How Will Rising Internet Penetration and Mobile Money Shape Payments in India?

January 5, 2021

Internet penetration and Mobile wallets have shown exponential growth during the Covid-19 induced lockdowns when the global economy entered a brief but intense drop. Mobile phones have gained momentum and become an integral part of life. To answer the question that will it shape the future growth of payments? Let us analyze the data.

Rise of Internet

Public access to the Internet in India began on 15th August 1995, as an Independence Day gift. The first mobile phone with internet access was launched in 1996. This combination took the nation of 1.37 billion people by storm as evidenced with data collected by Statista over the years of internet usage in India.

In the year (2020) the internet penetration rate reached 50%, imagine that now half of 1.37 billion people are using the internet yet five years ago it was only 27%. Projections now say that absolute numbers of internet users in India will grow to over 974 million users by 2025. We are the 2nd largest single bloc of internet users in the world after China. A report published by the Internet & Mobile Association of India (IAMAI) research papers IAMAI gives a detailed insight into the distribution of internet access and usage. An interesting factoid is that demographically India has 504 million users who are five years and above. 

Of the overall Internet population, 433 Million are 12+ years old & 71 Million are 5-11 years old who access the internet on family members' devices. For the first-time rural penetration exceeded urban penetration by 10%, with 227 million users. The number of new female users was more than 12 % over new male users. The most active age group is 12-29, which is responsible for 70% of activity in rural areas. 70% of the users use it every day, around 16% use it 4-6 days per week, and only 10% use it less than once a week. In terms of devices used for checking the Internet, mobile phones are a clear winner.

Internet on Mobile

It is remarkable to see how many people are accessing the internet through mobile networks if we look at 2019 data presented by Statista Internet Usage by Type of Network, an estimated 94% of people preferred using mobile phones for day to day internet connections whereas only 6% of them prefer Wi-Fi. Fondness for Mobile phones is not surprising as it is economical and empowers its user with 4G speed, making it as good as working on a laptop or desktop. The cost of mobile phones in India is one of the cheapest in the world. An average smartphone costs between $13-67, and the price of internet on the phone is the most affordable in the world; one gigabyte of data costs around $0.26, whereas using an average package wi-fi will cost $12.90 Data Pricing Worldwide.

The advent of the Mobile Wallet

A mobile wallet is an app installed in the phone that lets the user make and receive payments, either done online or in-store payments for cab services, toll taxes, coffee, groceries, and so much more. The first mobile wallet launched in India was in 2006, and was called wallet365.com. Since then, many companies have tried their hands, but only a few have survived. At present, there are 49 e-wallet services as per the RBI. A typical e-wallet’s success rests on the quality of it’s  interface, security, convenience, and most importantly, adoption by locals.

Future of Payment in India

Digital payments were unheard of a decade ago and now some optimistic projections show that digital payments are expected to exceed $1 trillion by 2025. Many factors have contributed and rolled out the red carpet for non-cash payments in this part of the world. Here are a few factors advocating that digital payments are the future.

Mobile Internet Penetration: The data presented above makes it evident that mobile is the first or, in most cases, the only choice for the people in urban as well as rural locations. Mobile phones have gotten to the country's remotest parts, and even the poorest of families has access to the internet on their mobile devices.

Government's Regulation: Demonetization, Jan Dhan Yojna, Digital India all these schemes have made companies look for alternate ways of transacting. The schemes have also pushed retailers, traditionally an industry with a sluggish mindset to adopt the new way of receiving money.

Attack of coronavirus: Nobody was prepared for Covid-19, which has been a catalyst for digitalization. In turn, the online ecosystem emerged as a savior for commerce as the world was locked down, and contactless transactions have now become more of a requirement than ever before.

Secured Payments: E-wallets are more secure than e-banking as they do not store debit or credit card details but use encrypted data. Fraud is also reduced when you have no credit or debit card data to be lost or stolen.

Unbanked population: E-Wallets are accessible to people without any bank account, with no requirement that access to formal financial institutions be achieved for their usage. This has empowered small-time businessmen, vegetable vendors, poor and illiterate people in the remotest areas, all of whom can now download multiple apps to receive and send the payments.

E-Wallet business

E-wallets have been making a niche for themselves in the market at a consistent speed since they launched almost a decade ago. Demonetization further accelerated the adoption of e-wallets because of the cash crunch it created. As per RBI reports RBI Bulletin. PPI (Prepaid instrument) business in the year was INR 838 billion in 2016-17, 1416 billion in 2017-18,  further growing to INR 2129 billion in 2018-19, Total digital growth over than span was an impressive 58.8%.

Mobile wallets giants - Paytm sits at the apex of this industry  with its presence in Tier-III cities and beyond with 50% of the market share, catching up slowly is Phone Pe with 30% of the market, Google Pay at 10%, and others also at 10%.

Send more than money.