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Mobile wallet outshines credit cards in India

Mobile wallet may be a new concept, but Indians seemed to have adopted the mechanism faster than credit cards.

While there are about 10-12 companies operating in the mobile wallet space, Noida-based Paytm has more than 20 million active users. The number is actually higher than the cumulative number of credit cards in India.

According to data available with Reserve Bank of India (RBI), 19.95 million credit cards have been issued by 55 scheduled commercial banks in India till October 2014. HDFC Bank has issued the maximum number of credit cards at 5.57 million, followed by ICICI Bank at 3.3 million. On the other hand, banks have issued 441 million debit cards in India so far.

In the mobile wallet service space, Paytm competes with Mobikwik, Oxigen and Citrus in India, among other smaller firms that have operating licences from the RBI for mobile wallets. While users can digitally store cash for mobile and online transactions, they cannot withdraw the money.

Paytm, which received the wallet service licence from the RBI only last year, aims to cross the 100-million users mark by 2016, said Vijay Shekhar Sharma, chairman and managing director of One97 Communications that operates Paytm. Its rival MobiKwik, which started operations in 2009, claims to have 12 million users.

“More than 40% of our users are from tier-II and tier-III towns. Some of them don’t have credit cards or even online banking facilities. Some independent shop-keepers create mobile wallets for the unbanked people using their own credit cards or online banking facilities, while physically accepting cash for the amount they deposit in the mobile wallets,” noted Sharma.

Mobile wallet operators follow a semi-closed model allowing users to load money in the wallets and make payments to only the merchants who have operational tie-ups with the mobile wallet service provider. However, deposits are below Rs 10,000 as complete KYC (know your customer) is mandatory for higher amounts. The average value of a transaction is about Rs 250-300.

Besides mobile wallet service, Paytm also offers a market place for merchants to promote their products for a fee. While Paytm earns just about 1% as transaction fee on payments through its wallets, fee in the market place segment is higher at about 5%.

Paytm, which is funded by SAIF Partners, Silicon Valley Bank, SAP Ventures, Intel Capital and Reliance Capital is currently in process of raising about $ 200 million from private equity firms, has an annualised transaction value of $ 600 million at present.

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