The Next Big Hope

M-commerce needs a much-required fillip to boost its services

At a time when the Indian telcos are leaving no stone unturned to cut each other’s throat in the race of acquiring and retaining more and more customers by using cheap tariff and lucra ve VAS apps as weapons, they have perhaps, so far overlooked other lucra ve avenues to increase their bo omline. One of these is m-commerce.

The country and the industry has so far been gung ho about its telecom success story and s ll chants numbers like 900 mn mobile customers, 10-15 mn new user addi ons on monthly basis, and a growth rate of 10-15% y-o-y, the same operators have somehow missed another huge number—around 700 mn.

Yes, that’s the figure that depicts the number of Indian popula on who s ll do not have access to bank accounts. And this number can be tapped, that too easily, by the operators in collabora on with prospec ve partners like banks, handset vendors, and VAS players, using the ubiquitous digital device—mobile phones.

If leveraged properly, the m-commerce opportunity could prove as a savior for the already bleeding Indian telcos who are marred by numerous factors like declining ARPU, unexpected failure of 3G, and regulatory disturbances. And m-commerce definitely seems to be such service that has the poten al of catapulting the Indian telecom service providers on the right growth trajectory. “A large part of the ecosystem will include telecom service providers and banks shi ing focus to include m-commerce as a part of their

mainstay businesses,” says Neel Chowdhury, CMO & VP, Obopay.

The increasing demand of u lity transac ons on mobiles, primarily due to con nued penetra on of mobile phones and the growing need for real- me cashless payments gave birth to m-commerce. India has more than 900 mn mobile subscrip ons; it has just 240 mn people having bank accounts, 20 mn credit cards, 88,000 bank branches, and 70,000 ATMS. Of the households without a bank account, 42% have at least one mobile phone.

M-commerce: A Growth Area

Touted as the next genera on of e-commerce, mobile commerce today enables customers to transform their mobile into their wallet. As a vast segment of the Indian popula on who neither had a landline nor a bank account today have made a genera on leap and not only do they own a mobile handset, but are also slowly a emp ng to transact on their mobile phone. With this reality, the es mated market size of the m- commerce in the country is pegged to be around ` 400 crore.

The total poten al revenue opportunity through mobile commerce can reach

` 20 bn in 2015, according to the IAMAI 2011 survey and this is only the beginning. So, clearly mobile commerce has rapidly emerged as a major growth area for mobile operators. Kalyan Banga, manager, product development, Netscribes India says, “Although mobile commerce market in India is in nascent stage, m-payment and m-banking segments have shown significant growth over the last few years. Ini a ves taken by the government and financial organiza ons to reach India’s unbanked popula on can ensure tremendous growth in the la er segments.”

M-commerce in India is primarily dependent on network operators who can effec vely enhance and advance the usage of its services, which has resulted in collabora on and partnership models in domains like banks and telecom operators and technology provider. The market expansion in this domain has to be nurtured, offering a wide scope in increasing revenue for m-commerce players and telecom operators.

“In order to fully leverage the poten al of mobile for financial transac ons it is important to use the mobile network, widespread distribution network and innova ve services mobiles offers,” says Sridhar Rao, business head, mobile commerce, Vodafone India.

The recent airtel ad of a girl buying bags after her mother comes to her rescue ‘through mobile’ or the one showing a friend helping another with mobile money through his mobile for a drink are just examples of companies trying to tap the m-commerce market in the country.

Market Dynamics

Although m-commerce market in India is s ll in its ini al phase, but with the growth of smartphones, tablets, and mobile devices, m-commerce has started to gain importance in the digital marketplace. Mobile phone penetra on in India is more than 60% and is expected to be over 90% by 2015.

Over the last few years, services like m-banking, m-trading, and m-shopping segments have shown significant growth. A recent study shows that 45% of smartphone owners and 53% of tablet owners plan to purchase more products on their handheld devices in the future, predicting a huge opportunity for the service in the country.

Presuming its wide poten al reach, all major mobile handset manufacturing companies have started producing Wap-enabled smartphones and providing the maximum wireless internet and web facili es covering personal, official, and commerce requirement to pave the way of m-commerce that would later be very frui ul for them. “The growth of Indian retail market and a gradual shi towards modern retailing formats, growing number of mobile devices and rising subscriber base has aided m-commerce in India,” says Rajesh Razdan, co-founder & director, mcarbon.

Playing a Pivotal Role

In the current commerce industry, mcommerce has already started playing a pivotal role in the areas of finance, services, retail, telecommunica on, and IT services. In these sectors, m-commerce is not only being widely accepted but also it is being more used as a popular way of business/commerce.

Jagdish Mitra, CEO, Canvasm says, “Currently, there are between 8 mn and 10 mn mobile banking customers in the country. This is expected to rise to anywhere between 40 mn and 60 mn in the next 4-5 years.”

