#Outlook16: What #Outlook16: What Indian Mobile Payments Companies Plan To Do In 2016Companies Plan To Do In 2016

As a part of our #Outlook16 series, we asked heads of mobile payments companies – Eko, Oxigen, PayU India, Freecharge, MobiKwik and Citrus Pay about their learnings in 2015, focus areas for 2016, and the challenges that the mobile payments ecosystem need to address. Answers have been edited for brevity.

What were the top developments with respect to mobile payments in 2015?

Abhishek Sinha, Eko

For Wallet providers:

– More than 100 million customers today using mobile wallets.
– Wallet players looking at both banked as well as unbanked customer segments.
– Huge investor interest in the wallet/payments space.
– Entry of at least 10-15 wallet providers in 1 year.
– Online acceptance of wallet is picking up, expected to grow exponentially over the next couple of years.
– Announcement of payment banks licenses.

Public goods / infrastructure being created for digital payments:

– Draft guidelines around UPI released by NPCI.
– Wallet players are getting their authorization to connect with UIDAI for Aadhaar.

Nitin Gupta, PayU India

Nitin Gupta, PayU India

Nitin Gupta, PayU India

Huge adoption of mobile wallets: In online payments industry, 2015 has seen a huge adoption of mobile wallets. Number of users on mobile wallets have increased significantly, however the transaction volumes on mobile wallets have not increased by the same percentage.

Mobile payments became more seamless and shift towards user experience: In the crowded segment of mobile, payment companies have realized that user experience while making mobile transactions play an important role. We have seen a shift towards innovative technology which can improve user experience by making transactions seamless.

Govind Rajan, FreeCharge

– As smartphone sales continue their journey by 51% every three months, the m-commerce market may grow by 55% from its present size of $2 billion to $19 billion by 2019.

– 2015 witnessed an increased adoption of digital wallet among the tech-savvy customers. The digital wallet is morphing beyond recharges or pay for everything from bill payments to food delivery etc. Wallets so far have performed a need gap function – making it convenient for individual merchants. A significant trend noted in this regard is the surge in the customers registered for mobile payment.

Abhijit Bose, Ezetap

– 2015 was a turning point for mobile payments with an explosive growth for digital transactions over the mobile Internet. Penetration and usage of mobile wallets by consumers and mobile POS by merchants exceeded that of traditional players and older systems.

– Innovative solutions from new companies coupled with regulatory and business push by the government, NPCI, and banks has kicked off the first real threat to the dominance of cash by electronic payment systems.

– Mobile solutions have reduced cost, simplified distribution at scale and are delivering smart services to consumers in every corner of the country. Payment banks connecting through new technology from NPCI would turn any phone into a financial service point and allow us to make the goals of Jan Dhan Yojana a reality within the next 2 years.

Mrinal Sinha, MobiKwik

– Mobile payments became mainstream.The first serious blow at converting hard cash into digital money was struck. Mobile wallets surpassed credit cards in terms of usage & popularity as it gained wider acceptance as a payment instrument both at the user and retailer end.

– For the first time ever brick-and-mortar stores in India started accepting mobile payments. Leading offline players such as Big Bazaar, Cafe Coffee Day, Archies, WHSmith India, all started accepting payments made with MobiKwik, the pioneer in this space.

Towards the end of the year, two new trends broke out:

– Users who started spending more frequently with wallets found the monthly wallet limit of Rs 10,000 restrictive. Hence leading players introduced KYC-initiatives so that users could load and spend as high as Rs 1 lakh in a month.

– The second was personalization of the payments experience. MobiKwik again pioneered this, revamping its payments interface and introducing an intuitive and personalized user experience. In 2016, we’ll see more players walking on this path.

Jitendra Gupta, Citrus Pay

Overall focus from merchants with app only strategy played big role in aligning payments landscape for mobile. In-app payment experience became a key requirement for merchants.

What were the biggest challenges for the sector in 2015?

