Convenience and low entry barrier made it the common payment mechanism among users and small shops and vendors
Mobile wallet transaction volumes grew nearly three times year-on-year in 2016-17 to become one of the mainstream payment mechanisms in India. The growth accelerated to 170% in FY 17 from 137% in the previous year. The average growth in the previous three years was 164%, on much smaller bases.
Much of the explosive growth can be attributed to demonetization decision of the government, announced in November last year. It is evident from the sudden uptake in m-wallet transactions in the last six months of 2016-17. While the total volume of m-wallet transactions was 363 million in H1 (April-September), it jumped three and half times in H2 (October-March) to reach 1267 million. Prime Minister Narendra Modi announced the demonetization plans on November 8, 2016, which was accompanied by a severe short supply of cash, forcing people to go for electronic payments. Mobile wallets, such as Paytm, MobiKwik and Freecharge witnessed huge surge in demand, because mobile wallets were the fastest, easiest and cheapest way to go electronic for the common people as well as small businessmen alike. Paytm, in particular, aggressively pushed its services by making it ubiquitous. Small shopkeepers, restaurants and even roadside vendors started accepting money through its service.
The total m-wallet transaction volume in post-demonetization (October – March) was more than the combined transaction volume of previous two and half years!
Value of m-wallet transactions grew a little slower at 159%. The higher growth in volumes as compared to values indicates that there was indeed an increase in usage. In fact, while the average value of each m-wallet transaction was INR 45.53 in H1 of FY 17, it dropped sharply to INR 28.97 in H2, due to more frequent use of the payment mode.
Today, mobile wallets have the least average transaction value among all comparable e- payment methods. While the average transaction value for mobile wallets stood at INR 32.66 in FY17, the corresponding value for a debit card (PoS sale only) transaction was at INR 137.50. For credit cards (PoS only), the average transaction value was far more—INR 302.82.
Most electronic payment methods, such as cards, mobile banking, NEFT, RTGS and IMPS payments grew impressively last year. Mobile wallets have grown close to 20 times in last three years.