More eWallets in India - How many is too many?

Written by Ketan Warikoo || March 2016

The last few months saw some big announcements in the e-wallets space in India. Wallet adoption, particularly on mobile, has been quite rapid in India, with wallet based transactions doubling in both number of transactions (153 Million in 2015 vs 67 Million in 2014) and value ($820 Million in 2015 vs $329 Million in 2014) as compared to the previous year (Q4 comparison from RBI data).

According to industry sources Uber is developing its own wallet for the Indian market. In the US, Uber has tied up with Google Wallet, while Uber’s Indian service supports Paytm’s wallet and Airtel Money, besides cash and credit cards. The decision by Uber to pilot their wallet in India has taken many by surprise and it remains to be seen if it will be a closed loop wallet and whether Paytm’s integration be affected. 

Similarly, Amazon India could be launching its own digital as soon as the second Quarter of this year. This move should be read in conjunction with its ‘Pay With Amazon’ (PWA) Service that lets Amazon leverage its extensive customer base and their stored card credentials to deliver seamless payments for third party services. Amazon’s move was anticipated as last month it had acquired Emvantage Payments Pvt Ltd, a Noida based payments company for an undisclosed amount. Prior to this Amazon had launched a digital wallet in US in 2014, but shut it down in under a year. 

Amazon’s move comes close on the heels of Flipkart re-entering payments with a wallet after its maiden payment gateway PayZippy bombed and was discontinued in Aug 2014. Its wallet, Flipkart Money, is only usable on Flipkart and can be loaded with a maximum of INR 25,000 per month (US $371), which restricts its usage for high value purchases by power consumers. Six months back Flipkart had acquired FX Mart last year for just under $7 Million, valuing it for its RBI sanctioned prepaid wallet licence.

The reasoning behind these companies raising a wallet division is three fold: cutting the middleman to save the 2-5% commission charged by wallet providers, removing any friction in the UX (user experience) and also capturing critical customer data while restricting access to third parties. Capturing payment data at their end would help them better profile their users (to offer personalized discounts and services) as well as effectively determine the customer lifecycle value and key behavioural insights to understand any deficiencies in the wallet experience- information that a third party provider might not share very easily or objectively.

However, such eagerness by every ecommerce player to launch its own proprietary wallet could prove counterproductive as an end user wouldn’t like to keep significant amounts of money locked on multiple wallets. The key metric for the success of any digital wallet on the consumer side should be support for payment at maximum vendors. Based on this metric Alibaba backed Paytm already leads the pack with over 200 integrations that allow its customers to pay for all kinds of services with their Paytm Wallet.

For operators like Uber, Flipkart and Amazon to develop and nurture such an ecosystem would first require them to catch up and on-board all sorts of merchants. The second and potentially the deal breaker step would be for them to support payments by their wallets on their competitor’s platforms, which is something they might not consider. The payments ecosystem requires extensive cross-seeding, not silos. Are these entrants up for the challenge?

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