Abhishek Sinha, Eko India Financial Services

Currently, customer acquisition and driving of transactions through the wallet is through discounts and incentive, leading to a loss-making business model. Currently, the biggest challenges are:

– Rapid scale with a positive unit economics.
– Acquiring larger wallet share of the target customer segment.
– Building customer loyalty.

Sunil Kulkarni, Oxigen

The biggest challenge in 2015 was cash management in retail. Cash at retail continues to be the single largest contributor to the payments and the benefits that government is trying to put have not been fully translated into actions. Digitisation of payments in retail currently stands at $1 trillion dollar payments market.

The second big challenge was that multiple digital wallet players were trying to acquire subscribers by giving huge amount of cash backs, which were only subscriber acquisition related and not really based on a new cash incentive scheme. These cashbacks neither have any benefits in terms of retention of current subscribers as the users use the cash back amount and move to another player to avail the next best offer nor do they provide any further benefit to a company’s revenue base.

Nitin Gupta, PayU India

The natural concerns of security, a multiplicity of devices and operating systems, slow adoption, and the technological limitations all contribute to the obstacles facing mobile payments, today. But they are being successfully overcome through innovative technology, careful planning, education, marketing, and by choosing the right payment service provider as a partner.

Govind Rajan, Freecharge

India remains a cash lead country in transactions. There is an overwhelming preference for physical cash, even in urban centers despite the available alternatives. The digital wallet ecosystem, in reality, is not a single ecosystem but a convergence of varied ecosystems ranging from financial institutions, retailers to electronic device & application providers thereby challenging the business model per se. Converting cash into digital money is one of the biggest challenge towards adoption of digital wallets.

Abhijit Bose, Ezetap

– With solutions now achieving significant scale, the focus has been on creating awareness on the benefits of switching from cash to digital payment options, both for consumers and merchants.

– Moving away from cash is primarily a behavioral and perception issue that will require the industry (incumbents and new entrants) and regulators to work in unison.

Jitendra Gupta, Citrus Pay

Jitendra Gupta, Citrus Pay

Jitendra Gupta, Citrus Pay

Stable internet connectivity on phones remained a big challenge even after 3G roll out.

What were the trends that surprised you in 2015? Why?

Abhishek Sinha, Eko India Financial Services

OTP based Aadhaar is not being considered as a valid KYC for wallet. I am expecting this to change in the coming year.

Govind Rajan, Freecharge

2015 demonstrated start of a trend where consumers preferred frictionless transaction experiences versus discounts. Advent of same/ next day delivery, on-demand, wallet, one click interfaces are showing consumers moving in a direction which saves time and just money.

Abhijit Bose, Ezetap

Speed of adoption of integrated solutions was above our expectations. Beyond standard GMV and transactions which increased 400% in 2015, 3rd party API calls to/from Ezetap increased 100% quarter-on-quarter reinforcing that digital payments from an ecosystem of interconnected, smart applications is starting to take off.

Mrinal Sinha, MobiKwik

We were surprised to see how quickly users were able to adopt a new technology and mode of payment in the offline space. Being the first to introduce mobile payments to an offline store, we imagined it to be a massive challenge to spread awareness and educate users about how they could use a mobile wallet to make payments offline. But we were pleasantly surprised to see them intuitively grasp the payment process without needing much assistance from us.

What were your key learnings in 2015?

Abhishek Sinha, Eko India Financial Services

– Rapid scale in wallet is a must.
– Wallet becoming the primary payment instrument for large number of customer, 200 million – 300    million, will happen in years to come.
– Wallet acceptance needs to become 10x of card acceptance.
– In-store acceptance of wallets will be key to their adoption.
– Cash needs to be leveraged as the biggest source of funding the wallet.

Sunil Kulkarni, Oxigen

Customers are progressively moving towards mobile payments which is frictionless, easy to use and therefore single click checkout or instant delivery of service is one of the key differentiator for bringing the mobile payment to masses.

Nitin Gupta, PayU India

We have realized that cashbacks and discounts can only be given for some time period to acquire customers and encourage force spending. However to retain them, technology and experience plays an important role. Now we are more focused towards making payments friction-less and improvising user experience on mobile payments. First step in this direction was the introduction of patent pending OneTap technology by PayUbiz.

