September 29, 2013
In India we had frequent changes to the prepaid instruments loading limit. How much you load your prepaid instrument directly affects how much it will be attractive to end consumers. A few thousands didn't do any good. Finally RBI allowed INR 50,000 to be loaded on your prepaid instrument and that led a number of players (PayTM/One97, Mobikwik, Flipkart, etc.) to apply for prepaid license to launch various products such as Mobile wallets. Mobikwik has announced the release of the New Avatar of its Mobile Wallet for Android and iOS on 27th September, 2013. Its important to note that they had a mobile wallet and an app for a while now. That app had over 500,000 downloads. This statistics is for the old app which was a closed loop mobile wallet.
Before we talk more about this lets look at the basics. The prepaid cards can be categorized into open-loop cards(allows cash withdrawal and purchases, can be used wherever card brand is accepted), semi-closed loop cards(no cash withdrawal, can be used wherever card brand is accepted) and closed loop cards(merchant- specific, no cash withdrawals).
New Avatar of the Mobikwik wallet seeks to empower people with the ease of one click transactions and storing upto INR 50,000. Its a semi-closed prepaid instrument. This would be (at the minimum) used for activities such as paying bills - prepaid, postpaid, DTH, Data transactions, gas, electricity, landline and insurance. And hopefully they can do merchant acquisition and go beyond these popular categories with the new wallet.
Mobikwik was established in August 2009 by Bipin Preet Singh (CEO). According to him, For Merchants who want to accept online and mobile payments, the MobiKwik wallet is the first payment option in India to guarantee nearly 100% transaction success rate and maintain user loyalty to the brand owing to a superior payment experience.
Before we go into details of the new wallet, its important to discuss about the overall Mobile payments Scenario in India and why there is so much of excitement around it. The following chart by Knowledgefaber gives a good insight.
Sizeable presence of unbanked population, coupled with increase in mobile phone penetration presents huge potential for m-payments adoption in BRIC countries
According to Knowledgefaber, expect many more launches of Mobile wallet and Mobile payment solutions in the next couple of years. Not only from 3rd party players like Mobikwik, but Ecommerce players, banks, operators and large technology firms.
Now coming back to Mobikwik. Users can also add upto Rs 50,000 to their mobile wallet through credit/debit card, internet banking and cash cards. In case a customer needs to withdraw money, the wallet is required to be linked to a bank account, and money can be withdrawn to a bank account only.
This development has occurred about a month after RBI gave a semi prepaid payment license to MobiKwik, Paytm, QuikCilver and HotRemit. Mobikwick claims to already have the largest number of active digital wallet users and has a turnover of close to Rs 100 crore. They would be looking to migrate the users of old wallet to the new semi-closed mobile wallet. So it should be good news for subscribers.
Major competitors for Mobikwik in India include Airtel Money, ZipCash, Money On Mobile and State Bank of India. Other mobile wallet providers from India such as PayTM, till now provided features such as recharge and toll/bill payments. Flipkart had briefly introduced its wallet for online shopping/payments on its site but pulled it back. Now they are taking the license from RBI for semi closed wallet operations. Airtel Money on the other hand provides money transfer to mobile and bank accounts, movie ticket booking, insurance and even donation.
Have you ever used a mobile wallet in India? Maybe not. Overall the mobile wallets have not really picked up in India so far. Some of the reasons are:
- Lower transaction fees beneficial to merchants, but model diminishes role of banks, mobile operators (guys with marketing firepower)
- Banks have no visibility in customer transactions, threat to money transfer business of banks (customer education responsibility will fall on the players who are mostly startups or mid-size firms with limited financial muscle)
- Limited uptake of services currently based on this model due to limited application areas (unlike in US, with more power in wallet)
Mobikwik wallet is a good move to overcome the third and most important limitation. According to Mobikwik, a merchant can go live in 2 days with them (Site). If the uptake increases, mobile wallet companies will get funding from investors to market these products and educate customers.
LTP View: It will be interesting to note if other players such as PayTM and QuickCilver will launch their own New versions of mobile wallets. Merchant acquisition would be the key. If the new avatars also provide only mobile recharges and bill payments, it won't be fun because there are already solutions. It may be asking too much but if proximity payments (offline, at stores) could be brought onboard, as in other countries, it could be a game changer.