made by mobile phone in 2013 was around $ 24 billion , more than half the country ’ s GDP . As mobile phones have become more widely available , mobile payment transfers have helped reach the “ unbanked .” In at least eight countries , including Congo and Zimbabwe , more people have registered mobile money accounts than traditional bank accounts .
Mobile payments also are booming in China , with total transaction value topping Rmb38 trillion ( US $ 5.5 trillion ) in 2016 , triple the previous year , according to Beijing-based iResearch . By comparison , the U . S . mobile payments market increased by 39 percent to $ 112 billion last year , according to Forrester .
In places like India , Indonesia , and Brazil , it ’ s easy to buy an Android phone for as little as $ 25 — even less for older , secondhand ( or thirdhand ) refurbished phones . But there ’ s likely to be little onboard storage , and the pay-as-you-go data plan is too precious to waste on apps , especially those that send and receive data even when you aren ’ t using them . Browsers are popular again , not just because typing a URL has become simpler , but also because they work harder to compensate for the nature of wireless access in emerging markets .
India and “ demonetization ” Smartphone penetration in India was estimated to be at 239 million in 2015 ( 17 percent of the population ), and is expected to grow to 702 million by 2020 ( 55 percent of population ).
According to the Reserve Bank of India , the country of 1.3 billion people has fewer than 23 million credit cards and just 640 million debit cards — and 88 percent of those debit cards are used only for getting cash out of ATMs . India averages just 6.7 electronic payment transactions per person , compared with 249 in Australia , 201 in the U . K ., and 14 in China . As for those paying by card , in a country with 1.3 billion people there are only 1.2 million machines that can accept them .
On November 8 , 2016 , Prime Minister Narendra Modi went on TV at 8 p . m . and , in an unscheduled national address , announced that “ the 500 and 1,000 currency notes presently in use will no longer be legal tender from midnight tonight .” ( The notes were equal to about US $ 7.50 and US $ 15 .) The abrupt move left Indians short of ready cash . I was in India the first week of December and we were unable to
GROWING YOUR SYSTEM
get small bills anywhere to tip drivers , etc . There were very long lines at ATMs and a person was able to withdraw only a few thousand rupees at a time .
Before this jolt , India was a 90 percent cash economy . Homes and even large buildings were paid for in cash — not cards , cash money . The government wanted to change the cash economy so that corruption would decrease and Indians would begin to pay taxes ( 6 percent of Indians paid taxes last year ; one result is very poor infrastructure ). You had just a few weeks to take your 500 and 1,000 rupee notes to the bank to exchange them for new bills or your old money would be worthless .
Unable to pay for daily transactions in cash , millions of Indians have now gone digital , as have firms and small traders worried about a huge loss of business . Moolchand Parantha is just one example . The famous street food stall in New Delhi had only ever accepted cash for its Indian breads . But it signed up for Paytm , an Indian mobile wallet app , just hours after Modi dropped his 8 p . m . bombshell . Now about 20 percent of its daily takings come from the app .
Local perspective I asked Rajeev Manchanda , founder director at Inventure India , for his thoughts on India ’ s move to shift from a cash-based economy . Here ’ s his response :
Payments-related technological innovations are changing the way Indian consumers pay . The recent demonetization drive by the government gave impetus to adoption of e-wallets like Paytm overnight . One of the greatest benefits of demonetization has been the fillip it has given to digital transactions : the cash-to-cards ratio saw a complete reversal . This quick adoption of digital payment methods has played out across the organized retail sector .
In the major cities , it would have taken people from different socioeconomic classifications three to five years to adopt digital payment methods . Demonetization fast-tracked the cash-to-digital transformation to a matter of months . Around 12 million additional customers were added in a single week to the number of Indians using “ digital wallets .” This opened more avenues for organized retail players as people explored alternatives such as shops in malls or other organized retailers to purchase basic items , which led to increased footfalls across the sector .
The government unleashed a formidable competitor to e-wallets by building the United Payments Interface [ a payment system that allows money transfer between any two bank accounts or from a bank account to a merchant by using a smartphone ] and an application that facilitates payments in an easy and quick manner . For people not having a plastic card or smartphone , the government is enabling payment through India ’ s Aadhaar , the world ’ s largest national identification number program , based on demographic and biometric identification through which seamless transactions are possible .
Paytm founder and CEO Vijay Shekhar Sharma says his business was gaining tens of thousands of new users a day before the rupee note shortage . “ Now we ’ re signing up half a million customers a day ,” he told CNN . Since the move was announced , he says Paytm has added 10 million users , growing its customer base by 7 percent in less than a month to 160 million . “ In urban India , you have places where you can use cards , but in rural India you don ’ t have so many places ,” Sharma said . “ So mobile is the only way beyond currency .” But for a country where more than 90 percent of daily transactions take place in cash , even for big ticket items such as jewelry and real estate , switching to a digital economy will be easier said than done .
The bottom line In-store smartphone purchases worldwide were predicted to increase
1,000 percent in 2015 , according a report by Deloitte Global , and its acceptance continues to grow . “ Smartphones are already being used to check balances , transfer funds , and transact online , but they have not reached a ‘ mobile wallet ’ status globally ,” said Jolyon Barker of Deloitte Global .
The world of mobile payments is here — everywhere . Franchisors must adopt this payment tool or lose sales . Your competition is doing it !
William Edwards , CEO of Edwards Global Services , Inc ., has 44 years of international business experience . He has lived in 7 countries , worked on projects in more than 60 , and has advised more than 50 U . S . companies on international development . He has been an international master licensee and a franchisor executive . Contact him at 949-375-1896 , bedwards @ edwardsglobal . com , or read his blog at edwardsglobal . com / blog .
76 Franchiseupdate ISSUE II , 2017