You will find too many E Wallets at India and most are near-empty

Indian e-wallet industry’s size stood at an estimated Rs 154 crore in 2015-’16, it is expected to zoom to Rs 30,000 crore

Together with Indians increasingly taking to e-payments for their transactions, regular or otherwise, the cell wallet market has been growing rapidly in the nation.

Big opportunities had opened, with an estimated 95 percent of all trades being performed in cash until at least November 2016, when the government demonetized two high-value currency notes, sucking nearly 86 percent of the money in circulation (by value) in the market.

And everyone, from technology businesses to banking into India's National Payments Corporation, is scrambling for a share of the pie.

Lately, even a few non-banking players joined the celebration, the latest entrant being Hike, the messaging program of telecommunications leading Airtel's parent company, Bharti Enterprises.

It's the initial messaging platform in India to introduce this type of feature. Its wallet will allow money transfers from 1 person to another, and allow fund moves to banks using the government-backed Unified Payments Interface system.

Then there is the communications program, Truecaller, which, in March, launched a phone payment service for Android users within its app. And Amazon is set to pull out its e-wallet in the nation.

While the developing Indian e-wallet industry holds immense potential, success won't appear easy, and certainly not for fly-by-night gamers.

Indian e-wallet industry: What does it resemble?

The e-wallet industry is over a decade old in the nation. The first such product was Wallet365.com, launched from the media leading Times Group in association with YES Bank in 2006. Between 80-90 players, of which some 55 were non-banking players like Paytm, Mobikwik, Oxygen, and ItzCash, there were by 2017.

While in November there were about 100 million e-wallet consumers in India, the number has shot up since that time, not the least because of demonetization. Marketplace pioneer Paytm alone had more than 200 million users. The table below names that the industry players that are dominant, as stated by a financial inclusion scheme of the Narendra Modi government, the Pradhan Mantri Jan Dhan Yojana.

With the rising use of smartphones this year, India is expected to replace the US since the second-largest smartphone marketplace, a Morgan Stanley research report says -- and increased internet penetration, about 60 percent of urban India is currently browsing on mobiles. They are also warming up to payments. Needless to state, convenience and the ease of using them are reasons for this.

While digital payments were turning popular anyway, the government gave it a major push last year.

The game changer

Last November's demonetization of the Rs 500 and Rs 1,000 money notes resulted in an acute cash crunch in the economy. This exercise was aimed at curbing cash and weeding out notes. The move also nudged more Indians towards electronic payments.

For instance, in the first few hours following demonetisation, Paytm saw an eye-popping 435\% in growth in traffic, a 200\% increase in program downloads, along with a 250 percent rise in total transactions and trade value. Rival Mobikwik also witnessed a leap in program downloads in the days following demonetisation. The government's payments stage, Bharat Interface for Money or BHIM, which can be linked to over 30 public and private sector banks, was employed by 12.5 million people by February this year.

However, the fun didn't last.

Over three months after the currency ban, digital repayment falls started declining. Competition among e-wallets intensified as money made a recovery. Companies now have to get creative to succeed in the section that is overcrowded.

Profitability mystery

Most Indian e-wallet companies are yet to become profitable. "If you're just a wallet company that consumers are using to create small payments then there's absolutely no revenue stream, and the margins are extremely narrow," Vivek Belgavi, leader, financial services technology, PwC India, said. "A wallet can make money only when it expands into extra services and provides an opportunity for cross-selling or up-selling."

Thus iKaaz, which began as a mobile pocket player at 2015, has now shunned the business and transformed itself into a payment services company. CEO Soma Sundaram said that with the UPI program set to revolutionize digital payments and competition, which makes money will get tougher for businesses that were e-wallet. "We adopted a cautious approach and determined that it makes better sense to shift the business focus on another payments alternatives method, like tap and move, than being a wallet," he said.

Meanwhile, such is the lure of the marketplace that newer players maintain flocking in, occasionally even without understanding the fundamentals of the sport, experts state. "There are players who have got the license [in the Reserve Bank of India] but haven't started operations nevertheless. ," said Ashvin Parekh who conducts Ashvin Parekh Advisory Services. "This is because after getting the license, when some of them return to the drawing board they realize that the money required is enormous and they need substantial volumes to be rewarding, and therefore they back off," said Parekh who has advised several companies and banks in their digital economy game program.


Diversify, or move home

The best bet to stay in the game without burning a hole in the balance sheet is by expanding the sales streams, admit cellular pocket players.

"To earn money, you need to diversify...and also go niche at precisely the same time," explained Naveen Surya, managing director, ItzCash, a wallet company headquartered in Mumbai that recently turned profitable. Besides wallets and pre-paid cards, ItzCash has also entered the financial services segment and is currently collaborating with monetary businesses to provide loans to retailers. It is also taking a look at the market.

The huge scale India provides is alluring. Digitizing payment is a gateway to payments and banking. "There will be over one thousand individuals with electronic IDs, one thousand mobiles...people are going to utilize them," said Tidhar Wald, the government and corporation relations specialist at the UN's Better Than Cash Alliance. "Then it's a win-win-win situation for the government, the people, and private businesses."

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