Micromax targets India's cash dependence for a comeback

Its newly introduced mobile wallet hopes to lock-in its 22 million-and-counting user base while battling other more entrenched players such as Paytm.

India's love affair with cash and its many accompanying inefficiencies may just be the panacea Micromax needs to recover the valuable ground it has ceded to its rivals over the past six months.

India is one of the most cash-intensive economies in the world with a cash-to-GDP ratio of 12 percent, almost four times as much as other markets such as Brazil (3.93 percent) and Mexico (5.3 percent). The country has a puny 21 million credit cards in a country with over 1.3 billion million people and 900 million mobile phones. Chinese consumers, meanwhile, are able to send each other cash gifts via Instant Messaging apps. In Kenya, the fabulously popular Mpesa cash transfer system pioneered by Vodafone allows the seamless transfer of cash between two people, but India is yet to see anything like that.

Sure, India's conservative banking rules were part of the reason it managed to insulate itself from the world economic crisis in 2008. However, the lack of access to payments is proving to be a serious impediment for companies looking to see growth in India's small towns and vast hinterland where most of the population lives. It is also ruining the livelihoods of the rural poor whose cash payments are usually siphoned away by middlemen. Less than 20 percent of bank branches are present where over 60 percent of the population lives, and this means that the rural migrant who gets a job in the city as a labourer is unable to send money to his or her dependants back in the village. It is a sorry state of affairs.

India's largest domestic phone company Micromax hopes to fix that and solve not just this thorny problem of payments but also another greater existential one: a major loss of market share thanks to aggressive and canny Chinese phone companies who have been campaigning hard in the country over the last year. It wants to do so by introducing a new payment wallet built directly into its user interface on all of its phones.

Micromax recently inked a three-way deal with digital payment provider Visa for enabling mobile payments using QR code scans and a PIN at stores across the country, as well as with Mumbai-based payment technology platform provider TranServ, which will provide the actual mobile wallet, Udio, that will be embedded onto all Micromax phones. There will also be an Udio card handed out to customers so they can make physical or online payments. "We have about 30 million smartphone users who access apps, of which we expect 50 percent would be using the wallet by the year end," said Micromax co-founder Vikas Jain.

Pilots have apparently started across 5,000 retailers in Bangalore and will hope to integrate the "Around Yu" platform that the company already has in place to offer things like movie tickets and car rides to increase customer loyalty and stickiness.

Micromax's program couldn't be more timely. India is going through a mobile revolution after largely skipping the computer one -- the number of mobile internet users in India is expected to mushroom to 314 million by 2017 from approximately 280 million today. Nearly 60 percent of users accessed the internet for the first time on their mobile phones.

There's also a huge uptick in using cashless payments what with the rise of Uber and OlaCabs. Even autorickshaws in Indian cities are beginning to prefer using apps for payments.

According to Nielsen, these kinds of apps are so popular that their usage has increased from one in five active Indians last year to over one in every two this year. Plus, Indians are beginning to spend much more time on mobile payment apps -- by as much as 1.5x -- with usage in small towns the highest.

Correspondingly, the market for mobile-enabled payments in India sky-rocketed to more than fifteen times between 2012 and 2015 to reach its current size of $1.4 billion (£979 million), according to research firm GrowthPraxis. These are statistics that Micromax will welcome as it focuses on expanding its reach and battling not just the Chinese but a resurgent Samsung.

There are a few caveats, though. One, Micromax will have to battle other more entrenched players who are backed by telecom players as well as banks such as Paytm, Oxigen, Mobikwik, and Freecharge, who are all frantically gunning for the same market.

And while the adoption of 4G hopes to boost cashless activity further, the unfortunate truth is that while mobile banking has picked up, it is not yet a go-to service for payments.