Can Google’s mobile wallet Tez revitalise India’s struggling digital payments industry?
As Google debuts its new mobile payments app for India, Mumbrella Asia editor Eleanor Dickinson looks at the implications for the country’s cash-based economy and whether marketers are ready for change
For its first foray into mobile payments in Asia, Google couldn’t have picked a more uncertain market to test the water.
With the launch of Tez, a free mobile wallet in India that lets users link up their phones to their bank accounts, Google has joined a plethora of mobile wallets and e-payment services fighting for their share in the country’s rapidly digitising market. Available on Android and iOS, the app lets users pay for goods in stores and online and do person-to-person money transfers.
On the surface, India seems a natural choice: it’s a country with one billion people, nearly 50 per cent of whom are under 25, a rapidly growing urban middle class and an increasingly mobile savvy population.
Meanwhile, in the months immediately following Prime Minister Narendra Modi’s controversial demonetisation policy last November, it seemed like India was on the cusp of a mobile payments revolution. The main mobile wallet player, Paytm, reached 200 million users by February this year, while the transaction value of the country’s Unified Payment Interface – a system that allows money transfer between any two bank accounts by using a smartphone – went up from US$15 million in November 2016 to $249 million in January 2017. As Digitas LBi India’s head of strategy Upasana Roy describes it: “Every rung of the economy [was] jumping on board – right from my milkman to the vegetable vendor around the corner. With the move of demonetisation, the digital playground gained immense impetus.”
However, by March this year, it became clear the sheen was becoming to wear off. As cash was once again re-injected into circulation, mobile wallet user growth flatlined – and then shrunk – according to comScore data shown below: 
While players such as Paytm, Mobikwik and FreeCharge clamour to attract consumer – and marketer – attention, India’s seeming mobile payment revolution has largely become something of a damp squib. That is the view anyway of Hari Sivan, the founder of Singapore-based fintech start-up soCash.
Speaking to Mumbrella Asia, he said “Digital payments are not taking off in India. Some channels have still shown a healthy growth trend but volumes have declined while value has more or less retained pace, which means less number of people are using it. Post the initial bump, the trend is beginning to stabilise, albeit, on a lower side. The runway of cash is very long; India is likely to cash-dominated for decades, much like every other developed market, say Japan, Germany.”
ComScore senior vice president for Asia-Pacific Joe Nguyen also shared the view that India is some way off from having an economy like that of China, whereby Alipay and WeChat have become the de facto payment choices. He says: “Overall, the usage of eWallets has come down significantly from the beginning of the year, as physical currency is ploughed back into the system. Earlier, there was a big race for eWallets to sign up merchants, but that has come to an end – now merchants chase eWallet companies to sign up.”
Their views are backed up by World Bank data, which shows 97 per cent of India’s retail transactions in India are conducted in cash or by check.Given the bleak outlook shared by Nguyen and Sivan, Google seems to have chosen an odd market in which to test out Tez. However, as Roy points out, Tez will serve as more than just another e-wallet, but will instead link up with several major banks in the country through the UPI system – the one integrated choice within a very fragmented market.
“Anything that supports and utilises the UPI system is a clear winner for us,” she said. “Tez is not like any other mobile wallet – it is in fact, not a competitor to a Paytm or Mobikwik since it capitalises on the UPI connect directly accessing the users’ bank accounts.
“Growth lies in the rise of direct payment systems on mobile devices. This country is driven by the power of mobile devices and access to low cost internet. Therefore, anything powered by the UPI, which allows direct transaction abilities on mobile is going to be seen as a far more practical solution in the future.”
She adds: “Bottom-line, a mobile wallet has only a limited appeal and worked well during our cash crunch, but the long-term effects can be argued otherwise. On the contrary digital payment systems – that allow seamless transactions – is the clear winner, and I suspect we will see quite a few of them cropping up soon.”
However, while linking Tez up to bank accounts may seem an attractive option for your white-collar worker, for scores of India’s rural and urban poor, it is less likely to make much difference, believes Nguyen. “It’s more of a debit real time linkage to a person’s bank account,” he says. “More convenient, but may not be as enticing for the working class who tend to use banks less.”
Nevertheless, he adds: “The ‘sending money home’ [option] is an interesting proposition for non-resident Indians who work overseas and send money back home to their families. This is a multi-billion dollar industry and competes with Western Union and other similar remittance services. It’s a bigger play for Google I would think.”
Despite its somewhat sluggish growth in recent months, there are some marketers who are sitting up and taking notice of the mobile payment climate, especially in the B2B space, explains Roy: “Businesses are entering partnerships with e-commerce teams, to create exciting couponing experiences. For example, a couple of months post the launch of [mobile wallet] Jio Money, the company also announced that they will offer exclusive incentives for people who opt to use the app for Uber payments.
“Most telecom players, banking, financial and insurance and e-commerce brands are more than ready and waiting to adopt more aggressive strategies to react to this growing trend. The struggle is mostly with hyper-market/retail and FMCG players: these are the two sectors where we are witnessing inertia to move towards digital payments. Even with the rise of on-demand grocery apps and Amazon Pantry entering India, we still have most consumers opting for cash on delivery.”
Even though two such major sectors remain largely untouched by the mobile payment economy, Roy is confident the market will once again take off, particularly through UPI-powered wallets. “While demonetisation definitely triggered the adoption of cashless practices, the recirculation of cash back into the system resulted in people comfortably falling back into their usual rhythm,” she says.
“However, with a very strong caveat: people are now mobile banking ready. They are ready, aware and much more strongly inclined to frequenting mobile payment solutions than ever before.”
Whether this gives rise to Google’s success in the arena, however, remains to be seen. Sivan, for now, is unconvinced. “We should be looking at 20 years ,not two years [before adopting a cashless economy],” he says. “With a lot of Google products – like Maps – it will take a while before we see anything tangible. If Google backs it for 24-to-36 months , may be there is some juice in it. Otherwise it will also end up in the app stores’ ‘wallet graveyard’.”
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