A Purse With A Password

It was perhaps the time when we evolved from barter deals to metal pieces as an exchange of trade that the need for small pouches was felt first for carrying our money. The introduction of coins and banknotes tailored the small pouch to its more modern look of what we call wallet or purse. With digital disruption reshaping almost every aspect of our lives, the wallets too had a makeover in step with the changing mode of finances. And, we reached the age of mobile wallets.

The virtual kitty is safer, faster and more economical, compared to its physical predecessor, of course, with a few limitations. It uses a bank account or credit or debit card to make payments seamlessly while securing user data.

The mobile wallet segment, which was rather a slow starter, suddenly went on top spin with the government’s decision to demonetise 500-rupee and 1,000-rupee currency notes in November 2016 and push for cashless payments.

Paytm, one of the pioneers in India’s digital wallet space, logged in 185 million users – up from 125 million in less than a month – and made India the epicentre of all the action in the e-wallet business. At least a dozen mobile wallets are in operation now in India along with 40-odd authorised prepaid payment instruments (PPI) like gift cards, meal reimbursements, and foreign exchange cards.

Along with the emergence of mobile wallets, evolved the concept of cashback, which companies dole out to attract buyers. Convenience for all stakeholders have brought e-commerce and e-wallets to grow in sync with most platforms accepting online payments from digital wallets and reverting the cash doles to the virtual purses.

One of the reasons customers like mobile wallets is because of the cashback option. It allows users to save money and use that cashback to repurchase with the mobile wallet. Cashbacks could be one of the ways merchants can encourage users to make repeat purchases with them.

India’s push towards a cashless economy accelerated in 2019 with card and mobile payments, as a percentage of GDP, rose to 20 per cent in the December quarter from 13 per cent a year ago. Card and mobile payments also exceeded ATM withdrawals for the first time in 2019, according to an S&P Market Intelligence Report.

India’s payments market is estimated to touch $1 trillion in the next three years from $200 billion pegged last year, according to Credit Suisse. Another recent report estimated the growth to Rs 281 lakh crore in 2027 from Rs 101 lakh crore in 2020.

The Reserve Bank of India has proposed to allow direct money transfer across wallets, though it is still limited to a select few operators. Once it happens in full scale, the acceptance of wallets will rise rapidly and cashbacks received can be used across platforms.

According to media reports, digital or mobile wallet payments were the most used point of sale payment method globally in 2020 and are poised to represent one-third of all PoS transactions worldwide by 2024. Digital or mobile wallet payments equated to 44 per cent of the share, twice as much as credit cards and three times more than debit cards. By 2024, cash is expected to drop to just 12.7 per cent of transactions.

Technology innovators have started using artificially intelligent chatbots that are skilled to execute and robotise essential exchanges with the endorsement of users for mobile wallets. The practice of cashback in cryptocurrencies has hit the Indian shores and e-wallets are likely to add a crypto pocket soon.

Biometrics, which found massive use with the launch of Aadhaar-based transactions, are soon going to be featured on digital wallets that would work with fingerprints or retina scans. Wallets of future could be voice-based. Amazon, Google and Apple have begun work towards this.

***

No. of Mobile Wallets 40

No. of Mobile Wallet Users 160 million in 2020

Payments Market Size Rs 2,153 lakh crore in FY20

Payments Market Outlook $1 Trillion by 2023 Share in GDP  20%

Innovations on Cards AI, Biometrics, Crypto, Voice Scan, NFC