About three decades ago, we queued up to withdraw our cash in a bank, and stood painfully in another to pay our bills. The arrival of credit and debit cards solved many of our cash-related problems and post that, the internet allows us to pay bills at the click of a button.

With the buzz around ‘mobile wallet’ and talk of the death of cash payment, is it possible to leave your wallet at home and get through a typical day? In the digital era, old ideas of money management have taken a new shape, thanks to revolutionary technologies that make a cashless world very much a reality.

Mobile wallet is often confused with mobile banking, but is a much broader concept that includes using the mobile phone as a mode of payment. It is the digital equivalent to the physical wallet we already have in our pockets/bags today. Our mobile phones are with us at all times, and as we use them for payments to retailers, travelling on public transport and a myriad other things, the need for physical cash diminishes.

4 kinds of wallets Even an unbanked person, one who doesn’t have an account, or has poor access to banks, can access a mobile wallet for transactions. Users can decide the amount their m-wallet carries (the maximum value has been capped at ₹50,000 by Reserve Bank regulations) and the wallet can be accessed by users either online or via a smartphone application.

The wallet stays as a software record on the cloud and can be accessed by a user name and password for multiple transactions — like a private bank locker. It is a lot like online banking but the difference is in the reach and additional convenience the users get in dealing with even the smallest of establishments.

Broadly, there are four types of mobile wallets — closed wallets (not re-loadable with cash and do not permit cash withdrawal, for instance, prepaid and gift vouchers), semi-closed wallets (re-loadable but do not allow cash withdrawal as they are not linked to a bank e.g. MobiKwik Wallet), semi-open wallets (linked to a bank, but do not allow cash withdrawal e.g. m-pesa) and open wallets (re-loadable and linked with a bank, permit cash withdrawal at retailer outlets, agent outlets and ATMs, e.g. Paytm).

The major companies providing mobile wallet services in India are telecom service providers such as Vodafone Plc’s m-pesa, Bharti Airtel Ltd’s Airtel Money, Aircel’s Mobile Money and Tata Teleservices Ltd’s mRupee and payment services companies like Oxigen Services, PayTM and MobiKwik. They have been successfully able to create such wallets and provide services that link technology, merchants and consumers.

Paytm in India already has 25 million active wallets and plans to reach 100 million wallets by this year-end. Mobikwik is at 8 million wallets whereas Oxigen claims to be doing 50 million transactions per month. Apart from these, this year, 41 companies have applied for RBI licence to operate in the payment banking space. In the Asia-Pacific countries, mobile wallets are expected to grow at a compounded rate close to 140 per cent.

Financial inclusion In India, cash on delivery (COD) currently accounts for around 60 per cent of e-commerce GMV (gross merchandise value). The primary reason for this is that we have more people with internet connection than those with credit cards. With the GMV estimated to hit $100 billion by 2020, even if mobile wallets manage to take away 10-20 per cent market share from COD, payment solution companies would process $10-20 billion worth of e-commerce transactions from nearly negligible levels today, as per a recent Morgan Stanley report, indicating the growth potential in the sector.

In India, where more than 500 million people do not have bank accounts but own mobile phones, getting these people on to mobile wallets helps achieve our country’s financial inclusion agenda in a big way. With increasing penetration of smartphones, mobile wallets will become the obvious choice for payments in the rural areas and unbanked population as it eases the challenges faced in managing cash.

In terms of market adoption, online retailers and utility companies were the earliest to partner with mobile wallets. Mobile wallet companies are roping in old brick-and-mortar shops and the digital natives to expand reach and improve market share. Oxigen is looking at a universe in which college students will pay for most things with mobile wallets. MobiKwik and Paytm continue to increase their partner merchants across categories. It is expected that ₹1,500-2,000 crore could be transacted on these platforms this year. Paytm is developing a system under which you could pay by simply transferring money from your mobile wallet to the retailer’s wallet — just like cash.

Earlier this year, it also launched a chat-enabled app for smartphones, which helps shoppers literally bargain for a product before buying it.

For merchants of all types, a mobile wallet has the potential to boost revenues and reduce operating costs. One of the most popular benefits of mobile wallets and payments by retailers is the ability to reduce costs by lowering fraud loss and/or payment processing fees.

Mobile wallets are the future of cash. The days when they are accepted at the ‘Kirana’ store, chemist shop and restaurant in India are not far. This also means the physical wallet is one step closer to becoming redundant. So brace for a cashless world as we fast-track our journey towards becoming a digital nation.

Alka Mahajan Chawla is Director-Mobility Practice, SapientNitro, India

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