Growing Mobile Payment Market in India (Part-I)

Digital wallet payment solutions are becoming more relevant for the Indian economy  driven by mobile centric internet penetration. The Reserve Bank of India (RBI) issued “Payment Banks” licences to different companies who are then eligible to provide RBI approved wallet-centric services like transferring money from wallet to bank, bank to wallet, wallet to wallet or provide merchant payment services to their partners or any other banking services in similar form.  The current digital wallet segment is populated with several players from different verticals but in many cases offering overlapping solutions. Most players are concentrated on urban areas and only a few looking beyond comfortable boundaries and providing  grass root level services.

An overview of the ecosystem is given below. Customers and merchants are holdings two pole of the ecosystem, while players are increasing their footprint in multiple areas to drive more profit.

Wallet Payments Value Chain

 Key Takeaways:

  1. Ecommerce, Travel and Entertainment are key online markets with highest gross merchandise values. Other sectors like food, grocery and daily household expenditure, will be the key to generate scale in Online to Offline (O2O) mode of commerce in future.
  2. A rural/urban split is visible among the digital wallet players with most concentrated on urban consumers that they chase using heavy advertising spend. However, value per transaction is low and limited by customers switching between multiple wallet solutions. This is forcing wallet providers to think beyond online towards offline.
  3. In the light of current social & economic developments, digital wallet payment solutions are becoming more relevant for the Indian economy, driven by:
    • India is a mobile-first country for internet access and already has the third largest smartphone user base globally.
    • Digital wallets can work as a one stop payment solutions for multiple sectors such as: ecommerce, remittances, mobile banking etc.
  4. Many players are providing overlapping services while using digital wallets as a platform to acquire new customers:
    • Players like Oxigen Services and PayU provide digital wallet solutions, payment gateways, PoS terminal with strong backend infrastructure in place.
    • While telcos such as Airtel, Idea and Vodafone are leveraging backend support from these players to provide better service offerings and driving increase revenue per user.
  5. A few players like Oxigen, Ezetap, and Suvidhaa provide a mix of urban and rural reach – concentrating on grass root solutions. They rely on building customer loyalty via word of mouth. This creates a more robust and unique user base with potential to spread deep roots in rural India.
  6. There will likely be consolidation in future. Players with significant market positions and funding will likely acquire smaller players and those providing complimentary parts of the value chain.


  • Inevitable consolidation: We expect consolidation to occur relatively rapidly leading to an eventual situation with few large players dividing the market. The winners will have distinctive solutions for the major constituencies in the market.
  • It is possible a few niche players will remain and may grow in number as the market continues to develop and mature.
  • Big players will get bigger: With little product differentiation, the players with the largest investment backing will likely prevail in the long run.
  • Transaction without Internet: Telco’s will likely form a key component in the m-commerce value chain. A whole new m-commerce market likely unfolds by connecting offline marketer. It is most likely there will be transaction system without internet through carrier billing or developing on Telco’s SMS platform

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