The e-commerce and online purchase industries have only seen better days since the emergence of digital payment modes. Add to it the demonetization drive by the sarkar leading to the mushrooming of the digital payment platforms like Net Banking, Magnetic stripes, UPI, QR codes and payment wallets.
What’s a mobile wallet?
A mobile wallet is a type of virtual wallet service that can be used to pay and receive money digitally via a mobile app. It is one of the most preferred modes of digital payment in the retail sector, akin to the role of a payment gateway in the e-commerce industry. The mobile wallet stores your bank account or debit/credit card details in an encoded format to allow secure payments. This e-wallet acts exactly like a physical one where you can add money to make payments and purchase goods & services. This eliminates the use of the direct bank to bank transactions. Many banks in the country are leading the e-wallet services along with a few private players, some of the popular ones in India being Paytm, Mobikwik, Freecharge, etc. The various services offered by mobile wallets include sending and receiving money, making payments to merchants, online purchases, etc.
How this works for the wallet users
In the Master Direction that was issued last year, the RBI has laid the groundwork for the interoperability between payment instruments, particularly prepaid ones. This interoperability will allow users of one wallet to transfer money to a user who prefers a different one. The RBI has further enabled issuers of PPIs by allowing them to also issue physical cards to their users.
Previously, restricted by acceptance, the average wallet user often found themselves juggling money between various wallets. This helps with your local grocery store deals too where it’s not mandatory for both of you to have the same app to make a digital payment. Interoperability allows multiple wallet apps to communicate with each other. This reduces the reliance on cash for menial transactions. Cards have an established reputation in being compatible and universally acceptable among all merchants. If wallet companies start issuing cards to users, there would be a significant rise in the adoption of digital transactions. This would largely benefit the service providers as it would mean a greater variety of offerings.
What this means for the service providers
This move (interoperability) by RBI has ensured that the big players do not eat up a huge chunk of market share. Big players do have an advantage over the small ones in terms of merchant onboarding since it requires pouring larger investments. As interoperability opens up new avenues for smaller players, it provides an impetus for them to cover up what they missed during the great demonetization wave that had gripped the country a few months back.
Up until now, only banks were designated to issue cards to the users. After the master directives, however, the wallet companies can partner with card-networks to issue chip and PIN-enabled cards to their users. This means users can withdraw cash from their e-wallets whenever required, thereby adding to their convenience.
To summarise, digital payments or cashless transactions can bring about a great deal of change in the economic status of India and the way we deal in our day-to-day life. Being cashless is easy, burden-free and ensures ‘white’ dealings with a digital record. However, only 12% of transactions in India are made electronically currently. This step of making digital transaction interoperable can provide the much-needed boost for e-payments.
The NPCI has made commendable efforts in promoting cashless transactions via UPI, QR, BillPay and other services. Interoperability will further ensure mobile wallet players will join hands with banks in the quest to digitize transactions.