M-payments set to take off in India as mobile penetration reaches 100%

Source: The Associated Chambers of Commerce and Industry of India

The booming retail market with annual transactions worth 410 billion dollars (about Rs 1,850,000 crore) and nearly 100 per cent mobile penetration make phones a perfect medium for payments, apex chamber ASSOCHAM said today.

A growing middle class with over 300 million people and their increasing disposable income has led the retail market to grow exponentially, said The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

At the same time, India has been among the fastest growing mobile market with more than 720 million subscribers amid bruising competition among operators to retain customers with innovative applications along with value added services. By 2015, mobile phone penetration stands to touch about 100 per cent.

But the country is pre-dominantly a cash economy with 67 per cent of retail transactions being conducted in cash. All current non-cash payment modes like credit cards, debit cards and multiple mobile payment solutions appeal to a small section.

"While the ubiquitous mobile is surely the most promising channel, the need of the hour is to develop an innovative mobile payment system which is customised to the Indian ecosystem requirements and has a mass appeal," said ASSOCHAM's secretary general D.S. Rawat.

Mobile payments are a must for India to retain its growth where most people do not have a bank account but have a mobile phone, he said. "Companies identifying this opportunity and leveraging available technologies and regulations to carve out mobile retail payment solutions that are suitable to Indian marketplace are set to emerge leaders in this space, leaving others behind."

India has 173 million debit cards and 23 million credit cards in use. It is fundamentally a very different market from other countries where payment by cards has been successful. The point of settlement terminals in India remain low at 419 per million inhabitants as compared to 1,700 in China, 17,020 in the United States and 24,611 in Brazil.

The organised retail is just about five per cent of the total market, ticket size of transactions continues to be low due to widely distributed and predominantly urorganised retail industry and 70 per cent of people living in rural areas.

But within a few years, mobile phones have grown from a very small base to overtake even television viewership. Even the penetration of personal computers has been mainly restricted to urban India, making the installed base minimal at 95 million.

Given the mobile payments is the future of non-cash payment mechanisms in India, adequate steps need to be taken to tap this vast opportunity. "This wave of mobile money momentum - if facilitated by regulation and right business model - has the potential to revolutionise the payment system," said Mr Rawat.

Stakeholders involved in the development of mobile payments ecosystems are the Reserve Bank of India (RBI), network operators, financial institutions and technology providers. The RBI has allowed non-banks to issue mobile payment instruments to end users. The daily limits set for mobile transactions have also been increased recently.

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