Driver 5: Early Adopters

Certain sections of the economy have begun experimenting with mobile payments and are paving the way for others to follow suit. The early movers include:

Banks
As of mid last year, there were 222 commercial banks in India having operating branches of over 68,000. Since around 40% (400 million roughly) of the population does not have access to bank account, their market potential is still very large. A mobile-enabled disbursement and collection platform offers banks an easy way to support micro-finance initiatives and is an efficient and conducive method for loan disbursement and collection.

Retail Merchants
Retailers in India, considering their huge numbers, can be among the prime drivers for enabling mobile payments. The Indian retail sector is set to cross $450 billion in revenues in 2011 according to Technopak Advisors. Merchants with POS terminals are still low, but their numbers are growing rapidly. With stiff competition staring in the face, small and medium size retailers, to attract and retain customers, will offer multiple payment options. Considering its convenience, retailer's preference will be more for mobile payments. Mobile payments are not saddled with the transaction fees of up to 2-2.5% that credit card payments have. In addition, they have no hurdles like unsteady telecom link, to derail their smooth operation.

Travel
Mobile service providers in tie up with domestic airlines and the Indian Railways offer ticket booking through mobile. India's domestic aviation is among the fastest growing in the world. By 2010, India's carriers are expected to fly 40-45 million travelers, compared to an estimated 22 million passengers flown in FY06. IATA deadline of 100% adoption of ticketing systems by 2007 will help in increase in online and mobile ticketing. India has the second largest rail network in the world. A colossal 125 million train tickets are booked in India each year. There is a growing trend towards booking tickets over the Internet. Even if a fraction of them is booked through mobile phones, the numbers will be huge.

Utilities Bill Payments
The average Indian household in the top 10 India cities pays 42 bills annually to utility providers like insurance, telecommunications, power and water, mostly in person or through banks. A combination of paucity of time and desire for convenience is likely to increase the number of Indians paying bills online to 1.8 million by 2007-200, from the current 0.3 million in 2005-06. The available market share for mobile bill payment service at transaction fees of Rs. 5 per bill and 15% market penetration will be $3 million.

Inhibitors

Regulation
Like most countries, India too is adopting a cautious approach to money transfers to combat money laundering and other illegal movement of capital, thereby styming convenience due to caution. In the protected Indian Banking sector, approval for money management is by Reserve Bank of India (RBI- India's central bank). The good news however is that RBI, recently, has indicated an openness to allow mobile payments, considering the huge impact it will have on a vast majority of Indians without a bank account. That said regulatory hurdles posed by each country are a barrier to creating a global mobile payment system.

Security
Consumer adoption of internet commerce through credit card took a longer time than many predicted, leading to the demise of the first wave of M-commerce companies. Similarly, for mobile payments to take off, consumer perceptions of risk and security associated with them need to be erased. Besides, security and encryption protocols need to be standardized. While there are many proposals and formats - from software-only solutions to embedded chips - a single standard and dominant format is yet to emerge.

Human factor
Security, ease of use and privacy are important to consumers. However, the most important inhibitor is convenience. Personal digital assistant (PDA) succeeded, thanks to mobile e-mail, and the intensely loyalist early adopters becoming mass evangelist. For mobile payments, capturing the early adopter profile and mindshare, therefore is very important. Just as eBay was the application that made Pay Pal an effective payment option, mobile payment platform will need a killer application.

Interoperability

Operators and Banks are key channels and hence can become prime hurdle for smooth adoption of Mobile payment.

What does it mean to you - the entrepreneur?

A booming mobile market, new generation of cash flush consumers and a strong push from mobile service providers, application developers and merchant establishments have opened the doors to start-ups ready to capitalize on this opportunity. Mobile payments will happen; it is just a matter of time. If mobile payments become ubiquitous, it will open the floodgates to create M-Commerce solutions, which otherwise becomes cumbersome or not profitable. If you have great ideas that you want to brainstorm, call or write to us.

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