A Micropayments Infrastructure for India: Part 4

Indian consumers spend about Rs 100,000 crore ($22 billion) on mobile services – 50 crore subscribers with an ARPU of just under Rs 200. The number of postpaid users is less than 10%, though their value will be more.  There is a lot of ‘cash balance’ flowing through the mobile ecosystem.

For operators, one issue could be that people may start using their ‘airtime money’ (which is very high margin for them) for alternate transactions (which would be low margin). I don’t think there will be a shift – there is no replacement for talking and texting. In fact, I expect that people will now probably have more money with the operators since there is much more that they can do, enabling operators to sell higher-priced VAS!

The real opportunity will be for thousands of developers and service providers who can now create paid services for the mass market with a capability to target hundreds of millions of Indian mobile users – and get 90-95% of what the end users pay. This will spawn a whole new industry in India, and make the mobile that much more valuable.

Apple did much the same with the iPhone. Its existing iTunes accounts with credit cards helped it jumpstart the Mobile  App Store. Today, there are over 100,000 apps. India needs something on a similar scale to drive innovation at a mass scale.

Tomorrow: Part 5

4 thoughts on “A Micropayments Infrastructure for India: Part 4

  1. Rajesh
    I have been reading these notes on micro-payments with great interest. I have had very similar thoughts and have even spoken with a local operator here at Bangalore.

    One big point that will come in to the mix is the fact that DoT has a revenue-share/fee based on the revenues of the operators. So, if the micropayments paradigm that you recommend was to manifest, the operators not only have to provision for a “lower margin” transaction, but also have to share a part of that with DoT? I don’t know the fine print here, perhaps the operators have an escape clause in revenue share, where revenues come from non-telco activities. But, we don’t know that for sure. If this surmise is true, then it will be a longer “sell cycle” for your idea.

    But, I like the train of thought you have articulated, not just because I have also similar thoughts. This could create a level-playing field, massively expand the addressable market pan-India in an inclusive manner, and make every day transactions appear so much easier.

    And best of all, being a non-cash transaction, the govt can see an increase in indirect taxes? Which can only be great for the community, state and the country.

    May this idea be blessed so that it can emerge as an implementable one. Is there a way I can help?


  2. @vishnu i dont think govt gets (or should get) a cut for micros transactions.

    Micropayments over mobile in India is not a technical challenge, but whats the real challenge? why we dont see it in India?

    Would love to read about that….

  3. Rajesh, this is a classic case of coming up with a solution for a problem that doesnt exist.

    1. People are paying cash today, and are just happy doing that.

    2. Who is the customer and what is the scenario? (for example, the twitter guy Jack Dorsey’s new startup, squareup, enables vendors to collect payment using their iphone. ppl dont carry cash in the US, so he has some real good use cases.) Whats your use case?

    3. Will the investment in collection infrastructure be justified? What about all the regulatory issues? if i have 10k in my mobile balance, will i get interest on that?

    4. Why will anyone pay 5 percent commission on a transaction? most merchants always prefer cash / debit card bcos of this reason, what is their incentive to collect money from mobile accounts?

    5. call me stupid or use this as a “ppl will say no, but you need to do it” event – i dont see one chance in a million of this thing working in India. No way. And dont quote some two lines in a businessworld article talking abt how farmers use mobile phones to pay 2 years from now. doesnt mean someone is running a profitable business out of it.

    6. when u do a copy from MS word and paste into notepad, u dont end up replicating the document. so u need to be careful in picking the source of these concepts. for example, africa is more like textpad if u say india is notepad, US is MS Word. India is notepad.

  4. Rajesh
    Small correction in para 1. I think you mean ‘postpaid’ (is under 10%) rather than prepaid.