets from merchants active in tourism across Europe and America.

The mobile wallet market in Brazil is projected to double in the next 5 years, from 15% to 31% with a value worth about USD 23.7 Billion by 2021 (Source: WorldPay). This growth can mainly be attributed to the e-Commerce boom in Latin American countries, which is supported by the increased ease of online shopping. M-commerce in Brazil is set to achieve a worth of about USD 10.1 Billion in 2021, owing to the increased penetration of mobiles with about 1.3 mobile subscriptions per capita. WorldPay expects the number of connected adults to grow rapidly as well.

Key Players

Some of the key players in the global mobile wallet market are American Express, Apple Inc., Google Inc., Blackberry Ltd., Sprint Corporation, MasterCard Incorporated, AT&T INC, Samsung Electronics Co., Ltd, and Visa Inc.

In December 2018, Western Union announced an alliance with TerraPay to enable mobile wallet and bank account payout. This partnership will also enhance Western Union’s payment network across Africa, Asia, and Latin America.

Segmentation

By Wallet Type

  • Device-Centric
  • Merchant Centric
  • Network Centric
  • Others

By Payment Mode

  • NFC
  • Remote Payment

By Application

  • Mobile Commerce
  • Mobile Transfers
  • Micropayments
  • Others