How mobile will transform India’s payment market

As the second-biggest country in the world in terms of population and with a rapidly growing economy, India offers huge opportunities for the payments industry. With over a billion consumers, providers who understand the unique challenges of the nation and present the right offerings stand well-placed for success.

One of the biggest areas of interest is mobile payments. India has a burgeoning mobile sector that is set to enjoy considerable growth over the coming years. And while many developed countries are heading towards stagnation as the market becomes saturated, this is not the case in India, where the arrival of more affordable devices and a growing middle class are contributing to the continued rise.

A booming market

Figures published earlier this year by Strategy Analytics suggest that by 2017, the country will have overtaken the US to become the world’s second-largest smartphone market. It forecast the number of smartphone sales in India is set to increase from just 82 million last year to 174 million by 2017.

Director at the firm Linda Sui commented: “India’s growth is being driven by low smartphone penetration, expanding retail availability of devices, wealthier middle-class consumers, and aggressive promotions from local smartphone brands like Micromax.”

While Korean brand Samsung is currently the biggest player in the market, Micromax is in a strong second place, according to research from app maker MoboMarket. It also found that vendors are increasingly turning to e-commerce to penetrate the market, while gaming, social and video tools are among the most popular uses for devices.

A key opportunity for the payments sector

Given this environment, it’s no surprise that the payments sector is taking a greater interest in the country. Indeed, it was announced in September that Chinese firm Alibaba – the world’s largest ecommerce company – is looking to move into the Indian market by buying a 25 per cent stake in Paytm, which is the country’s biggest mobile payment and commerce platform.

The deal will help Paytm develop its mobile commerce and payment ecosystem in India and boost its investment in marketing, technology and talent. Meanwhile, Alibaba and its financial services arm Ant Financial will be better able to tap into opportunities in India’s fast-growing mobile e-commerce marketplace and digital finance industry.

Daniel Zhang, chief executive officer of Alibaba Group said, “India is an important emerging market with strong e-commerce potential, and we look forward to partnering with Paytm to deliver innovative products and services to consumers.”

What the future holds

Meanwhile, recent figures from 6Wresearch reveal that mobile payments in India are set to reach $11.5 billion by 2022, driven by the entry of many new players into the sector. The study noted that the main areas for mobile payments are set to be money transfer, recharge, bills payments and ticketing.

Figures from the World Bank show just 35 per cent of Indians have access to formal bank accounts. Of those, 43 per cent have made no deposits or withdrawals in the past 12 months. In a country where access to branches is patchy, and financial inclusion a real concern, mobile payments and banking could prove vital.

However, for the market to reach its full potential, efforts will have to be made to spread awareness to potential customers. Reserve Bank of India (RBI) regulations, the shift toward mobile transactions in Tier 2 cities and the government’s ‘Digital India’ project will also be factors that contribute to the growth of mobile payments in the coming years.

Recently, the RBI relaxed rules requiring a PIN for card transactions up to Rs. 2000, which helps enable low-value proximity-based mobile payments. But a lot more needs to be done.