Mobile Wallet Payment

Currency is an important means of Payment of India, with 19% of the total payment is with currency as against 6 to 7% in advance counties.  Various other instruments like cheques, Bank drafts, Pay order , Payable AT Par cheques etc are used for payments in commercial transactions. The statutory basis for these instruments was provided in the Negotiable Instrument Act, 1881 (NI Act)

The NI act defines the instrument as a promissory note, bill of exchange or cheque. Use of currency has many disadvantages.  The most common elements of cash-management costs is bank fees, losses resulting from theft and cash logistics and roughly the same percentage doesn't include the time associated with handling cash as an element of their cash costs.  Today's tough economy is pressing retailers to take immediate action to lower their total cost of cash ownership, either through process improvement, automation technology, cash logistics services or a combination of all three. Cash can also be counterfeited. Today in India the nation’s vulnerability to fraud, terrorism and crime is to be blamed on its operation of a cash-based economy. And that because of the cash-based economy, it was very difficult to track money as people carried huge sums of money in cash and did whatever business they liked without being tracked. The number of counterfeit note found in India is 3 to 6 million which is much lower that what is circulating. Printing note, distributing notes, destructing old note and replacing with new one is a huge cost on the economy. Tendering exact change is also a challenge to the customer. The only way to tackle this is to introduce new payment methods and reduce the dependence of using paper money . Usage of plastic card also has many disadvantages. It requires merchant and acquirer to invest in equipment like POS machine, pin pad, network equipment etc. Within electronic payments, credit and debit cards form  57% of transactions by number, they transact only 13% by value. The largest electronic payments by value are through electronic funds transfers (NEFT or RTGS) which are predominantly peer-to-peer (P2P) transactions. These would not be used for retail payments, and the same can be said for Electronic Clearing System (ECS) payments. Hence, the usage of electronic payments in retail transactions (payments to retail outlets) is even lower, presenting a huge opportunity for players providing non-cash payment alternatives for retail payments.

Major disadvantages can be classified

Disadvantage	Merchant	Customer
Hidden costs	Processing fee per transaction charged by credit card companies, hence  eroding merchant’s profit margin • Some credit card processing firms also charge application fee, startup fee, activation fee, statement fee, monthly minimum fee, payment gateway fee, charge back fee and termination fee from the merchant	Late fee payment charges and high interest rates levied by credit card companies
Limited usage Unreasonable	Unreasonable pricing of cards acts as disincentive for small and medium merchants with lesser pricing power due to low volumes, to transition to card based payment	Usage limited primarily to large vendors / merchants that have PoS terminals installed and accept debit and credit cards
Privacy and Security concerns		Need to reveal personal information at multiple sites while using debit or credit cards for online transactions • Loss of cards that are not encrypted with a pin, leads to insecurity about card usage, bringing down the adoption rate of credit and debit cards by conservative users Card related fraud increasing every year  with availability of each card scamming devices

Mobile penetration in India is nearly 100% and large spiraling customer base make mobile wallet an ideal payment instrument to enable non cash retail transactions in India. This payment method is also ideal for small trader and shop that have transaction volumes low to support credit card and other similar non cash payments. Efforts required and cost to set up is also lower than the setting up of plastic card based payments.  Payment through mobile wallet can be convenient, easy and fast compared to cash and other non cash payment mechanism. Using the existing ecosystem of mobile wallet provided by the current telecom companies the system can be easily implemented.    

Recent amendments to RBI guidelines have allowed non-banks to issue mobile based semi-closed instruments, while also extending their usage to bill payments and ticketing.  The interbank mobile payment system (IMPS) has been developed by NPCI to expand the scope of Mobile Payment to all sector of the population. The Mobile operator needs to integrate with banks to enable customers to top-up their wallets . This can also be done using ATM or other channels (Voucher topup etc).  In today's world of razor-thin margins, tight credit and increased criminal activity, understanding and exploring ways to reduce the total cost of cash ownership can help retailers thrive in any economic climate.

Already mobile payments enable its customers to avail a host of services viz. shopping payments, telecom/DTH recharge, utility payments, rail/air/bus tickets and of course cinema tickets etc. and more and more services would be made available from time to time.