Bank e-wallets may die early death: Tie-ups with niche players more viable

Given the expertise, focus and core competency of mobile wallet players like Paytm and Mobikwik, it makes more sense for banks to partner such players than building or pushing own e-wallet apps

An accelerated digital adoption in India, especially after the Narendra Modi government’s November 2016 move to demonetise high-value currency notes, and the subsequent spike in electronic payments, are credited with scripting a success story for mobile wallet companies. And, with a loss of market share in the payments space that ensued, banks also jumped on the bandwagon and launched their own e-wallets. Now, however, with their wallet customer base, user interface and innovation not matching well enough with the numerous offers that niche wallets provide, banks are struggling to compete.

On the post-demonetisation digital drive, Ritesh Pai, chief of digital office, YES Bank, says: “Some users who never had an active interface with the banking system also embraced prepaid wallets and joined the less-cash drive”.

But today, with a number of banks partnering niche mobile wallet players, there is a fear that banks’ own wallet products might die an early death. According to analysts, it is more lucrative for banks to partner existing mobile wallet players than building their own wallets.

“Technology is changing at a fast pace. It is beneficial to embrace new digital products quickly by striking partnerships with fintech firms. So, many banks are going for tie-ups with tech firms for developing applications,” says Vijay Mani, partner, Deloitte India.

When private lender Axis Bank acquired Freecharge, it chose to retain the brand and not integrate it into its existing wallet. “Consumers typically use wallets for high-frequency and low-ticket transactions. This is a great tool for enhancing engagement with consumers. At the same time, the Bank is able to extend the relationship with the consumer beyond initial payments by offering well targeted and segmented banking products,” explains Sangram Singh, head of retail lending and payments at Axis Bank.

Similarly, IDFC Bank, which had earlier launched its own wallet ‘Ziggit’, recently partnered MobiKwik for e-wallet services. According to IDFC Bank Executive Director Avtar Monga, “On a standalone basis, we don’t want to push Ziggit. In our case, we were not buying the footfall by spending marketing dollars on it.”

Both IDFC Bank’s Ziggit and Axis Bank’s Lime are now unavailable on the Apple App Store and Google Play Store.

“It is difficult for banks to keep track of the technological evolution and stay in sync. E-wallet companies are more innovative, since it is their core business,” says DD Mishra, research director, Gartner India, emphasising that ‘it is no longer about doing everything by yourself but about adding value to the ecosystem’.

While some of the major e-wallet players have more than 10 million downloads on Google Play Store – Paytm leads the pack with 50 million – banks’ wallets mostly have small numbers to show. Only State Bank of India’s wallet State Bank Buddy seems to have done well, with 10 million downloads. ICICI Bank’s Pockets and HDFC Bank’s PayZapp follow at 5 million each.

IndusInd Bank chose to partner Mobikwik to launch a co-branded wallet instead of bringing its own wallet product. “The data from a user’s history of transactions, etc, enables us to gauge their creditworthiness and helps us offer them newer products, such as lending and insurance”, says Upasana Taku, co-Founder, MobiKwik.

Both banks and e-wallet companies call such partnerships a ‘win-win’ proposition. They enable both the parties to offer ubiquitous experience to customers. The bank is able to tap into the mobile wallet’s larger customer base, while the wallet gets a wider reach for merchant payments, both online and offline, by associating with the bank’s card network.

While private banks have been quite prompt in adopting changes, most of their public-sector peers have taken time to make amends. Of course, there are exceptions like SBI, the country’s largest lender, given its robust IT backbone and relationship with the developer community.

Executives at public-sector banks (PSBs) say intense competition leaves us with no option but to stay updated on digital banking. At the same time, many PSBs face constraints of resource, talent and time for building in-house fintech capabilities. So, it makes sense to forge partnerships with entities that have expertise in developing applications and products and cut down on time to market.

Sunil Kulkarni, co-chair for pre-paid committee at Payments Council of India, says the model of banks having their own wallets is not useful; inherent benefits with e-wallets will not be possible. He adds: “E-wallet companies have been focused on consumer experience for payments and service delivery, while banks’ main focus have been deposits and loans. Working with e-wallet companies complements banks’ core business (banking) with payments and services delivery.”