Mobile payments in India are predicted to grow 200 times over the next seven years to $3,000 billion and will benefit IT, telecom, banking and mobile wallet companies, as per a Bank of America Merrill Lynch report.
“In India, we consider mobile payments to be both an opportunity (for banks, telcos and
new players) and threat (due to dis-intermediation, more to the traditional banks). We estimate the value of mobile banking, estimated at just $16 billion today to rise 200x in 7 years to more than $3,000 billion,” BofA ML said in a report.
The report further said that by then mobile payments will form 10% of the total payments in India which was just 0.1% in financial year 2015.
“We consider this as an opportunity for banks, independent payment wallets, telcos and IT companies to improve their competitive positioning; a threat to some of the public sector banks, smaller companies who are late in this space and expect this to provide a big thrust to financial inclusion,” it said.
With evolution of alternate payment methods, the report expects payment though paper to fall below 2%. It expects gradual reduction of cash from the economy and said e-payments will help to soften lending rates and support growth over time.
“Some of the key drivers for this growth will be improving smartphone penetration – to double in 3 years, the young population – 60% of the population being under 35, and shift to digital commerce as buying products is cheaper online,” the report said.
It said that banks that are aggressively launching an integrated ‘digital platform’, have large customer base and market leadership, is expected to be the biggest gainers.
“We consider HDFC Bank to be the biggest potential beneficiary followed by SBI, ICICI Bank and Axis. For telcos, we expect reduction in churn/marketing expenses due to uptake in wallets. IT cos would also be beneficiaries given technology spend on mobility initiatives are estimated to be a $2.1 billion opportunity,” the report said.
Specific to India, the report finds Tech Mahindra to be better placed to capitalise on the opportunity given its payment bank license.
“TechM has formed a JV with Mahindra finance where it could leverage the company’s physical reach especially in rural areas,” the report said.