From Barter to Digital: How Mobile Wallets are changing the Digital Payment Landscape?

May 31, 2016 0 comments

NEW DELHI, INDIA: India as a nation, has witnessed different eras of economy. Starting from the trading economy where the exchange of goods through barter system was very prominent and gradually shifting to currency over the years. Once the concept of currency was introduced, India’s economy has always been cash-centric until the late 1980’s. In this phase, cheques and demand drafts were a part of the payment space that was used to transact heavy amounts. Keeping up with the economy standards across the globe, credit and debit cards were used to carry out transactions. With the involvement of technology in the late 2000’s, online transactions were possible in India as companies were able to synchronize directly with the payment gateway of the bank account. The number of companies and brands that were offering online payments as an option started growing drastically, eventually leading to the current scenario where most of the transactions are through the net. The option of online payments was available across all industries.


Since there is a sudden rise in the presence of digitization across all industries, there has been a transition from online payments to mobile payments with the aid of NFC (near field communication) technology. The advent of mobile wallets was introduced as an option of payments. A mobile wallet is a smartphone based virtual wallet created with the mobile service provider. It can be loaded with a pre-defined amount and based on the merchants listed with the service provider online and offline, customers can initiate transactions with the respective parties. While there are various types of digital wallets, payments with the aid of NFC (Near Field Communication) technology are picking up in recent times. In an NFC ecosystem, a consumer’s device could be a card, NFC-enabled smartphone or even a smart tag that could be stuck behind your mobile phone which is loaded with virtual money. When tapped on a merchant’s mPOS (mobile point of sale) device, a cashless transaction is done.

Mass Acceptance

Prior to the advent of digital wallets, the concept had gone through various stages to be brought into the market. Initially, the phases begin with ideation which leads to the exploration of the technology and conceptualizing the product. Another important phase that is involved to launch such products is the acceptance by the masses. Based on the dynamics so far, digital wallets have immense potential to bring a positive impact to the market in the next few years. Based on the number of mobile phone users, out of every 100 people in India, there are about 80 people who are users of mobile phones. With a total of nearly 1.2 billion mobile users in India, the concept of mobile wallets can be penetrated easily into the market. Currently, 29 per cent of all online transactions done globally are through a mobile or handheld device.

NFC Tech

Considering the advantages of mobile wallets, users will find it highly convenient to carry out transactions and aid in eradicating the concept of standing in queues. Payments made through tap & pay NFC-based wallets bring down the transaction time and helps manage high human traffic environments like food courts, airports, shopping malls, multiplexes, metro stations, industrial staff canteens and so on. Most of all, digital wallets will aid in bookkeeping where all past transactions can be tracked easily resulting in better financial management. Having a mobile wallet is safer since the bank account’s confidential data is not disclosed to any third party in the process.


Looking into the drawbacks of mobile payments, the user should be fluent with online banking as most digital wallet service providers don’t have physical counters where one can pay cash and load virtual money in the card. To carry out cashless transactions, the need for a data enabled smartphone is mandatory. Operating on the technology platform, there is a scope of cyber crime. Over the next few years, NFC-based wallets address most of these issues considering it is still in the nascent stage.

Mobile wallets are necessary as it works towards the interests of the country and as an initiative from the government’s front, the cost of transactions will be lower across digital payments. Government-driven initiatives like ‘Make in India’ and ‘Digital India’ are gaining momentum and attracting more players in the mobile value chain. Witnessing the current dynamics in the market, it is projected that 80 per cent of the world’s adult population will have smartphones by 2020 resulting in more usage of cashless transactions. In the next 3 years, there will be an annual growth of 30 per cent in be the value of the Indian mobile wallet market leading to a surplus of Rs. 1,200 crores as compared to last year’s value of Rs. 350 crores.

This mode of payments will not be catering to a particular segment, but reach out to all segments including the MSME segment. With digital payments across the nation, there will be greater visibility in the financial chain bringing in more transparency and reducing the scope for loopholes in the system.





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