Mobile Payments/Digital Wallets

Mobile Payments/Digital Wallet space is one of the most crowded space. A number of players from different domains are entering the fray, each relying on their own strengths. The competitors in the fray are Internet Giants like Google, Digital Payment Networks like Visa, startups like CitrusPay, telecom operators like Airtel and retailers like Starbucks and offcourse Paypal (although not that big in India).

The reason for the multi-dimensional fight are , well, multi-dimensional. The space stands at a cross roads of different industries, hence the interest from different players. (For more details about the players read the Economist Article.) But there are other major reasons for the attraction of the big players. First is the attractiveness of the market size and growth prospects –  the market is set to grow to threefold to $721 Billion of transactions by 2017. Second is the nature of the business – customers want a single, simple to use platform which they can trust – hence the jostling to establish one self. It is widely expected that because of the nature of the business and the economies of scale in the business, (Business entails largely fixed costs in terms of marketing and technology – variable costs are minimal) the industry will shake out and only a few big players would be left standing – and standing profitably, because customers will not like to switch to a new application they do not trust. This hasn’t deterred startups from entering the fray. CitrusPay, a Indian startup, raised $5.5 Million in the last quarter of 2013. Big companies are also on the hunt to acquire startups with promising products. Incidentally, retailers are also in the fray because “digital wallet” applications – will provide them valuable data about their customers shopping habits and help generate customer loyalty.

Whatever the results of the war, the battles are going to be very exciting. And with lower transaction fees, one sure shot victor of this war will be the end customer.

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