Amazon gains digital wallet license in India

Jonathan Camhi
5 Year CAGR

BI Intelligence


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Amazon has attained a license to provide digital wallet services in India, according to TechCrunch.

It’s expected to use the license to deploy a digital wallet for use on Amazon’s flagship site in India, as well as with a few third-party vendors, like Café Coffee Day — a popular Indian coffee shop. Amazon introduced a similar feature, called Amazon Pay Balance, in December, but the service was restricted to purchases made on Amazon.

A mobile wallet could boost sales for Amazon in India, where it’s being forced to adjust to regulations and monetary policy.

  • Laws in India require customers to go through a two-factor authentication process for each online purchase they make. But, with the wallet, users would authenticate when topping it up with money for future purchases. This could limit friction at the time of payment, and likely reduce shopping cart abandonment.
  • Demonetization efforts have made alternative payment methods more popular. The Indian government removed its 500 and 1,000 rupee notes from circulation in November, leaving customers strapped for cash, and prompting a 15-20% drop in e-commerce sales. However, digital payments in the country grew 400% after the demonetization.

This move will allow Amazon to compete directly with Alibaba-backed Paytm. Amazon already faces the threat of competition from Paytm’s e-commerce arm, Paytm E-commerce Pvt — which launched the Paytm Mall app in February and received a $200 million investment in March. With a user base of about 200 million and Alibaba’s backing, Paytm E-commerce is poised to quickly gain market share in India. A digital wallet may help Amazon better compete by drawing in customers looking for payment alternatives. In addition, it will provide an extra revenue stream for the company in the form of transaction fees charged to third-party vendors.

Retailers like Starbucks and Dunkin' Donuts are winning over consumers with their mobile wallets — apps developed by stores to make it easier for their customers to pay, and to deliver valuable perks. 

And these retailer wallets are leading the overall mobile wallets industry, thanks to their ability to rapidly push out innovative features like rewards programs, coupons, mobile order-ahead, and custom marketing.

This may be surprising considering that retailer mobile wallets can be used only at a specific retailer’s locations; in contrast, popular universal mobile wallets like Apple Pay and Samsung Pay can be used at multiple retailers, as long as users are using the necessary smartphones.

Ayoub Aouad, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on retailer mobile wallets that assesses what makes them so successful and which retailers can most effectively leverage the technology to push sales, traffic, and average ticket size. The report also outlines what makes these mobile wallets attractive, and discusses some of the advancements being made in the payments industry that will affect mobile wallets' growth rate.

Here are some key takeaways from the report: 

  • Retailers with large addressable user bases who are loyal, repeat visitors, will see their mobile wallets continue to be popular with consumers, especially as there continues to be slow merchant adoption of near-field communication (NFC) technology as well as weak offerings by universal mobile wallets like Apple Pay and Samsung Pay.
  • Loyalty programs will be a significant driver in retailer mobile wallet adoption. Companies like Starbucks and Dunkin' Donuts have been able to leverage their loyalty programs to acquire mobile wallet users, which, in turn, has driven store traffic and conversion rates.
  • By leveraging these programs, sales are expected to grow at a five-year compound annual growth rate of 68%.
  • However, adoption will begin to decelerate as a result of increased competition by 2020. As universal mobile wallet players begin to add effective loyalty programs and coupons to their offerings, adoption for retailer-based mobile wallets is likely to slow down because these offerings are their main marketing points. 

In full, the report: 

  • Explains what hurdles universal mobile wallets have faced.
  • Details what features retailers have adopted into their mobile wallets that have been successful  
  • Analyzes the use cases of retailers that have successfully leveraged their mobile wallet offerings to push growth.
  • Identifies how universal mobile wallets will eventually slow growth for retailer-based mobile wallets.

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