Mobile commerce in India has evolved rapidly to become a huge trend in recent years. It will continue to gain traction with rising smartphone penetration in a country of almost half a billion mobile phone users. According to our latest Market Monitor report, smartphone shipments in India during the seasonally slow quarter actually grew by 21% Y/Y, way above the industry average.

According to the recent data from Google, the transaction value through mobile phones increased to more than US$6 Billion in India, an increase of 383% Y/Y for the FY2013-14. Counterpoint Research estimates in FY2015-16 mobile transactions will increase almost three times in India to US$16 Billion. Mobile wallets are key to drive the mobile commerce space. There are currently 62 RBI-approved (Reserve Bank of India) Mobile Wallet players working in different parts of India.

Out of all the mobile payment/wallet players, Paytm and Freecharge have been able to create greater awareness and brand identity, mostly with focus on and traction from urban consumers. Currently, Paytm offers recharge services for Direct to Home (DTH) and mobile phone services as well as mobile wallet services for transactions on other mobile apps such as Uber, Bookmyshow, eBay, IRCTC and so forth. Paytm is slowly transforming into an e-commerce platform by integrating local sellers into their platform and expanding its reach beyond metro cities. However, the overall online commerce penetration is still low and these brands are actively strategizing to partner with offline players to expand the reach. For example, Paytm partnered with Café Coffee Day (CCD) and Domino’s with a payment solution. This is a significant move to increase its footprint with offline points of sale (POS). Furthermore, with AliPay’s funding in Paytm, it gives the Indian mobile payment provider a stronger basis to execute its expansion strategy. Longer term it may provide the platform for Alibaba to enter the India market.

Snapdeal, one of the top three e-commerce platforms in India, recently acquired Freecharge, the other fast growing mobile payment and wallet company. Snapdeal-Freecharge together are ramping to become India’s largest m-commerce platform with more than 30 million mobile app installs and roughly 20 million mobile Monthly Average Users (MAUs) according to Counterpoint Research estimates. However, most of its services are concentrated in metro and tier-1 cities and, like Paytm, will look to expand its reach to smaller cities and rural areas in efforts to grow to 60 million users by end 2015. Snapdeal’s $627 million funding from Softbank Corp has helped immensely in developing its strength in both m-commerce and e-commerce more broadly.

There are also a number of regionally-focused payment and wallet companies such as Mobikwik, Oxigen and Money on Mobile (MoM) that are also growing fast.

While the previously discussed service providers are currently focusing on e-commerce services like Suvidhaa are gaining traction in offline payments thanks to greater rural penetration and targeting the unconnected consumers. Suvidhaa has developed local solutions such as “Cash in Advance” where customers can place orders from local booths paying cash in advance. It also offers Point-of-Sale banking service solution for non-account holder using Adhaar-Card and biometric identification. This enables it to address under and unserved segments in Tier-II and Tier-III towns and more rural areas.

Another player, Ezetap is also concentrating on rural India where banking services are not easily available and where very few people have bank accounts. Ezetap has partnered with the largest network of banks in India, SBI, with plans to roll-out more than 500000 retail PoS in Tier-II, Tier-III and rural areas over the next five years. This will give the company a broader and deeper reach in rural India than many rivals.

The chart below provides a snapshot of how the different payment players are positioned in terms of reach (urban vs rural) and focus areas (online vs offline) and their competing ambitions to have ubiquitous reach and expanding areas of focus.

Payment Landscape in India

 Data: as at Dec-2014

Conclusions:

• Mobile Commerce going to be a big phenomenon in upcoming years relying on the growth in smartphone user base and mobile internet. It is already growing in multiple fold and expected to reach estimated USD$16 Billion worth transaction on mobile in FY2015-16 and. Mobile payment became more relevance in India due to low penetration of debit and credit card.
• Expanding in untapped rural markets in India will be challenging for all big players. Local focus online to offline (O2O) strategy and innovative services will play key role in the process.
• After economic slowdown in Chinese, India going to be best bet for players like Alibaba, Tencent, and Baidu by backing up local players or by acquiring upcoming start-up.
• With little product differentiation, low operation margin and relatively low barriers to entry, players with the largest investment backing will likely prevail in the long run.
• We expect consolidation to occur rapidly leading to an eventual situation with few large players dividing the market.

Above is a quick summary of  report on the Mobile Wallet in India. To read the full report please click the link below (registration required for first-time users).

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