Mobile money: Why India’s middle class is slow to adopt so far

A mobile money app only fiddles with a consumer’s transactions in bits and pieces. Consumer is forced to continue use cards and cheques, besides the App.

When the e-commerce giant Flipkart made its fashion etailer outlet Myntra App-only, many of us were waiting to see the outcome. The reason for this shift was counter-intuitive to many. One year later, Flipkart was to bring Myntra back to the desktop. Some analysts went on to say that this shift cost Flipkart its market to its rivals. It is difficult to even for the younger consumers to completely shift away from their desktop. This is despite the continuous marketing and huge discounts offered by the etailers to boost their Apps.

I am not here to discuss what went wrong with the Flipkart strategy. The lessons to migrate a sizable share of consumers from desktop to App-only are relevant for mobile money as well. In mobile money, the equivalent of the desktop is debit and credit card. 

From card to app
For decades, Indian consumers were paying at shops just by swiping their cards. Only a year back, Reserve Bank of India introduced an additional authentication in the form of a 4-digit PIN for consumers to authorize each swipe. 

In the Indian context where contactless payment is yet to take off, using a card is far too simpler than a mobile money app. However, card experience is restricted to the middle class – Indian poor will perhaps never be adopting cards. 

Leading mobile wallet providers Airtel and Vodafone have tried to reach the lower middle class and poor population segments. Before the poor can adopt mobile money, providers must include middle-class consumers to create an enabling ecosystem. But the question remains why the middle class is not embracing either mobile wallet or banking App.

Use App for this, use card for that
Consumers can now pay cabs, autos, shops, and so many other merchant outlets using mobile wallets from Paytm and Ola Money. Same can’t be done using mobile banking App these consumers have installed on their phones. Consumers have to choose different payment mechanisms for different purposes.

People keep their money for spending in daily expenses in a single or at most few bank accounts. It helps keep them a tab on their expenses. They receive their salaries in a bank account which they would withdraw using a debit card. When they visit a shop next, they would be forced to use a debit card or cash.

App is difficult, card is easier
A card transaction is far simpler than an App transaction, be it a mobile banking or a wallet App. On top of it, a mobile money App doesn’t ‘fit’ into the transactional habits of the salaried middle class. Everyone withdraws money from the ATMs using a debit card. When the consumer goes to a shop, she will be keen using a debit card, or cash, rather than a different payment mechanism.

Card breaks user’s App journey
Indian middle class has been a long users of internet banking for money transfer. Both the sender and receivers would be having access to banking channels. Again, the existing App-Bank-Payment ecosystem would prompt the recipient of a money transfer withdraw her cash using a card or a cheque.

While there are lots of improvements in user experience in mobile banking and wallet Apps, these Apps are built to perpetuate a user’s habit of using cards or cheques for transactions. Apps are more difficult to adopt and use than cards. We need to bridge the current gap between mobile banking and wallet Apps.

(Originally posted in SocialWell's Blog)