There cannot be a better time than now for mobile payments to take off in India. This
is not a prophetic statement, but a logical inevitability. Just take the sheer size of existing mobile users, add to
that the accelerating number of new subscribers, the rapid hike in consumer spending by a burgeoning urban youth
population, the growing base of mobile applications and a high cash-centric economy. The result - a scenario where the
ubiquitous mobile becomes the ideal payment device.
If you deep dive into each of the drivers that propel mobile payments the answer to "why mobile payment needs to
succeed in India" becomes apparent. Another trend that is slowly becoming visible is in Indian mobile users,
especially from the unorganized sectors realizing that their phones, hitherto, used only for voice, is also an
excellent tool to do business.
Driver 1: Increased Technology Penetration
India's cell phone user population has doubled during the past year to touch 150 million at the end of 2006. More
than 6 million new subscribers are signing up for mobile services each month, making India the world's fastest
growing mobile market. The wireless segment added 6.81 million subscribers during January 2007 as compared
to 6.48 million in December 2006. At the end of January 2007 total wireless (GSM, CDMA and WLL-F) subscribers
were 156.31 million, according to the Telecom Regulatory Authority of India (TRAI). The net addition of wireless
and fixed line subscribers in the first ten months of FY 2006-07 has been 56.39 million as compared to 28.39 million
during corresponding period of FY 2005-06.
The number of mobile subscribers in India is expected reach 250 million by end 2007 and 500 million by 2010
says India's Telecom Minister Dayanidhi Maran. All inhabited areas (and hence the entire population) of
India should be covered by mobile networks by end 2009.
Rapidly reducing mobile phone costs is helping push mobiles to more sections of the population resulting in a
wide user base. Entry-level phones coming in with sub $50 price tag, is leading to increased usage. Handset vendors
have strategically focused on ensuring that almost all of the new mobile phone devices launched are GPRS compliant. By 2008,
about 50% of handsets in the market will be GPRS.
Driver 2: Mobile Consumers
The booming Indian economy with GDP in excess of 8% has a strong base of consumers who are displaying
considerable propensity to spend. The techno-savvy youth, more willing to spend then their earlier
generation, form bulk of the burgeoning middle class population of over 300 million. Estimates are
that the India's mobile youth market will grow 300 % from 2005 through 2007, from 8.3-million to 27.6-million
people. Indian youth in the age group between 14 to 35 years form a substantial 44% of the total
population. A recent survey by one of India's leading mobile network operators has revealed that mobile
penetration in the age group of 15-19 is 3%, while it is 10% in the 30-39 years category. Senior citizens
over 60 years constitute just 1% of mobile users.
Driver 3: Mobile Commerce
Analysts covering the booming mobile phone segment in India predict that Indian mobile phone users will
find better use of their handsets. In a country where Internet penetration and plastic card (credit and debit)
usage is minimal, mobile commerce becoming a way of life for mobile users, is but natural. The enthusiasm of
the mobile service providers increasing the breadth and depth of service offerings to their subscribers
therefore does not come as a surprise. Not only would this enhance their subscriber base, but it will also
help grow Mobile ARPU, which at an average of $8.5 per month is among the lowest in the world. Service providers
are relying on Value Added Services (VAS) to grow their revenue. Cellular Operators Association of India (COAI)
expects VAS to contribute 20% of telecom revenue by 2009, from the current 10%.
The mobile content market, according to the Internet and Mobile Association of India (IAMAI) will grow from
the present to $124 Million to $400 Million by 2007 and the VAS industry, to grow from the present $63 million
to $100 million by end 2007. Meanwhile, Mobile gaming industry, will grow at 100% year-on-year from its present
size of $100 million, predicts NASSCOM.
Driver 4: Dominant Cash Economy
Despite a growing base of plastic card users, India is primarily a cash economy, with over 90% personal consumption
expenditure (PCE) done through cash. According to India Brand Equity Foundation, (IBEF) the total number of debit and
credit cards issued in India, as of end March 2006 is estimated to be around 47 million and 18 million respectively,
relatively low for a population of over 1 billion. Card transactions amount to only 1.8% of the total per capita income
of India according to IBEF. The value and volumes of transactions in debit cards have grown at a much faster clip than
credit cards. Even as value of transaction in credit cards rose 35% from the previous fiscal, in debit cards value rose
by over four-times from the previous fiscal. The personal consumption through credit cards is one of the lowest at 1% in
India compared to the World average of 8.6%, Asia Pacific's 6 % and even China's 3%.
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