Picking the mobile wallet

COFFEE, MOVIE TICKETS, and a cash transfer to a colleague is what Sriram Jagannathan gets with a few taps on his iPhone. If the CEO of Airtel’s m-commerce (mobile commerce) business had his way, no one at Airtel would carry a wallet. He wants his fellow workers and, eventually, 900 million mobile subscribers in India, to use their phones for transactions.

Unlike Square’s model in the U.S., where one creates a credit card-linked account and uses it to make payments through cellphones, Airtel offers a mobile wallet, called Money, created by depositing cash (between Rs 10 and Rs 50,000) at one of its 1.6 million shops.

It works like this: A subscriber downloads the Airtel Money app by dialling a specific number and registers for the scheme. The app has to be loaded with cash, which is used to pay bills or shop at places (including coffee shops and restaurants) that accept Airtel Money payments.

This mobile wallet is a “semi-closed payment instrument”, which, according to the Reserve Bank of India, is “redeemable at a group of clearly identified merchant locations or establishments, which contract specifically with the issuer to accept the payment instrument. These instruments do not permit cash withdrawal or redemption by the holder”.

Operators say unlike for plastic cards, merchants and customers in m-commerce do not pay transaction fees. The process is faster and there are no investments in devices such as card-swiping machines.

Airtel currently has 7,000 merchants in 350 cities accepting transactions through mobiles, including BSES (power bills), Indraprastha Gas, LIC Mutual Fund, and DT Cinemas.

The big advantage of a mobile wallet is that it can be converted into a no-frills bank account (just deposits and withdrawals) at no extra cost; that’s one way to give banking access to the 500 million Indians who don’t have bank accounts.

Airtel claims it is the first mobile services provider to launch such a service. However, earlier this year, handset manufacturer Nokia, launched Nokia Money, a mobile wallet service that was independent of any particular mobile network. The huge advantage of Nokia Money was that it worked on low-end featurephones, unlike Airtel’s service, which only works on smartphones. Nokia Money had 200,000 subscribers within three months of its launch in December 2011.

But in March this year, Nokia pulled the plug on this service, saying it was part of a shift in global priorities. Analysts say this offering could have helped the Finnish mobile phone giant differentiate itself from competitors such as Samsung and Micromax.

The problem is that there are only some 300 million credit and debit card users here and it’s a struggle to change payment habits.
“The regulations are still being worked out and awareness among customers is very low,” says Sandy Shen of Gartner, a technology research and advisory outfit.

Strategy Analytics India, a market research firm, conducted a survey on low-income mobile phone users in India in 2011. It found that 78% of respondents either didn’t have or were not aware of such functions on their phones.

“Since the service is nascent and there’s hardly any competition, service providers have enough time to educate customers before they experience it,” says Rahul Gupta, senior manager at Strategy Analytics’ global wireless practice.

That’s one of the reasons that Jagannathan travels to rural areas to find out what consumers are seeking and what needs to be improved.

Though Airtel is unwilling to reveal the number of mobile wallets registered or being used, it is estimated that within 10 days of its launch in February, it had 50,000 subscribers.

The success of mobile payments will depend on how much the company is able to scale it up without worrying about profits immediately. Till then, m-commerce will remain just technology or another value-added service on your mobile.