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Expert opinion

Mobile wallets business case - the day convenience overpowers greed

Monday 27 June 2016 | 12:08 PM CET

Abhishant Pant, payments professional: Are mobile wallets driving behaviour changes in India?

The way we make our purchases, how we pay for them, has become an important topic nowadays. Markets across the globe have embraced digital technologies that boost mobile commerce apps and have opted for different ways of making payments: by using QR codes in Asia (Alipay, Wechat), USSD and STK (M-Pesa) in Africa, NFC in Australia, or mobile banking apps (Swish) in Europe.

The arrival of mobile wallets and cashless payments has revolutionized the Indian market, and financial experts agree that payments for retail shopping will be disrupted in the coming years. Reserve Bank of India has indicated that mobile wallet transactions have jumped from 10 billion Indian Rupees (2012-2013) to 490 billion Indian Rupees (2015-2016) and that there are about 200 million mobile wallet accounts in India, although not all of these are active and many people have multiple accounts.

This leads to the question: does this adoption of mobile payments drive bigger behaviour change among Indian shoppers?

The study

To answer this question, during a guest lecture at IIT Mumbai Abhishant has conducted a short survey among the students. The results showed that even though almost every student within the class had been using a mobile wallet, only a few have used one issued by a bank, and only once. Wallets issued by banks are not as convenient to use as the ones issued by mobile payments providers, the so called “popular” or independent wallets. “Popular” wallets are among the favourite ones because they have the cashback option, and more than that, mobile wallet providers are giving incentives to users to encourage them adopt the mWallet. If this option should be eliminated, only half of the students would use the wallet.

The behaviour that drives options

Multiple studies have shown that behaviour change is a long term process which happens with constant reassurance and help from a mentor, winning trust, showcasing how new way of doing things is better than the previous one.

Once you learn doing something, the human mind creates an algorithm that defines it and then you simply keep-on doing. You don't unlearn that, until you discover a new way of doing it. This new way creates confusion in mind (Inertia), and this journey to change is long in absence of an internal catalyst, a supporter in whom you believe, or an external catalyst that knocks off the inertia.

This is what Indian mobile wallets players are trying to do: change shopper’s behaviour towards mWallet adoption by offering incentives in the form of “cashback”. Consequently, consumers will associate mWallet adoption with a recompense for services rendered, a bonus, and not as a method for payments.

Mobile wallets in India

This desire for incentives (“greed”) functions as a strong external catalyst in terms of mWallet adoption. Therefore, it will take approximately 1-2 years more for a consumer mind to accept mobile wallet as a medium of making payments. And it will require sustained investment by the wallet players in retail consumer payments categories to drive this behaviour change first in daily/weekly household consumption categories like: transportation, food, fuel and then in monthly/quarterly use cases like school, utility, taxes, society payments, personal.

Increased mobile wallet adoption growth

The recent trajectory of Ola Cabs, an Indian online transportation network company, and Uber in India comes to underline the fact that mWallet will be used as a cashless alternative payment by Indians in the next 2 years. They discounted heavily in first 2 years, but once the use case got established the “greed” was overpowered by convenience.

In the near future, mobile wallets in India will definitely win against cash (and possibly will make plastic redundant), though which wallet type - bank led or independent wallets (which now led by far)- will be more successful, is a question that remains unsolved.

About Abhishant Pant

Abhishant Pant is a payments professional based out of Mumbai, India. He believes that mutual sharing of “knowledge” and dialogue are the key to explore the self and the world. He writes regularly on payments and believes in sharing experiential learning. Recently he has started an experiment: a cashless journey of 85 days in Mumbai. He does not carry cash and does all transactions via a wallet or card. He documents the learnings of this experiment on his LinkedIn page https://in.linkedin.com/in/abhishantpant.

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