Payments Startup MobiKwik Launches Mobile Wallet As India’s Central Bank Acts To End Country’s Cash Dependence

In a move that could ease paper money’s stranglehold over the Indian economy and society, Mobikwik is releasing a mobile wallet for the country’s burgeoning smartphone-class to digitally buy goods directly from merchants. The Reserve Bank of India (RBI) is empowering payment companies to facilitate more digital transactions in order to create some competitive tension for existing players and the country’s biggest banks and telcos — which have so far failed to unleash the full potential of new technologies.

Despite the promises of the mobile and internet revolution, in a country with about 20% credit card penetration, cash still reigns as king. It’s the de facto transaction standard, so much so that e-commerce companies only flourished because of the quirky cash-on-delivery model, where the money is handed over only when the item arrives at your doorstep. The country’s biggest e-commerce company Flipkart said that 70% of its transactions are completed using COD, and it is developing its own seamless payment system to address the deficiencies of using credit cards (for Flipkart, one in three credit card online transactions fail).

The cash culture, and general fear and difficulty to use credit cards, is holding back the revolutionary forces of more efficient, scalable payment systems.

Screen Shot 2013-09-27 at 12.00.00 PMMobikwik is the latest company to try solve this problem with its new mobile wallet available for Android and iOS devices, launched today. CEO Bipin Singh is promising a simple, one-click digital experience to purchase a range of products or services, such as mobile minutes, pay utility bills or even movie tickets, from about 500 merchants. He said customers can directly load up the wallet from their bank account or a credit card and start buying, with the funds being transferred to the merchant as soon as the transaction is completed (eventually he hopes to allow customers to top up their accounts via cash, with collection agents coming to your doorstep). Importantly, the Reserve Bank has licensed the company to allow customers to withdraw money from their account.

It will compete with products such as Airtel’s Money launched two years ago and other players, including the State Bank of IndiaMoney On Mobile, and ZipCash.

“Most existing products, like Airtel Money, have targeted merchants but the consumer experience and connect has not been created. We offer a simple, one-click customer buying experience so all we need to do is tell our users: ‘hey, use this wallet for your most frequent transactions every month: you can park 1000 rupees and recharge your phone credit, pay your utility bills, buy pizzas, movie tickets, train tickets, and occasionally e-commerce,'” Singh said.

Mobikwik already has about 1.5 million active users for its existing online and closed wallet which, like most other “wallets” available today, work like vouchers redeemable at a range of affiliated merchants but can’t be cashed out for legal tender. It processes 75,000 transactions each day with an average customer transaction around 120 rupees (~$2).

Airtel hasn’t disclosed the number of transactions or users but it has been pushing hard for its success, recently partnering with a bank to promote the service at 800 branches. The telco claims it’s the first mobile wallet which allows users to instantly transfer money to other users, as well as bank accounts across the country; and last year, announced the service was available in more than 7,000 outlets across India.

Airtel and other incumbents can expect more competition in the near future, as the country’s economic regulator takes action to stimulate the growth of the industry. Mobikwik was the 23rd company to be authorised by the RBI to deliver pre-paid payment instruments, required to allow consumers to withdraw funds from their wallet. The licenses of Mobile On Money and ZipCash are due to expire this month, which could open the door for new players to come into the market. Last month, another company One97 communications also received a five-year license to issue a mobile wallet.

In his inaugural speech, the country’s recently appointed RBI chief Raghuram Rajan announced a series of initiatives to boost the take-up of mobile payments amongst consumers located in both the cities and the densely-populated villages.

“We will also work to get banks and mobile companies to cooperate in rolling out mobile payments,” Rajan said. “Mobile payments can be a game changer both in the financial sector as well as to mobile companies.”

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