Digital Wallet Business Model in India

Narendra Kumar

28 Oct, 2020

Post demonetization, digital wallet business model has seen tremendous growth in the past few months especially in early 2017. The explosion in the field of digital wallets is not very surprising and is showing no signs of slowing down while continuously competing with other online players in the market; such as network operators, device vendors, application developers, etc. In this article, we will discuss the digital wallet business model in India.

What are Digital Wallets?

Digital wallets are similar to real wallets, except that it contains money in digital form stored on your mobile phones or debit/credit cards acting as a container and a point of convergence for making and receiving payments.

Digital wallets are a combination of various banking and financial services. The foundation of the digital payment system lies with the ability of the system to process payments linked to stored-value accounts. It provides a customer interface for not just mobile payments, but a wide range of other services with the help of enabling technologies such as mobile web, SMS, NFC, Quick Response (QR) codes^[1], Bluetooth and even biometrics.

Now, let us get into the meaning of a Digital Wallet Business.

In this era of global digitalization, the concept of digital wallets is gaining fast recognition. The business aims at developing a software – mostly Android-based, which enables in itself the facility to make and receive payments as well as the opportunity to make purchases on various sites or pay utility bills, etc.

The business of digital wallets works on the collaborative approach as there are very few players in the market having all the capabilities that enable them to operate alone in the digital wallet market.

Various Players Associated with the Digital Wallet Market

• Banks:

The existence of the digital wallet business is both the opportunity as well as a challenge for the banking system. On one hand, they are an indispensable part of the overall business of digital wallets, on the other hand, they need a continuous endeavour to update their technology in order to go hand in hand with the digital wallet markets.

• Merchants:

The markets for merchants have been expanding continuously with the advent of new players in the market of prepaid instruments and digital wallets. The rise in the percentage of individuals preferring an online shopping experience is further making the merchants a major input player in the market of the digital wallet business. In the ecosystem of the digital wallet business, most of the merchants are playing the role of the third party. However, few online merchants have taken the bold step and have launched their own closed mobile wallet services. Recently, Amazon has obtained the RBIs approval for launching its own prepaid payment instrument.

• Mobile Operators:

The Android-based mobile phones, as well as high-speed internet, are the most important part of the digital wallet business, making the mobile operators an important link in the whole process. In a majority of countries, the operators provide open digital wallet platforms enabling payments for a wide range of third-party players. The reduction in the internet charges is one such step initiated by the mobile operators in India, which is intensifying the business of digital wallets in the country.

Digital Wallet Business in India

India is recently experiencing an exponential rise in the field of digital payment. With the rapid increase in the internet and mobile penetration in the country, India is all set to witness an enormous flow in the adoption of digital payments in the coming years. Moreover, the initiatives of the government such as Digital India acts as key catalysts in the digital wallet business in India. Along with other Fintech corporations holding their grip on the market, the digital wallet business is the one who is most benefitted from the whole process of digitalization. In case you want to learn about the registration of FinTech companies, visit www.enterslice.com.

At present, mobile payments only form a minor part of the overall digital payments industry in India. But this is expected to continuously increase and reach a remarkable point by the end of 2020.

The digital wallet segment includes services such as transfer of money, other banking transactions, value-added services such as shopping, ticketing, recharging, and bill payments. However, the money transfer business captures the highest percentage i.e., 38 percent, followed by recharge and bill payments, and utility areas by 30 percent and 12 percent, respectively.

Factors Affecting the Digital Wallets Business Model

• Still, a large section of the Indian population finds it difficult to use basic banking facilities. This creates an opportunity for the digital wallets businesses to outreach more customers, who are denied with these services. This means tapping the untapped market.
• Focus on providing merchants with the facility to receive payments from various channels.
• The existence of Near Field Communication (NFC).
• Use of tokenization or biometrics, thereby protecting the safety of transactions.

Conclusion

In conclusion, it can be said that the digital wallet business seems quite promising in a global context as well as in India. The need is the timely realization of the growth rate and moving hand in hand with the global scenario. The up-gradation of technology, as well as knowledge, is the need of the hour, in order to survive in the market in the long run.

Read our article: Pandemic leading to an era of secure and convenient Digital Banking