Govind Rajan, Freecharge

The only way you can keep your app intact on user’s phone is if you have a frequent use case for the user. Today, customers are spoilt for choice and always looking for options that saves time, money and energy.

Abhijit Bose, Ezetap

Interoperability across payment instruments, simple on boarding & usability for users, and smart solutions that deliver measurable value to consumers (convenience) or merchants (increase sales, improved operations and analytics) will be adopted. We as an industry simply need to increase awareness and sales coverage to take digital payments to the next level.

What new trends do you see emerging in 2016? Why?

Abhishek Sinha, Eko India Financial Services

– UPI will be a reality. This has the potential to disrupt Payment Gateway and wallet space again.
– OTP based Aadhaar will start to get leveraged along with biometrics.
– Low cost smartphones will start to have capability to capture biometrics, thus will leverage the Aadhaar infrastructure.
– Customer’s acquired through PMJDY will also start to use wallets. These customers are new set of 200- 300 million customers.
– Data generated through wallet payment will also start to get used for under-writing of loans.

Sunil Kulkarni, Oxigen

Sunil Kulkarni, Oxigen

Sunil Kulkarni, Oxigen

Technological advancements in point of sale devices at retail, interoperability of mobile wallets, offline to online ecommerce connect and increase in transaction limit of the wallet will be seen as the news trends in 2016

Nitin Gupta, PayU India

2016 — Wallet-killer year: In online payments industry, 2015 has seen a huge adoption of mobile wallets. Number of users on mobile wallets have increased significantly, however the transaction volumes on mobile wallets have not increased by the same percentage. While funding in this space will dry out, the cashbacks and discounts will no longer be available. The real winner in this segment will be the one with innovative technology and seamless user experience.

Credit will be big and will become easy: The micro, small, and medium enterprise (MSME) segment which typically relies on the organized lending market for secured or unsecured loans will get easy access to credit. Payment companies which are privy to some data on these merchants and their growth metrics might be able to facilitate credit lending.

Abhijit Bose, Ezetap

– Increasing comfort and acceptance of mobile and digital payments both online and in offline retail.

– Evolution of user experiences with tighter interoperability between various applications and easier more user-friendly methods of second factor authentication e.g. biometrics

– Robust digital payments infrastructure across the board. Further pressure on traditional transaction value based pricing of mobile and digital payments including the elimination of the MDR model for payments and the evolution of the sector towards a more value based model.

Mrinal Sinha, MobiKwik

In 2016, the war between mobile wallets will break out offline. India has around 30-40 million small-and-medium enterprises, of which only 1.1 million have point-of-sale machines deployed for payment acceptance. In 2016, as more and more brick-and-mortar stores start accepting mobile payments, we will see an explosion in the number of users making cashless and cardless payments offline.

Jitendra Gupta, Citrus Pay

Data analytics and real time credit decisioning will be flavor of 2016. We are already seeing demand for such products as success rate on mobile is in range of 70-80% while more and more transactions are moving to mobile. Consumers would love to experience easier way to pay on mobile. And wallets will be relevant only for specific use cases.

What kind of interconnection issues did you face with banks in 2015? How did you resolve them with the banks?

Abhishek Sinha, Eko India Financial Services

There is a need to strengthen the customer protection regulations and its adherence such that issues where a bank does not interconnect with a wallet provider, is avoided. To ensure customers are offered services in an unrestricted manner, playing field must be levelled to avoid large players being unfair. Additionally:

– Banks have got into the wallet space.
– We believe that rather than getting into a space where they aren’t the best, it’s better for them to come up with strategies in partnering with wallet operators rather than jumping into the space themselves.

Sunil Kulkarni, Oxigen

The payment gateways typically had low reliability with respect to many banks in terms of connectivity and that led to failures of transactions between banks and the service provider. Constant improvement of logic between the different integrations as well as improvement with the bank in terms of connectivity helped resolve the issues.

