Driven by an unprecedented growth in the internet subscriber base, which is expected to touch 150 million by the end of this calendar, the mobile payments (m-payments) industry in India is estimated to grow from $86 million in 2011 to $1.15 billion in 2016, with a compound annual growth rate (CAGR) of 68%.
According to a study by Knowledgefaber, a Bangalore-based consulting and research company, availability of affordable handsets, low mobile tariffs and increasing voice and data network coverage across the country will emerge as the key drivers for m-payments in India, with lack of adequate banking infrastructure, low Internet and PC penetration providing further impetus to the market.
“However ,trust coupled with security issues remain major hindrances to m-payments adoption. Lack of awareness has also emerged as a major roadblock, specifically in the rural and uneducated mass of the country,” the research report on ‘Payment Technologies in India’ said.
On the payment gateway scenario in India, the report said that prepaid cards accounted for 3% of the total debit cards in circulation in the country. Currently, the market for prepaid cards in India is estimated to be at $7.98 billion, and is growing at 40% each year.
While payroll cards dominate the prepaid cards market with a 34% share, travel cards and multipurpose cards enjoy a market share of 19% and 27% respectively. the market is highly consolidated among three companies – Axis Bank, ICICI Bank and Itz Cash Card, accounting for 73% of the market value in 2011.
“There is a huge potential for the expansion of the prepaid cards market, provided all government and other cash transactions are routed through prepaid cards. The current regulatory landscape favours banks but they focus more on credit and debit cards instead of prepaid cards, while non-banking card issuers are constrained by regulations,” the report said.
Stating that near field communication (NFC) technology is still in a nascent stage in India, the report said the trial of transactions based on NFC had started to pick up in rail ticketing, retail outlets etc. NFC is a short-range radio frequency identification (RFID) technology that makes use of interacting electromagnetic radio fields instead of the typical direct radio transmissions used by technologies such as Bluetooth.
“Many banks, mobile network operators, vendors and independent companies are already implementing this technology and undertaking trial runs across the country. Mobile payments is increasingly being adopted by Indian consumers. Couple this with over 900 million mobile subscribers, 240 million bank account holders (of which 42% own a mobile phone) and a booming retail market, the adoption of NFC technology is expected to propel further,” it added.