Mobile Paymentis the saviour, which helped millions of citizens of India in the face of demonetization. When citizens found themselves stranded with old currencies and ATMs ran out of cash, they had no other option but to resort to mobile payment to help them out. Naturally, the usage and popularity of mobile payment rose sky high.

In this article, we will explain how mobile payment has performed in India and what how the banking sector has helped its growth.

Situation of Mobile Payment in India

India has about 929 million mobile phone subscribers, the second largest market in the world. Out of this, 45% subscribers are from rural segments. Therefore, the scope of mobile payments is enormous in India.

India has a vast unbanked population, most of whom stay in the rural areas. Currently, the estimated unbanked population of India is 40%. Most of these areas are so remote that the banking system cannot reach there. However, the fact that these people use mobiles is a great way to connect them to the banking services. And this is exactly where mobile payment has been playing an important role. Mobile payment is a good option to cash. Since inception, mobile paymenthas helped these people get access to the basic financial services that they have the right to. Hence, mobile payment has a distinctive role to play in converting a cash only economy into a formal financial economy.

The role of banks in promoting mobile payment services

Mobile payment has transformed the financial services in two different ways. They complement the banking system and they also disrupted the traditional way of banking in India. Mobile payment is safe and easy to use, therefore, a user with limited knowledge of mobile phones can also use mobile payment services. They are a popular alternative to bank accounts.

RBI issued the first regulations related to the mobile banking way back in 2008. Following this, the first mobile payment that was launched in India was Interbank Mobile Payment System (IMPS) which is a mobile based fund transfer system. Soon, banks and telecom service providers joined hands to launch their own mobile payment services for their customers. Although IMPS did become extremely popular, mobile payment penetration in India remained at the very basic level, especially because people have been very cautious about mobile payment usage. The main reason for this was the high cost of usage of internet and mobile services.

Banks and telecom service providers have allocated and spent large advertising budgets to make mobile payment and mobile payment popular.However, acquiring and retaining mobile payment customers have always been a challenge. Mobile payments formed a minor part of the overall digital payment in India.

The much-awaited push however, was received through the recent demonetization initiative of the Government of India. When people found themselves stranded without cash one fine morning, banks and mobile service companies stepped in to help people in need. They launched targeted marketing initiatives to ensure customer sign ups and usage. Necessity is the mother of invention.Mobile payment services witnessed a one of its kind rise post demonetization.

Today, mobile payment in India is estimated to grow at a compound annual growth rate (CAGR) of 68%, while the mobile wallet market is estimated to grow at a rate of 30%. Out of this, 38% is money transfer business, 30% arerecharged and bill payment and 12% are utility payments. Other transactions constitute 20% market share.

Current modes of payment available in India

India is today neck to neck with some of the most developed economies of the world, especially when payment modes are concerned. Today in India, various kinds of payment modes are available. Below are some of the payment services available in India today:

Various forms of cards

There are various forms of cards available in the market today which include prepaid cards, credit cards and debit cards. These are used in ATMs, point of sale terminals and online.

Aadhar Enabled Payment System (AEPS)

Through Aadhar enabled payment system, one can pay at a point of sale and the business correspondence happens from bank to bank. Any bank account where the Aadhar Number has been updated can be used for this kind of transaction.

USSD-based mobile banking

India has a vast rural population where internet penetration is still poor. Hence, a non-internet based mechanism is strongly required and this is where USSD based mobile banking system comes handy. USSD based payment systems have enabled the digital revolution to reach rural India.

Unified Payment Interface (UPI)

The National Payment Corporation of India has set up a Unified Payment Interface through which quick and seamless payments are possible through Virtual Payment Address. Currently 36 banks participate in UPI. At present, it is used mostly for money transfers between wallets and accounts. However, in the near future, the same will be extended to merchant payments.

Digital Wallets

This is a virtual wallet through which users can make merchant payments. They are one of the most useful digital payment solution where payment is linked to a debit or credit card.

Point of Sale

Currently, most merchants in India accept card payment making it easy for users to pay for goods bought. A point of sale can be in a physical form like physical card swipe or it can be in a digital form.

India is in the path to become a cashless economy and in this journey mobile payment has a large role to play. Promoting mobile payment is a full proof way of curbing the parallel economy in India. According to several economists, India will lose 2% of GDP every year if they don’t integrate digitization, and that’s too big a risk to take. Hence, mobile payment will become increasingly important in the coming days. It will be interesting to see what methods the banks adopt to ensure each of them get their fair share in this digitizatal initiative.



Comviva is the global leader of mobile solutions catering to The Business of Tomorrows. The company is a subsidiary of Tech Mahindra and a part of the $21 billion Mahindra Group. Its extensive portfolio...