Nitin Gupta, PayU India

We provide the largest collection of payment gateways. Hence, we did not face any interconnection issues with the bank.

Mrinal Sinha, MobiKwik

We did not face any interconnection issue with banks.

Jitendra Gupta, Citrus Pay

We didn’t face any major issues. Though banks were more pro-active in seeking feedback related to infrastructure, technology etc.

How many transactions did you do at offline merchants and stores? How many offline merchants do you have at the moment? What will be your strategy for bringing in more offline businesses to use your digital payment service?

Abhishek Sinha, Eko India Financial Services

Eko is present with more than 4,000 retailers. Transacted more than US $3billion on retail stores by 10 million customers and acquiring in excess of 500k new wallet holders every month.

– Eko will be present in about 1 million retail stores in 12 months.
– Processing more than Rs 2000 crore per month at retail stores in 12 months.
– Wallet acceptance at in-store merchants is key to digital adoption of payments. In order to make this happen, Eko is partnering with POS, mPOS, other network providers, apart from having feet-on-street model and an app strategy to acquire merchants.

Sunil Kulkarni, Oxigen

We have around 200,000 retail touch points that act as payment facilitators for cash over the counter transactions. These retail touch points can be potential merchants if government’s digitisation program can support digital payments in lieu of cash. All these merchants are technically enabled with Oxigen mobile payment instrument. However, the use case at retail continues to be money transfer, recharges and utility bill payments.

Nitin Gupta, PayU India

We boast of the largest merchant base of more than 100,000 on PayUmoney.

Abhijit Bose, Ezetap

Ezetap is among the fastest growing players in this segment as of 2015 with over 80,000 smart PoS installations, driving over $1.5 million daily GMV.

Mrinal Sinha, MobiKwik

We are on target to breach the milestone of 1 million offline payments by end of 2015. As of now, more than 10,000 offline stores accept MobiKwik payments and by end of 2016 we expect that number to rise to 200,000.

Jitendra Gupta, Citrus Pay

We have more than 8,500 online merchants and over 10,000 retail stores. We are working on optimizing the experience for offline payments before we go on more acquisition of merchants. We have clearly seen that payment experience needs to be changed to drive adoption in offline segment.

How do you view two-factor authentication for card transactions? Do you prefer convenience over security?

Abhishek Sinha, Eko India Financial Services

Abhishek Sinha, Eko India Financial Services

Abhishek Sinha, Eko India Financial Services

With increasing payment through wallet, security will start to become important. While ensuring security, operators in wallet space will be evaluated on how invisible can they make payments.

Abhijit Bose, Ezetap

Mobile payments are at the cusp of achieving mass adoption. User acceptance of this mode of payments is going to be a very key factor in achieving scale. We do not believe that security should be compromised at any stage. Fortunately, innovation in user experiences built into smartphones, hardware biometrics, and publicly available APIs such as Aadhaar and UPI will allow smart solutions to achieve both convenience and security in their transactions.

Jitendra Gupta, Citrus Pay

It has given huge confidence to Indian consumers. I would say that it has been one of the major driver for Indian digital payments growth.

What trends did you notice in the challenges related to hiring of people (such as availability of talent, tenure of people, willingness to move, people accepting employment but not turning up, expectations of salaries etc) in 2015? How were they different from 2014? How do you expect things to change in 2016?

Abhishek Sinha, Eko India Financial Services

With the payment space experiencing exponential growth and investor support, it is also attracting the best talents amongst freshers and laterally. 2016 should be a better year on hiring than the preceding 2 years.

Sunil Kulkarni, Oxigen

The trend that we have seen in past one year across all levels whether it’s senior, mid or junior level, is that candidates are shopping for jobs especially with this ecommerce boom happening now. Candidates get offer letters from companies and they go out to explore further opportunities with current offers in hand as package benchmark. This is one of the biggest drawbacks that we have observed this year in the industry.

Secondly, we observed this year that candidates are switching jobs really fast within the ecommerce circuit. They are changing jobs by spending maximum of 1 year service time in a particular organisation, and that too within the same community. From the perspective of human talent and development, we do not believe that 1 year is a substantial time for any individual to understand the company, its working culture etc. to start delivering.

