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Cash,Visa,mobile or prepaid who will win

With reference to the growth of e-com in India ,now digital money is growing at the cost of liquid cash.This digital money could be a credit card (if it is credit card ,than all chances of it being visa) or a mobile cash.But even mobile transcactions are taking place thru credit cards.In India we do not see real mobile cash like the one prevalent in kenya.In Kenya there is enough transaction thru mobile as opposed to India where RBI is a tough regulator.

Till now one can book tickets and transact through a mobile using a credit card but come January 2011 ,everybody can also use their debit cards for mobile transaction.

Another thing in market is prepaid cards .

Advantages for companies building a business model around a prepaid card is that it helps them save on commissions which otherwise would go to VISA .

But the challenges for prepaid card would be

1) to build and scale IT infra and bring the product in line with electronic payment standards.I doubt whether prepaid cards prevalent in India will be easily used from semi-closed (or semi-open) can be reloaded and used as open-loop (when ever RBI allows in future).It seems difficult in given scenario but if it happens, it will be another chapter in the business model of the companies apart from being just an e-com player.

2) the cost of acquisition of customer is more as marketing spend is more. 

A lot is at stake travel, books and gadgets .It is how you build your business and your ecosystem.

Summing up , shall one build a business model on visa or prepaid cards.(Though US experience may be a guidance but India may be different.

Everybody’s opinion please.

  • Upendra Namburi

    It’s always good to benchmark and observe global trends, however one should be mindful of the structural and economic nuances in India for the payments industry
    a. Revenue Streams : The US prepaid market has a wider set of fees charged to the consumer, making the P&L metrics quite different. The current scenario for charging fees in India is rather different. The service provider / issuer would need to offer significantly greater value for money to increase the revenue streams
    b. Why Not Cash? : It’s great to have electronic payments. The value proposition for switching to electronic payments espescially in micro-payments is yet to be flushed out. In South Korea and several other countries there are tax based incentives in place for the retailer and the consumer
    c. MPesa : Great model, great proposition…however the Indian Postal network has been doing a great job in enabling domestic level remittances and transfers. Hence the proposition, yet again, would need to address different customer segments in different methods
    To summarize, even if the regulatory aspects are addressed, there is sufficient work to be undertaken in addressing the relevant needs of the stakeholders in developing profitable transaction based business models!

  • Sum

    Prepaid cards should be multipurpose for them to be an attractive proposition – for example, metro card + bus card + grocery card, bank card + prepaid amount, Employee-card + prepaid amount + usage in company txns across all branches, Gift cards. Having worked with card technologies and with hospitality companies to do a POC – I can say that the technology exists – but the investment for backend systems and who should be doing this still requires a clear direction from the RBI. The retail sector is already having a number of services based on loyalty that can be shifted to the mobile/card platform – and if RBI gives them the nod – there is enough to be done…

  • http://candleindarkness.blogspot.com suman

    My 2 cents on this

    .. I believe that mobile money or rather mobile commerce would be the next step after telecom revolution ..
    Lets look at the strength and drawbacks of these entities wrt India and wrt Cash

    The challenge for Prepaid cards would be the cash out. Prepaid cards need to acquire merchants for accepting the cards and taking the pains to get cash out of it .

    Mobile: The advantage of mobile companies would be the penetration ..Advantage two : Financial inclusion …Drawback one cash out .. Drawback two .. can mobile money be real money

    VISA: Advantage already in the system. Drawback penetration. Drawback .. they take comission .. Drawback .. Financial exclusion

    With the strict regulations slowly opening up .. things can change dramatically .. If talk time could be converted to Rupees then mobile would be the king
    Even if this scenario is ruled out .. mobile could team up with Prepaid cash to eliminate Visa .. if they can build a strong merchant base around it ..

  • Vamshi

    This is a half-baked article that needs a lot of editing to come across as intelligent and readable. I expect much better from VW.