India: Finding the truth behind mobile payment predictions

The timing of the mobile payment prediction report by ASSOCHAM has coincided with Google Wallet’s arrival. Coincidental it may be, this will be the start of a mobile payment clairvoyance deluge. After all, Google’s in it. There are many reasons to love Google. For starters, people love to talk about Google, though they are loving Facebook more now. Google loves people who talk about Google. Should it be the reason to talk about mobile payments? Not really. I say the time has come. If mobile is the next big thing, then better put some money in it.

Predictions doesn’t always turn out as they should be. That’s ok. There is a reason why they are called predictions. But the problem is in gross extrapolation without even a slight margin of error. The predictions based on extrapolations never take local factors or the environmental factors which affects the predicted.

Here’s data presented by ASSOCHAM on mobile payment growth :

  • Retail market is a $410 billion market.
  • 100% mobile penetration by 2015.
  • 300 million middle class people with disposable income.
  • 720 million mobile subscribers
  • 67% retail transactions in cash.
  • India has 173 million debit cards
  • 23 million credit cards in use
  • 419 POS terminals per 1 million inhabitants.
  • 5% of total retail market is organized retail
  • 95 million personal computers in India

This isn’t much of a prediction from the ASSOCHAM report, except the ‘new frontiers of growth’. If the new frontiers of growth are based on the stats above, then we need to re-look at some of them.

100% mobile penetration by 2015 : The mobile penetration is calculated by the number mobile phone subscriptions or the mobile numbers doled out by the telecom companies which is then matched with India’s population. Everybody knows that this isn’t the right thing to do but there’s no better way. It is safe to say that India mobile penetration will not be 100% by 2015 and probably it will not be close. India’s rural penetration is hovering at less than 30% and 70% of India lives in rural areas. Urban uptake is so high that it was able to skew the mobile density metrics despite 70% rural population. Instead of focusing on the mirage of 100% mobile penetration, even if we concentrate on the 30% of rural India or the whole of urban India, that is still good enough number for mobile payment uptake. It probably is the most realistic one. If the real mobile penetration increases, then it is all the better.

720 million mobile subscribers: If we haven’t beaten this to death already, maybe we will this time. These 720 million aren’t active mobile subscribers. These are the mobile connections that left the buildings. If we deduct the single person holding multiple mobile connections, the ghost and the dead connections, the number hovers around 500 million. Still a good enough number for mobile payments.

23 million credit and 173 million debit cards: They follow the same logic of mobile subscribers. This is nothing to get excited about.

67% retail transactions are cash: This number is not without its doubts. I assume this is for the organized retail. 33% of the retail transactions are not happening in cash. That’s a good number to get really excited about if you are a cog in the mobile payment wheel.

If we stop extrapolating and look at the realistic numbers, here’s what we should be looking at:

500 million mobile users + 33% of the 5% organized retail transactions is cashless –> BIG Enough for mobile payment to start with.

This category A.

Growth obviously comes from :

70% of the Rural population (70% of the total India population) + 95% of $410 billion unorganized retail market. This is Category B.

The solution which all the mobile payment entrants are trying to build should be based on the Category B and not on Category A.