WatBlog Newsletter Archive: WATBlog Update "Mobile Payments & MCommerce - The Future Opportunities & Challenges" from "WATBlog.com - Web, Advertising and Technology Blog in India"

Monday, November 10, 2008

WATBlog Update "Mobile Payments & MCommerce - The Future Opportunities & Challenges" from "WATBlog.com - Web, Advertising and Technology Blog in India"

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"Mobile Payments & MCommerce - The Future Opportunities & Challenges" from "WATBlog.com - Web, Advertising and Technology Blog in India"

Mobile Payments & MCommerce - The Future Opportunities & Challenges

With the RBI guidelines coming to the fore the mobile payments market has an official go ahead from the authorities. So we thought it was a great time to speak to some of the mobile payment players and know what they feel are the challenges and opportunities of this market.

We spoke to Sanjay Swamy CEO, Mchek and Sourabh Jain CEO, ngpay to know their thought on the mobile payments and mcommerce market in India.

1. Mobile payments market - how big is it currently and how big will it be in next 3-5 years?

mChek - Mobile payments are a key enabler that will democratize payment and financial services and make them available to the masses. The mobile payments market is still at its infancy in India and our estimates are that daily transaction volumes today will be in the range of INR 5-10 Million. Even if 5% of mobile bill payment and recharge shifts onto mobile payments platform the industry can grow to 200 Million INR a day. The opportunity as we see it is much beyond mobile bill payments and can include all forms of transactions including merchant payments, utility bill payments, peer-to-peer money transfer and any other transaction scenario that the consumer faces today.

There are a few key accelerators like regulatory environment, evolution of banking services and technologies, coming together of the eco-system and pace of innovation amongst merchants to custom create services for this channel that could together take the size of the industry to more than 1000 Million INR a day.

ngpay - Mobile payments can also be termed as Mobile Commerce or mCommerce which means all commercial transactions like bill payment, shopping, mobile banking, ordering food, buying movie tickets or travel are done using the mobile device.

mCommerce or mobile payments is simply electronic commerce (eCommerce) delivered over a mobile handset in a way that is easy to access, easy to use, and secure. Qualitatively, the mobile eCommerce market will most certainly be a multi-billion dollar market. The simple fact is that eCommerce is a multi-billion dollar market in Europe and the US. The demographics in India will dwarf both those markets.

The Average Indian does not own a PC, but >270 million have mobile handsets. Moreover, according to the Telecom Regulatory Authority of Indian (TRAI – www.trai.gov.in), there were less than 10 million total pc internet connections in 2007 and this number is conservatively estimated at less than 15 million in 2008. By contrast, TRAI estimates that today there are over 65 million internet subscribers on the mobile. The mobile channel offers reach and convenience for reaching people and completing electronic transactions that the PC simply cannot match – today or in the near future.

When you consider the size and growth of the Indian consumer class (who will very likely be interested in consuming eCommerce) + the # mobile users vis-à-vis PC users, then you can certainly conclude that (a) eCommerce will take off in India as a multi-billion dollar market and (b) the mobile will be the logical channel for consuming it.

2. What does the mobile payment guidelines by RBI mean for technology providers like yourselves, banks, operators and users? (please be elaborate)

mChek - We believe that the RBI has balanced the need for a robust security standard while allowing enough space for service providers to innovate while ensuring that the service is accessible to all – we are pleased to see the guidelines in the market.

ngpay - The RBI guidelines are very well balanced. They ensure robust, end-to-end security while not restricting the flexibility that banks have in deploying next generation mobile services.

3. How will 3G impact mobile payments?

mChek - We strongly believe that the time for mass adoption and usage of mobile payments is already here and sms is best positioned to leverage this opportunity.

With the advent of more advanced connectivity like 3G and GPRS there is a larger window to innovate service delivery but the common denominator of any user on any phone and with any connection, being able to transact on the mobile phone is already available.

ngpay - 3G will only help. Two of the barriers to mobile services being adopted are (a) performance and (b) cheap, widely accessible data plans. Widespread 3G will address both.

4. SMS vs GPRS vs IVR based payments which is the bigger opportunity?

mChek - Encrypted SMS messages (with 128 bit end-to-end encryption) is the bigger opportunity.

ngpay - GPRS is the only viable option for true end-to-end mCommerce. From consumer point of view, GPRS is actually cheaper than using the primary alternative – SMS. A typical end-to-end transaction on Ngpay will cost <50 paise (1-2 US cents) while an end-to-end transaction via SMS will cost 3-4 rupees (10 US cents). IVR is generally considered a "self service" channel that is a substitue to a call center. It is not usually considered when talking about "eCommerce". Even in mature IVR markets (US, Europe) the IVR provides information (account balance, flight info) and does not, in any scale, provide interactive transaction services (such as bill presentment & payment, book purchases, etc). Even airline services on the IVR usually go to a live agent from the IVR when the transaction involves viewing flight options, buying a ticket, & selecting a seat. eCommerce – and hence mCommerce- has a visual aspect to it (searching/browsing for products, viewing pictures, selecting seats, etc) that cannot be replicated on IVR.

5. Is the different handset models/OS an impediment for mobile commerce growth? IF yes then what is the solution?

mChek - Lack of standardization is an identified issue in the mobile industry and a key challenge for application development as this increases the complexity of distribution.

6. Biggest challenges and opportunities for mobile payments in the years ahead?

mChek - Education will drive adoption – and the biggest challenge is getting users to understand the power of what they can accomplish; like all new technologies, this will also have a learning curve and a technology adoption curve and it's important to have the right combination of services for the consumer during the early days. Based on the initial responses however, we are confident of the value proposition and interest among all constituents in the eco-system – Telcos, Banks, Handset vendors, Merchants and of course consumers and expect Mobile Payments to be the next Microwave oven – once you use it, you cannot imagine life without it!

ngpay

Opportunities

Penetration – Size and growth rate of the mobile market is the key driver of the mobile services market. Current mobile penetration is large (270M+ mobile users) but even then, there is still a lot of room to grow. The mobile provides convenient, high ROI, anytime/anywhere access for businesses to reach consumers and vice versa.

Infrastructure – The capabilities of handset easily support interesting services and applications. Entry-level Mobiles today have the same power as many PCs had in the 1990's. Also, High QOS (Quality-of-Service) data networks are in place. Almost everyone has access to data services with even the most basic handsets & mobile service plans.

Demographics and Evolving Consumer Market - The Indian consumer market - including a new young working class with disposable income - is growing very fast. People live fuller, mobile lifestyles these days. They value convenience and have a lot of things that they want to do. They are comfortable with eCommerce and willing to transact over the mobile to simplify their lives and optimize their time.

Challenges

User Psychology & Awareness of What the Mobile Channel can deliver. Users have to trust the mobile – the way that people implicitly trust eCommerce over the PC. Moreover, very few people are aware of the rich set of services that they can complete over the mobile … today. Users are constantly amazed at the User experience and services available on ngpay when they see it.

Open Access – The Internet exploded because any user could suddenly access any website in the world regardless of the PC or Service provider they used. For the mobile market to explode similar to the PC-Based Internet market, users anywhere in India should be able to access any service they desire – as long as it is legal and secure – without interference or effort.

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