Payment Wallets in India

In India, the smartphone grew at 21% in Q3, according to the research firm International Data Corporation (IDC), driven by sales of 4G phones. In addition to this mobile driven e-commerce has been steadily growing with e-commerce websites like Snapdeal, Flipkart are seeing close to 70% of their business order from GMV (Gross Merchandise Value) from mobile, according to 2015 Mary Meeker report. In such a scenario, it is no surprise that India’s digital wallets are mushrooming as there is space for growth.
Digital wallet is morphing beyond recharges or pay for everything from online food delivery to cab rides and even booking a new home. A payment wallet is a digital/ electronic form of physical wallet that you can use to make payments, transfer money, and perform most activities that you can with cash. The benefits of using a mobile wallet are multi-fold. One does not have to haggle for change, nor worry about a trip to a nearby ATM to withdraw cash. It is a secure, convenient and efficient way to pay for things without having to carry multiple credit or debit cards or even wads of cash and coins. Mobile wallet adoption in India has risen significantly in the last couple of years as smartphones and mobile internet have become an inseparable part of our daily lives. With better phones and faster data connections, transacting through a mobile wallet is an easy affair.


Broadly, there are four kinds of wallets in India:

  • Open wallets are the ones that allow you to buy goods and services, withdraw cash at ATMs or banks and transfer funds. These services can only be jointly launched with a bank. M-Pesa by Vodafone and ICICI is one such example
  • Semi-open wallet like Airtel Money, allows you to transact with merchants that have a contract with wallet provider. You can’t withdraw cash or get it back
  • In closed wallets, money is locked with the merchant in case of a cancellation or return of the order, or gift cards
  • Semi-closed wallets like Paytm, do not permit cash withdrawal or redemption, but allow you to buy goods and services at listed merchants and perform financial services at listed locations

India has about 150 million wallet users, according to a market research firm and consultancy. PayU Money, Paytm, MobiKwik, Oxigen and My Mobile Payments have captured around 70% of the market revenue, in no particular order. The penetration of mobile payment apps among users is similar across towns of all sizes, at 60% of those in large towns and 58% of those in small towns, but usage is higher among small town users, with these consumers spending 109 minutes a month on mobile wallet apps.

Paytm has over 100 million wallet users, which is double the penetration of Visa and Maestro combined (in India). Over and above this, in a country such as India and BRIC nations, the remittance market is immense.






To understand how big is the market consider this, Paytm, the market leader in this space, reaches just 40% of the smartphone users in India. Yet those users have deposited more than Rs 100 crore to their Paytm mobile wallets. There are over 40 mobile wallet services active in the country, with almost every bank also planning one of their own to take market share away from the likes of industry leaders Paytm and Freecharge.


Key Players

Paytm: With around 130 million wallet users, Paytm is unarguably the largest player in the market. Launched in 2014, the Company completes 90 million transactions per month. Just 4 months into launch of movie ticket bookings, the platform is already booking 1 lakh movie tickets a day.

Freecharge: Founded in 2010, FreeCharge claims to be strong in the mobile space with 20 million registered users. It is not a mobile wallet but a mobile recharge platform. The company recently was acquired by Snapdeal for $400.

Mobikwik: Started in 2009, MobiKwik claims to have 12 Million users. The MobiKwik Wallet claims to enable users to pay in a flash for their recurring mobile recharge, bill payments and online purchases on popular e-commerce websites (and apps) including eBay, Snapdeal, ShopClues, MakeMyTrip, redBus, BookMyShow, Domino’s Pizza, Fashionandyou, American Swan, Abhibus, Purplle, HomeShop18, Naaptol, Pepperfry, Yepme and Infibeam.

Other wallets include Citrus Pay, mRupee, Oxigen, PayUMoney, Vodafone M-pesa, Airtel Money, Novopay and Momoe.




Banks Entering Into Arena: Banks are taking the battle to mobile wallet companies, armed with their readymade payment systems, wide merchant network and an on tap customer base, attempting to reclaim a turf which just a couple of years ago was their territory. In the past year, large lenders like ICICI Bank, State Bank of India, Axis Bank and HDFC Bank, which together control around 40% of local banking assets, have launched new payment instruments as they seek to prevent customers from moving money to newly emerging non-bank companies.

SBI’s Buddy, ICICI’s Pockets, HDFC Bank’s PayZapp and Axis’ Lime are the new kids on the block, challenging the likes of Paytm, MobiKwik and Citrus Pay.

While wallets have had to spend millions to get their branding done, banks are leveraging their existing brand value to lure customers away from wallet players. Tie-ups with new tech innovators are also keeping bank costs low.


Threat From UIP: The National Payment Corporation of India is launching their Unified Payments Interface (UPI), a customer is no longer required to give their personal credentials like account details, security pins. UPI with its mobile first payments design moves towards interoperable and instant payments. The interface allows customers to make payments through a single identifier like Aadhaar number or virtual address.

However, it could turn a little sour for wallet start-ups like Freecharge, Paytm, PayU and Oxigen Wallet. This is because the regulations don’t allow wallet-to-wallet interoperability. For example, one cannot make transactions from a Mobikwik to a Paytm. This is applicable for semi-closed wallets like Vodafone’s m-pesa and Airtel Money. In order to operate on the platform, these start-ups might have to partner with the 15 odd banks that are partners with the platform. It doesn’t make things any easier for companies with payment bank licenses like Paytm, since they don’t have their wallet registered under their payment bank.

Wallet companies say banks cannot ensure enough attention to this business to make a difference. They point out to the fact that spending through debit and credit cards is still nascent despite an exponential increase in cards issued. Reserve Bank of India data show that the number of outstanding debt and credit cards has increased more than three times in six years to 669.61 million in January 2016. However, people still prefer to pay in cash after withdrawing it from ATMs




Mobile payments in India are estimated to grow from $86 million in 2011 to $1.15 billion in 2016, with a compounded annual growth rate (CAGR) of 68%, according to estimates. According to TechSci Research report, “India Mobile Wallet Market Opportunities and Forecast, 2020”, mobile wallet market in India is projected to reach US$ 6.6 billion by 2020. The mobile wallet market in India is projected to exhibit exponential growth during the forecast period, on account of rising smartphone penetration rate, growing mobile internet user base and increasing government support. In addition, mobile wallet companies operating in India are also offering attractive deals and incentives to attract new users. In recent years, wallet companies have increasingly formed collaborations with service providers and financial institutions to offer a robust and seamless mobile wallet platform to the users. Usage of mobile wallet is growing across various applications such as money or banking transactions, mobile recharge & bill payments, ticket bookings, utility applications, etc. In addition, approval of payment bank licences of major companies such as Paytm, Vodafone, Airtel, etc. is projected to drive growth in the number of banking transactions through mobile wallet over the next five years.


Sources: Secondary Research, News Articles and Research Reports