Nitin Gupta, PayU India

Hiring for niche skills such as growth hacking, mobile development was one of the challenges as these are the new segments and finding highly skilled employees in these areas is one of the challenges. Also, they make up for competitive job positions as number of candidates in niche segments are few and all the companies wants to hire the best of them.

Abhijit Bose, Ezetap

We found the market for the right talent at the right compensation to be competitive and will continue to remain so.

Mrinal Sinha, MobiKwik

As a fast-growing technology startup, we do draw attention of and attract some of the best talents in the country. The challenge for us has been to identify people who A) would make a great addition to our culture and B) are self-starters, who would go beyond their roles and sign up for more and more difficult projects once they are on board. Once A & B are in place other factors such as tenure, willingness to move, salary, etc cease to matter.

Jitendra Gupta, Citrus Pay

We were fortunate to have better traction in hiring senior talent in 2015. We hired talent across teams such as technology, product and sales. This all was possible due to better quality inflow of interests. In 2016, it will become more easier to hire as more and more people are open to work with startups and take risks. It is no more a taboo.

What are the challenges that need to be addressed in 2016? Please explain how can these be addressed.

Abhishek Sinha, Eko India Financial Services

– Rapid scale with a positive unit economics.
– Acquiring larger wallet share of the target customer segment.
– Building customer loyalty.

Currently, Eko is servicing over 10 million customers, acquiring 500,000 customers every month. All of these customers fund their respective wallets using cash.

Sunil Kulkarni, Oxigen

One of the main challenges is low adoption of mobile wallets in physical retail. There is a massive unbanked population of smartphone users that could be a huge user base for mobile wallets. With 13-15 million Mom & Pop shops in the country, there is only 500,000 merchants having 1 million Point of Sale terminal as payments acceptance infrastructure. Remaining 14.5 million shops deal in cash where retailer does not see cost of cash. Where as to implement mobile wallet acceptance, the retailer needs to pay, which is called “Merchant Discount rate” (MDR). Against cash where he thinks, there is no cost, the MDR for Mobile Wallet provides that deterrent to accept mobile wallet leading to more cash based transactions.

Govind Rajan, Freecharge

Govind Rajan, Freecharge

Govind Rajan, Freecharge

Consumer adoption of mobile wallets depends on a compelling commerce experience. Mobile wallets need to speed the checkout process and make consumer’s life easier, or they must offer some reward. To break the competitive logjam and allow different players to build mobile payment applications more easily, we foresee more collaboration on open technology platforms. As the payments sector deals with these potentially disruptive changes, the issue of protecting individual data will only grow in importance. But it is the consumer experience when paying for goods and services using their smartphone that will really tip the scales.

Abhijit Bose, Ezetap

– Awareness and increasing adoption of digital payments by consumers over cash
– Speed at which merchants can be activated and transacting once sold.  The old KYC and paper-based negotiation process on MDR needs to be scrapped.  We need 15 minute KYC and approval. We’re keen to see if/how Aadhaar, NPCI, and Payment banks can shake up the existing system in 2016.

The enemy is cash and paper and as long as the industry collectively continues to work towards that there is a large market to be had for companies with sound business models and solid execution. Continuing regulatory support and funding of the innovation ecosystem are going to be key.

While our digital infrastructure will continue to make strides, we need (particularly in Bangalore) to make huge strides in improving the infrastructure of everyday life (better roads, more manageable commutes, reliable power) to continue to drive the innovation ecosystem more smoothly.

Mrinal Sinha, MobiKwik

Culture is sacrosanct for us- everything we do as a business has our culture as its foundation. As we keep growing in 2016, we believe the key challenge for us at a fundamental level, would be to preserve and keep growing the cultural ethos of the company.

Jitendra Gupta, Citrus Pay

The biggest challenge will be driving profitability and remain focused. I see so many different ideas coming to the market which looks disruptive and it is easy to get swayed but key will be to execute faster with heads down.