Even with over 900 million subscribers, India is yet to see strong demand for electronic account services that allow consumers to transfer money and pay bills using their mobile phones, experts say.
Lack of awareness of these mWallet services and fees imposed by banks on firms offering them continue to curtail the growth of the globally multi-billion dollar segment.
MWallet is considered an effective tool in developing nations since these countries generally have higher number of cellphone users than of traditional computers, they added.
Also, since there is lower rate of banked individuals, mobile phones can be a potent medium for taking banking services to the smaller parts of the country.
Players like MMP Mobi Wallet Payment Systems (MMPL), Oxigen, Paytm and MobiKwik feel that mWallet can play a major role in not just tier II and III cities but also in rural areas. Besides, mWallet applications enable the users not just to pay their utilities and mobile bills, but also buy various services like transport, banking, etc.
Research firm Greyhound said mWallet as a service is an untapped market in India. It gives telecom vendors scores of opportunities to tap into markets where people do not have banks or bank accounts.
It can easily be applicable in sectors like ticketing, communication or even paying at petrol stations.
The Reserve Bank of India has started a pilot project to check feasibility of offline cash-out trial using biometric authentication. The project allows mobile payment providers to test cash withdrawal facilities for a small portion of their semi-closed mobile wallet users.
"Our primary objective is to drive the evolution of the payments landscape in India. MWallets is one such service that can help in reaching out to almost all the corners in India providing affordable and reliable services," MMPL, a Tata Teleservices subsidiary, COO Pradeep K Sampath said.
MMPL's wallet service, mRupee, currently has over 300,000 customers and will increase focus on the migrant population in the country to offer domestic money remittance by expanding retail presence in more than 25 cities, he added.
MWallet services firm Oxigen's Founder Pramod Saxena says that such service not only reaches the areas where penetration of banks have not been as expected, but it also enables people to safely transact their business without going to banks, that in some cases is in the next district or town.
Oxigen launched its wallet in 2008 and is the first virtual mobile wallet in India to be integrated with NPCI (National Payments Corporation of India).
"It is instant, secure and completely reliable and can be used across multiple devices like web, mobile or SMS. Besides, it is also convenient and simple to adopt. It has been quite successful with the migrant workforce who use it frequently to send money to their towns and villages," he added.
Discarding doubts about the success of mWallet service, Saxena said Oxigen connects over 150,000 customer touch points (retail outlets and chains), aggregating services from more than 40 brands and has over 35 million transactions a month.
Another digital wallet services firm Mobikwik said the service is making an impact in two areas -- domestic remittances (led by likes of Airtel Money, Vodafone M-pesa) and online or mobile shopping.
"First use case is fairly simple, where a migrant from Mumbai wants to send money to Uttar Pardesh, he can make use of the wide distribution network of the telco," MobiKwik Founder Bipin Preet Singh said.
Second use enables people who are un-banked or do not know how to use credit or debit cards to start transacting online. This is done through firms like MobiKwik, he added.
Paytm General Manager (Payments) Amit Lakhotia said the increasing penetration of smartphones and with users becoming comfortable with other uses, besides voice and SMS, it is a matter of time before mWallet catches on.
"Growing use of smartphones in small cities helped dispel the 'owning desktop/laptop' barrier to access internet. Now people are experimenting and also trying such services, which are simpler than opening a back account," he added.
Greyhound Research CEO Sanchit Vir Gogia feels that the opportunities are enormous.
He says most of the telecom giants already have this service and the others are following. Vodafone and Airtel have been heavily promoting their mWallets within in their enormous subscriber base.
Vendors like Itz cash, Paytm, Mobiwick, are one step ahead in terms of allowing the customers to make transactions beyond their utility bills, he added.
"Giants like IBM, Google are also developing mobile wallet services. It is a reflection on the possibilities that mWallet possess," Gogia said.
However, almost all the players feel that one of the major factors that blocks the effective utilisation of mWallet is lack of awareness.
"mWallets has its advantages, there are challenges that both government and firms needs to address. Security is one of them. The digital age is brutal and the gatekeepers need to be strong to build the confidence of the customers," Gogia said.
While security layers are being implemented through biometrics and voice recognition, it does not solve the problem for phones that are not smart. There are loop holes where companies need to work together to solve these issues, he added.
Oxigen's Saxena feels that while this service has given great relief to banks to shift traffic from their branches to retail, the banks are also imposing cash deposit fee from companies. This reduces viability of financial services.
"I think government should direct all PSU merchants like utilities, electricity companies, water boards, metro, railways, etc to start accepting mobile wallets for payments," Mobikwik's Singh said.