As per the latest report by BCG, mobile banking in India is set to generate a fee based income of ` 20,250 crore over the next five years, mainly driven by lower transaction cost, favorable regulatory environment, and the UID project.

Similarly, a BCG report suggests that by 2015, $350 bn in payment and banking transac ons could flow through mobile phones, compared with about $235 bn of total credit- and debit-card transac ons today. So far, 32 banks have been approved to provide mobile banking facility in the country by the Reserve Bank of India (RBI). Twenty-one banks have already started providing these services.

The volume of mobile banking transac ons in July 2011 was 1.74 mn with a value of ` 1.51 bn, an increase of 223% over the posi on in July 2010.

Looking at the lucra ve market condi ons few leading operators are evaluat-

ing all aspects of the market in an effort to determine their individual business strategies and to select their preferred technological approach to supporting those strategies.

Operators’ Play

Talking of the country’s largest integrated telecom operator Bhar airtel, the operator launched its airtel money services by airtel M Commerce Services early last year in Delhi/ncr and Chennai and it was subsequently rolled out to 300 cities and across 20,000 outlets earlier this year. The service offers its customers with diverse usage across sending money and spending in different categories such as food, entertainment, travel, and u lity payments na onally.

Sriram Jagannathan, CEO, airtel M Commerce Services says, “airtel money has an established merchant partnerships with over 1,800 brands across the country, which includes u lity providers; state electricity boards viz, BSES, Reliance Energy, Indraprastha Gas, BSNL/MTNL, and insurance and mutual funds, organized retailers, as well as local chemists and grocery stores who will now accept payments via airtel money, thereby ushering a new era in the world of electronic payments.”

Vodafone entered into the segment in 2010 ofering m-shop a marketplace to avail a range of goods and services from 2010. It also offers M-paisa a bank account on mobile from 2011. The services have been accepted by wide sec ons of the society in both urban and rural markets. Vodafone has partnered with HDFC Bank for the MPaisa bank account on mobile. Vodafone also separately provides a wide variety and suite of VAS services for its customers.

Idea has partnered with Axis Bank to launch its banking pla orm Idea Mycash will use Idea’s network of 10-lakh points of sale. Under the scheme, a customer can open a no-frills bank account of Axis Bank at Idea’s outlet by submi ng minimal documents.

Under the ini a ve, the customer can perform basic banking services like deposits and withdrawals at the Idea outlet either free or for a charge. Idea Mycash

If leveraged properly, the M-commerce opportunity could prove as a savior for the already bleeding Indian telcos who are marred by numerous factors like declining ARPU, unexpected failure of 3G, and regulatory disturbances

would provide basic banking services, including money transfer, using the mobile. Select retail outlets of Idea Cellular would act as customer service points, and also handle cash receipts and payments. The remi ance facility is being tested on the Dharavi-allahabad corridor currently.

Corpora on Bank in associa on with Tata Indicom and Paymate announced the launch of ‘Green Money Transfer’—a unique person-to-person mobile money transfer service, in early November 2009. “We ed up with Indian Bank for green money transfer. We have got the license for mobile money through prepaid card and we will rollout mobile money soon.

Few collabora ons are on pilot stages. Few operators have launched them in phased manner or in certain corridors to test their efficiency and latency.

Vendors are also coming forward to technologically support the en re system. Ericsson will be adding Ericsson Money Services to its expanding range of managed offerings for carriers. This is not just a hosted service, but an end-to-end process that the company is set to create a global ecosystem that makes sending money person-to-person as simple as sending an SMS.

Many operators are in the process of se ng up the right system and pla orm to tap this through significant financial commitments in this space through investment in a mobile money pla orm and have already signed Mous with a couple of banks.

However as of now of the total 15 operators present in the country, only four of the operators have launched their m-commerce services in the country. Of these services launched, both the public sector operators like BSNL and MTNL are missing from the picture.

BSNL that has the maximum rural penetra on in the country has s ll not taken up the ini a ve and leaving a plethora of opportunity untapped. The entrance of PSUS in the space is bound to mature the space and redefine the business.

Kalyan Banga, manager, product development, Netscribes India believes, “Mcommerce services stand to gain immense trac on in India, if rural and sub-urban popula on and their needs and preferences are properly catered to.”

M-trading

Online trading in India has grown into a mature business despite the low penetra on of internet in India, as the internet has re-defined the financial services such as banking and trading. Realizing the poten al of mobile trading and its tremendous opportunities, Securities and Exchange Board of India, on August 26, 2010, issued guidelines for securi es trading using wireless technology on laptops, mobile phones, and smartphones. Brokerage houses consent that mobile trading is slowly picking up though at a nascent stage.

