NEW DELHI: Mobile commerce and banking are set to "take off" in India, the Boston Consulting Group has predicted.
The company estimated there are over 500m mobile subscribers in the country, compared with the 240m people holding bank accounts, 20m credit cards, 88,000 bank branches and 70,000 cashpoints.
Nine out of every ten card transactions are currently attributable to ATMs, demonstrating that electronic payments remain in their "infancy", with m-commerce at an even less advanced stage.
Indeed, half of Indian households, or 110m homes, do not yet have a bank account, but 42% possess at least one mobile handset, and 90% of these devices can handle basic financial transactions.
"The mobile payments and banking opportunity is on its launch pad, ready to take off," BCG said.
"But companies must show that they can develop services that respond to consumers' needs and achieve scale."
BCG's analysis suggested mobile payment and banking transactions would reach $350bn by 2015, measured against approximately $235bn of credit and debit card purchases at present.
More specifically, it argued India's two main "metamarkets", namely the cities and the countryside, had different requirements.
"Unbanked rural markets have a tremendous need for mobile payment and banking services," BCG said. "Over the next five years, they could begin to rival the urban market in size."
"In urban areas, many consumers have bank accounts but still rely on cash for 90% to 95% of small-ticket transactions. Mobile payments would be a tremendous convenience for these consumers."
In valuing the market, BCG stated consumer banking could be worth $150bn by 2015, the largest of five key sectors it identified.
"Banks could profitably serve many of the unbanked households with basic bank accounts and credit and savings products if they adjust their business model," BCG said.
Peer-to-peer remittances are expected to deliver $70bn by 2015, mostly as people in metropolitan hubs transferring funds to their families in rural markets.
Bill payments and point-of-sale purchases are set to hit $40bn by this date, and should see considerable further growth going beyond the forecast period.
"India's retail industry is dominated by mom-and-pop shops," BCG said. "If they trusted the service, store owners could easily and inexpensively accept mobile payments through text messages."
"With every mobile handset potentially acting as a debit card, this is likely to emerge as the second-largest category."
Government payments are anticipated to supply $40bn, coming in at $60bn for business payments, such as transferring salaries to employees or the movement of funds from one firm to another.
From a corporate perspective, BCG reported it costs business representatives equipped with mobile tools between 8¢ and 15¢ to serve a customer, standing in the $1 to $1.50 range for a formal branch.
Moreover, these staff can help promote the uptake of services in rural communities, and assist new customers in utilising the products available.
When consumers are willing to bank directly via a mobile phone, the cost per transaction declines to under 1¢.
While the fees generated may only touch $4.5bn by 2015, lower commissions and costs on airtime purchased using mobile money, reduced churn and more touchpoints through which to engage consumers should all prove beneficial.
"So long as operators recognise that these reasons -rather than fees - will drive the business, they can gain important advantages in customer 'stickiness' and lean operations," BCG said.
Many telcos and financial services providers have already joined forces, such as Bharti Airtel partnering with the State Bank of India.
Vodafone and ICICI Bank have pursued a similar venture, as is also true for Idea Cellular and Axis Bank, while Nokia has teamed up with the Union Bank of India and Obopay to roll out a slate of services.
Data sourced from Boston Consulting Group; additional content by Warc staff