Recently there is some discussion on whether in the current context of multiple digital payment systems being in place, the “Mobile Wallets” have lost their relevance.
Economic Times carried an article recently which declared “Here is why the flavour of the season..mobile wallets will die” .The argument was that in the long term systems like UPI stand a better chance as they enable direct transfer from Bank accounts to pay. The lack of “Inter operability” of mobile wallets was one of the reasons cited why people may opt out of mobile wallets. Lack of interest on wallet balance was another reason quoted by the article.
The article quoted PayTM owner Mr Vijay Shekar Sharma stating that they will soon start focussing more on “PayTM account” after which PayTM wallet will become a tool to operate the account. Then the interest may be payable on the main account balance. This is possible because PayTM has received the Payment Bank license and can accept deposits upto Rs 1 lakh.
Presently the Singapore based Bank DBS operates a similar system where it offers to pay interest on the SB account balance maintained which will be linked to a card (like ICICI Bank’s Pocket Card). The DBS account which is accessible through a mobile works like an interest earning mobile wallet besides providing a physical card that can be swiped in the POS machines when required. It looks promising but seems to be still struggling with technical hitches.
Today most Bank applications also provide the option to be used like a mobile app for payment for various bill payments. Many of them offer it directly in the main account management app while some have created add on apps. One such is HDFC Bank which has adopted a sister App called PayZapp which can be used for online shopping, splitting bills, recharge of mobile accounts etc. Hence a combination of a traditional Bank account and an app can be used for all requirements. SBI has also released such add on apps for handling other connected services.
The advent of UPI including the BHIM has changed the functional convenience when funds are to be transferred from one account to another. There is no doubt that this is more convenient than first transferring money from a bank account to a mobile wallet like PayTM or any other mobile wallet since there is no need to park idle funds in multiple wallets.
However, sooner or later the preference for convenience has to be weighed by customers with a concern for security. In this context, one may prefer a “Mobile Wallet” instead of an UPI medium including BHIM because, it provides for one additional security feature where we park a designated amount into the Wallet and donot expose the entire account balance to the app. In the event of a security breach, while only the mobile wallet amount may be at risk, in the case of an UPI, the entire account balance may be at risk.
I therefore consider that apart from the exclusive marketing features that some wallet providers may offer, the ability to segregate the main account balance from the wallet is a huge advantage in the mobile wallets. This alone may be a reason why Wallets will not die.
On the other hand we may see that UPI app owners like Banks or an inter operable UPI gateway like BHIM may also have to provide a mobile wallet of their own and try to make other wallets redundant just as some of the wallet owners start their own Payment Banks or link up their wallets to one or the other Banks from where funds can be transferred as and when required.
Thus we may see an integration of UPI apps and Mobile apps by both the current UPI owning Banks and Wallet owning companies and they will continue to compete on other commercial considerations. Here the private sector players like PayTM will have an advantage rather than a similar app of a Bank.
BHIM as an inter operable UPI platform when it also launches a mobile wallet as an add on feature will be a formidable product. However, it is unlikely that NPCI will be able to match the rigorous security standards which other private organizations may set and hence a part of the market will continue to favour private sector wallet cum UPI apps.
Within the next few months, I will expect that the private sector mobile wallet owners will come up with their own consortium gateway to provide for an interoperable platform between the different mobile wallets so that the need to sprinkle small un-remunerative balances in different wallets will not arise. All wallets will link to a common pool account of the customer and they will share revenue from the transactions so that all will benefit.
So the future belongs to an innovative combination of different services with “Security and Convenience” continue to be the factors that determine the choice of the consumer.
We look forward to the new evolved Wallets to be released by the current competitors such as PayTM, MobiQuick, PayUMoney, Oxygen, Jio Money, MPesa etc. The survivor will be the one who is more innovative than the others.