Mobile wallets - convenience or pain points?

Abstract

The latest and buzzing tech in India is the digital wallet, e-wallet or mobile wallet apps. From a typical paan shop to e-commerce giants, or to even buy a single banana, one can make payments using a multitude of e-wallet apps. Consumers can recharge phone or DTH, pay utility bills and do many more things now with these magical virtual facilities. These Apps belong to private players as well as Government and banks. Some popular wallet (apps) are Paytm, Mobikwik, PhonePe, BHIM, Google Pay (Tez). All apps are trying to get a space in your mobile offering cash discounts and cashbacks. Then, you also have similar offerings from players like OLA and Jio. So, if you wish to do a quick recharge for your phone, you can check at least ten apps for cashback offers – you may decide to use JioMoney (or Airtel Money), or PhonePe or Amazon Pay to save some money (Rs. 10 to Rs. 50). Easy? Complex? Confused? The availability of many apps and various offers is a classic problem of plenty! Let’s take one more example. Suppose you want to buy a formal shirt. There are potentially three ways. You may visit a big brick-mortar retail store, shop online, or visit a relatively small shop in the main city market. Let’s assume that the price for the selected product is similar (or the difference is negligible) at each of the three alternatives. Now, which one consumers prefer most? A virtual marketplace which offers almost limitless choices that include hundreds of brands, sizes, color, and fabric. Or, a big retail shop with multiple floors and at least 10 to 15 brands offering hundreds of possibilities. Or, a small shop having choices that include top 5 brands, most preferred colors (blue, white), and fabric (cotton). Think a while and consumers may agree that more is not always better in some cases! Sheena Iyengar, author of ‘The Art of Choosing’, is a renowned expert and excellent researcher in the field of consumer choices. Her research has empirical evidence that there is a threshold of choices or information which our brain can process. In fact, while selecting an alternative, there is an implicit agony felt because consumers can select only one option among many. For example, while buying a car for the first time, a consumer may shortlist 2 or 3 models but buys only one. So, there is an inherent risk involved of ignoring the other alternatives. If there is a problem or dissatisfaction with the product/service, it’s very common to vent the anger/frustration like this, “I was planning to buy X but bought Y. I should have bought X!”. And the choice sticks till the next buy. Interestingly, if you enquire what is the biggest benefit of any e-wallet, most probably the answer would be ‘convenience’. Ironically, this is exactly what is missing from all such apps. There is no integration among apps. So, a typical user may end of having an average of Rs. 500 in those 5 to 10 apps to complete the routine tasks of mobile/DTH recharge (roughly Rs. 5000 across apps). Paytm is the current market leader and facing stiff competition from other players. One may think that retailers accept payments predominantly from Paytm as one can visibly notice ‘Paytm accepted here’. However, the introduction of Unified Payments Interface (UPI) has completely changed this. Infact, any consumer can register for UPI and a direct transfer is possible between any two entities. So, the real problem is options of multiple apps for mundane tasks where consumers are caught in the whirlwinds of offers and cashbacks. So, what would be the future for mobile wallets? Right now, there is a wild race to get consumers and lock-in with the digital wallet without worrying about profitability. Recently, PhonePe (from Flipkart) and Amazon Pay have incurred losses of about INR 1,135 crores in FY 2018. In any industry, after such wars at the end only a handful of players survive, for example credit card industry (Visa and MasterCard) and carbonated drinks (Coke and Pepsi). Indian telecom industry provides an interesting example, which started with multiplayers and after many round of price wars (which are still going on!) and merger/acquisitions is left with three main players Airtel, Jio and Vodafone. And all the three are still trying to figure out how to make money. A similar fight and future awaits the digital wallet companies where the firms with deep pockets and ability to sustain the price war will remain standing once the dust settles out. The firm which captures most of the users will have the strongest advantage. The reason being, in technology world, the stickiness counts. The huge adoption and popularity of WhatsApp and Facebook among Indian users is one example. For a new entrant in the messaging apps domain, it is very difficult to get users switch from these apps because user’s friends are already on such apps. So, unless there is a mass exodus in the short time frame, new apps will remain in a niche segment. The e-wallet firms play similar logic at the cost of convenience to users. Well, the fight-to-death is on, any firm which provides the best integration, user experience and seamless movement across apps and utilities has better chances of survival and winning in this exciting digital race!