With more Indians making payments using wallets and apps on smartphones, phone companies, with the technology to offer these services and above all the user base that is already using their handsets, are making a beeline for the lucrative digital payments market.
After Samsung, now Xiaomi, Realme, and Oppo are offering pre-loaded payment apps on their smartphones. Some of these support the widely used unified payments interface (UPI) platform allowing users to send money to friends or pay to merchants at retail outlets. OnePlus is expected to join the club sometime this year.
Indian phone company Lava, yesterday, introduced a payment app, Lava Pay, which works with feature phones and does not require internet connectivity for payments.
Phone companies with an already strong footprint in the Indian market are well placed to make a foray into payments. In December 2019, there were 450 million smartphone users in India, according to the International Data Corporation (IDC).
“A large base of captive customers provides phone companies a significant opportunity to offer native payment solutions with handsets. Convenient payment modes such as contactless, and flexible options across virtual cards, and UPI would definitely spur customers to use their phones for transactions given the ubiquitous presence of a smartphone," said Fali Hodiwalla, partner, advisory services, EY India.
The flat growth in the smartphone market is making phone companies explore other sources of revenue. Diversifying into services such as apps, video and music streaming, fitness, and payments is a natural curve for companies that already have a user base. Services now account for a fair share of revenue for some phone companies.
“Digital business models evolve from information and communication to entertainment and from there to commerce. For digital commerce, digital payments is a key component to not only acquire customer but to control and deliver a differentiated experience and overall higher value creation," said Naveen Surya, chairman of Fintech Convergence Council and chairman emeritus of Payments Council of India.
Having sold more than 100 million smartphones in 2019, vendors such as Xiaomi already have an existing user base ready to adopt their Mi Pay and Mi Credit platforms.
Phone companies such as Xiaomi have the technological backbone to support sophisticated solutions to step into the market, pointed out Vikram Singh, lead of financial services, Xiaomi India. “Given the huge base of Xiaomi smartphones in India, it makes Mi Pay an automatic go-to option for UPI-based payment. The benefits of Mi Pay are its deep integration within MI User Interface (MIUI) across contacts, SMS and app vault where one can send and receive money directly within these services," said Singh. While Samsung Pay also supports near-field communication and magnetic secure transmission payments allowing users to tap and pay on a payment machine, Xiaomi’s Mi Pay supports scan and pay, allowing users to pay by scanning a QR code. Xiaomi also has a lending solution called Mi Credit, which provides loans of up to ₹1 lakh.
The ease with which regulators have welcomed new players such as Google, Amazon, and Facebook into payments in India has spurred the interest from phone companies. “The Reserve Bank of India has made sure that appropriate regulations are in place to ensure customer safety and that applies to all entities, local or foreign. These regulations and frameworks have so far worked well in the interest of customers by helping to keep their money safe and resolving any issues," said Surya.
Despite the fact that many of these phone companies belong to China, their payments services are expected to do well, especially with strong regulations in place, which will get a further boost from the data protection laws when they are enforced. “When people use payment apps they look for convenience and security parameters and don’t really care about the country or even the brand behind it. Individual awareness and how regulation around them works will also determine which platform gets priority," said Vishal Jain, partner at Deloitte India.
Though companies such as Google, Amazon, and Samsung had the early mover’s advantage, Xiaomi and Realme seem well placed to carve a space of their own as the size of the digital payments market is going to grow from here. Smartphone makers could well emerge as formidable competition to incumbent digital payments players, given that some of them already have strong customer engagement and brand strength, according to Hodiwalla.