Mobile Payment in India - Ringing bells (Industry Analysis)

Mobile Payment, worldwide has failed and as Booz Allen and Hamilton points out, the only way to make mobile payment work is increase cooperation among the key stakeholders – i.e. payment industry (banks/credit card issuers), operators, handset manufacturers, merchants, channel enablers and of course the regulatory authorities.

While mobile payment buzz started in 2000 and never took off [except for maybe Japan], the time is ripe for m-payment solutions – primary driver being the recent advances in handset, chip, mobile network technologies and of course the increased purchasing power of BRIC economies. [esp. India]
And why is India a hotbed for mobile payment services?

While PC penetration in India is close to 18 million+ [grows@CAGR of 5mn], the mobile population stands at 150 milllion+ [adds 4.5 million subscribers every month].
Mobiles are available at as low as Rs 1200-1500 [i.e. 30-35$]
Expected growth of mobile users expected to reach 200+ million in the next 2 years

With India being a hot market, currently there are 2 types of mobile payment players:

Text/SMS based service – for e.g. Paymate/mChek, Obopay [a US-based firm, entered India a few months ago, is into P2P payments too]
GPRS based service – JiGrahak.

While SMS based solution works on any phone with SMS capability, GPRS based phones will need Java-enabled phone (and you need to download the software too). Considering that Nokia 1100-type of phone is the most selling model in India, SMS based services will see a major adoption.
But this logic may not be 100% true.
As any product adoption curve goes, the early adopters of these systems would be the high-end users [most probably owns a Java enabled phone], and that makes JiGrahak highly relevant.

The early birds will be the users who are most comfortable with online payments, technically aware of mobile payment, well-to-do guys who will carry the high end phones and will look for secure payment solution.

But the biggest threat to GPRS based solutions would be the launch of Nokia Wallet phones [6310 and beyond],which will allow users to conduct online transaction via WAP browser [assuming Nokia forms partnerships with operators/merchants]

And the biggest hurdle for SMS based systems will be the quality of mobile network in India. I have an Airtel connection – and I must say that call drops/dead network/unsent SMSs are a common thingy. SMSs are lost/not sent and many a times not received immediately.

Anyways, the basic question about mobile payment remains unanswered -

98% transactions in India are still cash and cheque! Why do you think people will switch to m-payment mode, when credit card payment has still not taken place?
What’s the value proposition over plastic money [i.e. credit card?] If it’s only ‘pay anywhere/anytime’ – there are couple of *safe* options available. Why m-payment?
Why is it that none of these payment enablers have tied up with vendors that matter the most (atleast to me).For e.g. mChek has tied up with Airtel for bill payment – I don’t need this service since I have an autobiller payment registered. Same with credit card companies.
Why not tie up with retail merchants like Foodworld, Shoppers Stop, Landmark etc [where the uber customers/early adopters frequently visit] and make the product most relevant?
What’s the business model? How do these companies plan to monetize?
As Deepak Srinath points out – “And from an investor’s point of view, what is the revenue model for m-payment providers? Both Paymate and Ji Grahak are free of charge to the user; does the merchant pay them for every transaction? Can they break even with only online merchants?”
These are questions which m-payment companies need to answer. And I would be damned if these companies tell me that they wanna advertise on my cell [even though they wanna do it contextually!].
Please sir, I receive quite a good no. of ‘free ISD’ SMSs a day [courtesy Airtel] and any further attempt to bomb me will be met with severe F**K O**’ screams.

Will you use a mobile payment solution? What are your issues/concerns regarding the same? Are you concerned about security? Do let me know.