Leading BSE stockbrokers Angel Broking, Mo lal Oswal Securi es, Marwadi Shares & Finance, BCB Brokerage, Ashika Stock Broking, Geojit BNP Paribas Financial Services, SMC Global Securi es, ICICI Securi es, India Infoline, Kotak Securi es, and Standard Chartered STCI Capital Markets are among those who have started providing mobile based trading facility to clients. Bonanza Por olio is offering its internet trading clients the op on to use the mobile trading pla orm.

Speaking about the penetra on of mtrading, Venkat Rangan, co-founder and CEO, Market Simplified states, “We see the next-genera on investors adap ng

mobile as their primary trading pla orm and the adop on has just not been in the urban areas, but also in the er-2 and -3 ci es, where we had cases of a retail investor being empowered by being mobile, where there is scarcity of even power. It’s a great empowerment tool.”

M-shopping

Mobile offers an immediate opportunity for retailers to connect with customers in a more meaningful way. Retailers have realized that as the mobile device is being personalized more, it has also created a tremendous opportunity for unique, individual personal marke ng programs.

M-adver sing helps in increasing the sales and it creates immediate transac ons. It is emerging as a service channel apart from being a marke ng channel. Indeed, retailers are able to get higher rates from mobile adver sing as compared to the average tradi onal media marke ng tools like online or print.

Of late, mobile adver sing has created a great opportunity for retailers who use m-adver sing correctly. Mobile technology must be integrated with retail stores, consumers could be helped to find what they need in-store. Retailers can set up mobile-enabled retail stores. By u lizing different mobile channels such as mobile web, search, applica ons, SMS , mul media messaging (MMS), email, Bluetooth, and content serves as an addi onal way for retailers to efficiently promote unique, mely, and personalized offers.

Roadblocks

Well, after going ga ga over the huge poten al of a services like m-commerce holds in the country, its me to look at the reason why the service it not picking up in India and what are the areas that need to be plugged for a smooth uptake.

Some of the key prerequisites are a broad regulatory environment that supports the use of mobile financial services, ensuring privacy and data security. Banks must exploit the distribution reach of mobile networks to penetrate unbanked areas especially the rural and underdeveloped areas. Mobile Payment forum

M-commerce definitely seems to be such service that has the potential of catapulting the Indian telecom service providers on the right growth trajectory

of India (MPFI), having representa on mainly from RBI, banks, mobile network operators and technology providers, and other payment system providers, is proac vely working to define the standards for mobile payments. Sriram Jaganthan, CEO, Airtel mcommerce Services says, “Airtel plans a mix of online and offline PR, online marketing and educational newspaper campaigns, localized marketing campaigns, acquisi on and e-ups with regional merchants and vendors for promo ng m-commerce across states.”

“A key factor to aid adop on in rural markets will be to develop the content in local languages and make the technology less forbidding,” explains Harsh Sisodia, sr vice president, Rage Communica ons.

The inclusive poten al of mobile as a medium for banking and payments would be unleashed when the large unbanked and underbanked segments of popula on are brought into the organized financial services framework. Banks and retailers will need to provide their customers with clear and unambiguous assurances about security.

“What would really give the preferred impetus to prolifera on of mobile banking usage in India is increased consumer awareness, educa on on safe transac ons and the user friendly aspect of services. It is impera ve to spread knowledge regarding the benefits of mobile banking along with assurance on the perceived security issues and threats,” It is impera ve to spread knowledge regarding the benefits of mobile banking along with assurance on the perceived security issues and threats says Srinivas Nidugondi, head, Mobile Financial Solu ons at Comviva.

Jagdish Mitra, CEO, Canvasm also agrees that m-banking and the payment solutions, even after being extremely useful and promising has not been able to pick up as an cipated and there is an even greater need for the m-banking, payment solu ons, and VAS companies to urgently clarify their communica ons, reassure consumers about their security concerns, and overcome general confusion along with bringing useful features with simplicity for their “There is an urgent need m-banking, payment solu ons and VAS companies to clarify their communications, reassure consumers about their security concerns,” Jagdish Mitra, CEO, Canvasm.

Recognizing the need for financial inclusion and riding on the growing mobile telephony penetration, the regulators keep issuing various guidelines for mobile banking transac ons, which are aimed at providing a safe, secure, and compliant solu on and has indeed been in the right direc on all the mes. “Service providers need to take care of all the bo lenecks especially around infrastructure, security and consumer awareness to ensure increased m-commerce adop on,” says Abhishek Chauhan, senior consultant, ICT Prac ce, Frost & Sullivan, South Asia & Middle East.

Well, talking into account the immense opportunity that the service holds, all that is needed is a strong building block, a robust system in place and the right ecosystem.