Mobile Payments potential huge in India, but will it really take off?

The global market for mobile payments is slated for a blockbuster growth in the next five years. Gartner estimates the number of mobile payment users to reach $340 Mn and a total transaction value at $245 Bn by 2014.

The mobile payment story in Indian context is expected to be even more rosier. The recent launch of Google Wallet has been generating a lot of buzz and is expected to empower the mobile (android) device to become the ubiquitous payment system.

With smartphones evolving at the pace they are, they have already become critical for tasks way beyond calling / messaging. The convenience factor of mobile payment is also a key factor and this mobile payment video we posted earlier speaks volume. The growth story for mobile payments in Indian context is expected to be even much more stronger.

A recent Assocham release paints a hugely positive outlook for mobile payments in India. Mobile payments in India seems like a marriage made in heaven. A fast growing mobile market and a equally burgeoning retail market seems like the perfect recipe for success especially in a largely disorganized retail market in India. The release goes on to suggest that mobile payment could be a huge support system for the $400 Bn retail market.

The case for mobile payment growth in India like everything is expected to be driven by the ever expanding consumer base across urban as well as rural demographic. Incumbents like mcheck and paymate are established players in the mobile payment market in India and should benefit from the increasing adoption of mobile payments.

I would like nothing more to see mobile payment take off in India but then I have my doubts. The success of cash less transaction platforms in my mind depends hugely on the security / trust index that the platform establishes with the end consumer.

One such platform is E-commerce which despite all the market estimates has failed to grow in India. Technical Infrastructure difficulties are cited as the primary reason people remain sceptical of e-commerce. However, I think we can safely say that a lot has to do with mindset of consumers at large who still don’t trust the platform and that coupled with the end consumer frustration with the sucky e-commerce technology is not helping e-commerce to grow in India. Even though mobile payment is different from e-commerce, I still feel the problems plaguing the e-commerce growth will apply to m-payments at some levels and hence disappoint the existing expectations from mobile payments.

One of the major points in favor of mobile payments vis-à-vis e-commerce is often the access. Where access to internet may not be that widespread, mobiles are almost ubiquitous and internet access on mobile is relatively positive.

While I agree to the basic premise, I think the mobile payment adoption will need a lot of additional drivers with ease of use being the biggest motivation for me. Case in point could be the Apple app store which makes paying over mobile a piece of cake.

From my own personal experience, buying on the app store is even simpler than buying in cash at times. Mobile payment applications developed on a similar approach could really foster the adoption of mobile payments.

Technology will obviously be a factor and I personally feel that developing non-internet mode for mobile payment is critical or mobile payments using internet will have the same fate as e-commerce. There have been initiatives earlier on providing mobile payments without GPRS usage but I am not sure if they have really taken off.

Taking a SMS driven approach could be a step forward and ensure that the entire mobile subscriber base can use their mobile for making payments. Regulatory authorities in India would also need to take a positive approach towards ensuring that mobile payments can take off and the value chain (merchants, consumers, payment application providers) are not restricted at any stage.

Analysts and industry experts are sure gung ho on the mobile payment adoption story but at the least, the expectations and the timeframe for its mass adoption look too far stretched to me.

What are your thoughts on the optimism for the mobile payments in India. What will be the key differentiator that mobile payment does not go the same way as e-commerce- sucky / immature?