To create a micropayments infrastructure, we need to build on what already exists. Mobile operators in India have created an amazing network of points of presence where one can buy airtime. They know how to handle cash that users pay. (Cash remains the preferred payment mechanism given the low penetration of credit, debit and cash cards in India.)
Today, mobile operators cannot use the cash balance that is there with them for purposes other than voice and data services. Besides, the high incidence of taxes (10% service tax and 15% spectrum and allied charges, for a total of about 23% on what the end users pay) makes it difficult to use the cash balance for real world transactions.
Suppose, we were to change this and allow the cash balance that operators have to be used for third-party non-voice services for a fee of say 10%. Credit card companies charge merchants about 2.5-3% for transactions. Operators could play a similar role for small transactions (say, under Rs 250 or Rs 500).
This would be a game-changer in India. Application and service providers could now create services and leverage the cash balance that users have for collecting their payments. Consumers already know how to refill their accounts with cash given the ubiquity of the mobile prepaid infrastructure.
If we can even imagine India’s top 20% (10 crore) mobile users spending Rs 50 a month on new services, it creates a new annual market of Rs 6,000 crore ($1.3+ billion).
More importantly, it will create interest in computers, software and the Internet amongst the youth, and out of that we could see the emergence of India’s Tencents and Googles. A decade ago, many in India were fired up with the potential of the Internet only to be disappointed by the market. This time around, the potential of the market can delight many in India.
