India has seen an explosion in mobile wallets and apps as the prime minister ushered in the digital economy. Brands like PayTM, PayUMoney and MobiKwik cropped up and became the preferred mobile wallet brand for the consumer. A mobile wallet is an application where you can load your money and transact with shops to buy grocery or pay bills at restaurants. Payments are made using the mobile number or email id of the recipient. You do not need to have a bank account to use it or to load money in it while you transact freely with others. That is why it is used a lot in the rural markets and especially the youth who may not have a bank account.
Although now, the strict RBI rules have asked all mobile wallet companies to do a KYC of their user base and customers. They are also popular because of the reward and cashback offer they give to their customers. Basically, they give you cash back if you cross a certain usage or amount of transactions. This reward is just like a loyalty program and makes sure the customers transact more. Internet travel and tour companies like MakeMyTrip and Ibibo use mobile wallets to give rewards and cashback to loyal customers, which they can use on further purchases. Mobile wallets are thus a more effective marketing tool. Many cab companies like OLA and UBER also have mobile wallets in their apps and their customers can load them in advance. They can then pay directly from the app and complete a smooth transaction. People also felt mobile wallets are safer then UPIs. They fear in linking too many apps directly to their bank account and most want to have that extra layer of safety and protection. Of course, the threat of hackers is also there.
UPI payment gateways have come up rapidly in the last few months and now threaten to take over the mobile wallet user base. UPIs have more than 420 million users, which is very close to 450 million by mobile wallets. These apps are linked directly to your savings or current account and you can pay directly through your account on the point of purchase like a debit card of sorts. They are being used heavily to transact and are being used by giants like Google, Apple and WhatsApp. These giants have launched their own version of payment systems like Google Pay, Apple Pay and Amazon Pay so their members can buy, sell and transact more efficiently within their systems. They are being used more by the urban population. Their growth has been huge.