However, the buzz around mobile wallets and the sharp rise in its numbers have led many to state that they would be the credit card killers. While there has been enthusiasm around mobile wallets, it will be farfetched to say that the ubiquitous credit card is on its way out. In fact, if you look at month-on-month data provided by the Reserve Bank of India, the number of credit cards has been increasing slowly over the last one year. For example the number of credit cards in circulation in June, 2014 was at 19.6 million.
What has caught attention is the very fast paced growth of mobile wallet adoption in the country. However, this does not provide a true picture as there are many factors at play here.
1) India specific - The biggest push for mobile wallets came when the RBI insisted there has to be a two-step authentication process for all card transactions done for a cab service. This meant cashless payment that was pushed as one of the greatest ease of availing these cab services were suddenly rendered useless.
Operators like Uber, Ola and others, then switched to mobile wallets to enable user carry out cashless payment. The biggest segment of mobile wallet users is the ones who avail such cabs and hence the segment has seen rapid growth. However, when growth hinges on regulatory preconditions, any change in law can completely change the picture. If RBI does away with two step authentication for transactions of lesser value, there is every chance that mobile wallets will lose their popularity.
2) Too many stakeholders - There are just too many players in the market, which includes telecom providers, handset makers and stand alone tech startups. While there is little to differentiate between the products, with each player trying to push its services. This has led to a highly fragmented market for mobile wallets and adoption has been low. Handset make Apple has Apple Pay while tech major Google has the Google Wallet. Similarly in India we have standalone services like Paytm, Oxigen among others. The adoption issue has meant mobile wallets have not seen real traction.
3) Smart phone - While India is one of the fastest growing smarphone markets in the world, a vast majority are still outside its purview. Even merely having a smartphone will not be good enough as most of Google, Apple and other mobile wallets run on NFC, which makes ..
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