A high level analysis of Mobile Payment Services.
Latest posts by AshishT (see all)
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Banking industry Vs mobile operators –
I would also like to highlight how customer’s expectations are managed by these two industries.
Mobile operators business is all about putting the capacity to serve 1000 people and selling it to 5000. (Based on the assumption that not all its customers will ever use the network resource at the same time ) – The level of service provided is just above the “I-cant-take-it-anymore” threshold.
Banking industry is all about redundancy, extra capacity, reliability and old and proven technology.
We expect our banks to be rock solid and reliable, we don’t have that kind of expectation from our service providers. I am not sure if M-payment services can ever operate at rock solid reliability because of their dependency on telecom domain.
I do see an opportunity to sell services to a small, technology savvy affluent crowd, but its not for “aam janta”.
My point is that there is no mass market for M-payments.
We do have huge number of mobile devices out there, but I think its the wrong lens to look at M-payment opportunity.
Lets step back and analyze, why there are so few credit card users in India? – I personally don’t think its because of the lack of products (at least in urban areas) or lack of creative marketing.
*Its because people still like the simplicity of a cash transaction.
*Huge underground economy
*For a segment of population, access to credit is still not readily available
*Old habits
Lets look at the challenges for M-payments –
*All of the above +
*Greater demand from end customer – Application installation, Service configuration, password management, Battery management (imagine running out of battery in the middle of a transaction)
*Language issues
*Incompatible networks, technology issues, standardization issues.
*Security issues
*Transaction fees
*Usability
I don’t think huge number of mobile devices can fix any of the above issues.
To me its a like a manufacturer trying to break into airplane industry – If only we can fit all these cars with propellers?
Hello Guys,
Sorry to deviate from the interesting discussion going on ..
But is it true that carwale.com has raised 2 cr for 30% dilution from seedfund ?
livemint.com has an article mentioning “In December, Seedfund picked up a 30% stake in Carwale.com for less than Rs2 crore, signalling the growing availability of capital for start-ups just off the drawing board”
I mean it is very difficult to find out how much VCs value a company .. if someone has more news on this.. it would help budding entrepreneurs understand what VCs look for before investing and how much would the valuation work out to be..
I mean carwale has been in operation for around 18 months, is a great resource, these guys had developed software for car dealers, have a very well designed website and very good number of hits… –> and they managed to raise 2 crores for 30%..
If the numbers are true then it would give YOUNG entrepreneurs and idea about what they should aim for before approaching VCs
My second point on this subject. Is a bit of wild concept thought. At least I have not heard or read it being discussed.
The concept I refer to, is to use the prepaid charge as a tradeable currency!
At the outset, it will be operator driven and even restricted within the operator’s circle. For example, an Airtel user transferring his Airtel prepaid amount to another Airtel user. Operators can put the restrictions that the amounts can be transferred and perhaps, there is a small service charge (the operator’s gain!) each time the amount is transferred, but the amount cannot be encashed. Upto this point, its like a barter concept. I am getting paid for my product or services, by means of something that I need (‘air time’) and not by cash. At least for person-to-person payments and small business payments, this may not be too bad to begin with.
What this delivers as a solution:
1. A means to make ‘payments’ without worrying about banks, mobile collections, etc. A solution that could potentially be implemented right away. And with operators having millions of prepaid subscribers, they are offering a service that finds enough potential usability.
2. Does it ‘increase’ the net air time sale or since it cannot be converted to cash ever, net-net, will there be any increased sale of air time (considering this from operator’s perspective)? If this is the most instantaneous form of payment that I can give to my vendor in Jaipur, he will be willing to accept it, and even if he does not find immediate use of it, he may transfer the minutes to his daughter’s prepaid. And there in, the usage may actually start growing. Other than that, since people may not start talking more just because they have more air time, there may not be a significant increase is usage or sale of air time.
3. However people may opt for a specific service provider (operator) who offers this service, just for this one reason. And sign ups may increase for the first mover.
At a second stage, interoperability of prepaid charges across subscribers can be made possible. This could even evolve into prepaid charge ‘exchanges’. There will be a small discount at which you may ‘encash’ your excess prepaid charge, at the exchange. The exchange will always have buyers and sellers of minutes. Buyers may get the minutes at 2% less than market rate, and sellers will receive 4% less for their minutes, and the exchange makes the differential 2%. If it becomes a veritable currency, the volumes will be plenty for the exchange to make money (Jignesh Shah of MCX could be the first one to jump at it!).
Of course, it is initially an operator driven concept and would require a lot of regulation and TRAI approvals. But the movement could well drive mobile phones to another league?
Tear it apart, now.. !
I have two distinct sets of responses to this debate, and will use two different comments, to keep them separate. The first one being this one:
1. I think the person-to-person and person-to-small-business usage of mobile payments is grossly underestimated in this PPP. It is the person-to-person payment requirements that has seen the evolution of Paypal. We do not have an equivalent of that here, and it may not be a bad idea to skip the entire Internet version of Paypal, and go straight into the mobile payment aspect of it.
There are many many occasions in our daily lives, that we need to make small payments to each other. Be it for dutching the restaurant bill, or sharing some other expense, or compensating for some expense done on our behalf, etc. Also to small businesses like the newspaper vendor or the dhobi or the gardener etc. As we keep smaller and smaller cash around, and get comfortable with plastic, we need not worry about the little cash too, now, if m-payments were possible. Not to speak of the growth to p-to-p (Ebay.in and the like) e-commerce, that this could provide.
2. Where the less literate person may find sending messages challenging, if it provides ease of collecting money, keeps his money safer (I think, on collection day, my milkman must be carrying a few thousand rupees in caseh, on his bicycle!), and if he is fundamentally a business person of sorts (all above examples – newspaper vendor, milkman etc.), believe me, he will learn to use this device! They are more enterprising than we give them credit for. Also in most cases, they will need to RECEIVE payments and not necessarily send them out. Adaption can happen with the proper regional language marketing and promotions.
3. I can see many other potential usage opportunities for such mobile payments. Magazine subscriptions, trial orders (ordered on television or print say, with a last line, ‘pay Rs. 400/- for a trial package, by sending SMS… to .. ‘). It will create a response mechanism and generate impulse purchases, that normally television or print cannot deliver. Mechanisms for collecting delivery addresses, etc. are trivial challenges, Could happen via a return second SMS.
I think commerce of all kinds can only get a huge boost with simple easy to use mobile payment options.