By Bernard Lunn
If the future is mobile – there seems little debate on that – then countries that leapfrog to mobile may produce the long-awaited mobile wallet winner. In the West, mobile wallets have been a solution looking for a problem. Paytm in India seems to have found the problem.
Mobile wallets are technically simple (there are some nuances, but this is no cure for cancer story) so the winners are all about adoption and those winners will emerge from solving real pain points.
That mobile wallet winner could be Paytm from India.
Yes, the land of offshore outsourcing and snake charmers is producing the next Fintech Unicorn and succeeding where lots of well-funded and media-lauded startups in the West have failed. Yes, Paytm is a kludgy name, but that matters less in the mobile age. What matters is that Paytm seems to be passing the toothbrush test.
This is one of the big stories of our time, what I call “first the Rest then the West”.
In the last decade we had a huge reversal of the norm – technology adoption used to start in big enterprise and then moved to consumer. Now technology adoption flows the other way.
That reversal is now happening geographically.
For most of the 20th century, technology was limited to the West. Countries in the Rest (formerly known as developing, then emerging, then rapid growth economies) were “tech deserts” until those economies started to open up (first China, then India, then Africa). Then technology adoption started to flow from the West to the Rest; the last decade has been a boom time for Western tech firms selling to the Rest.
Now the flow is reversing as technology adoption starts in the Rest and then goes to the West.
This megatrend is not limited to Fintech, but within Fintech mobile payments and mobile e-commerce is the big disruption and that is happening first in the Rest and then will flow to the West.
Technology adoption flowing from the Rest to the West is one of the big 21st century megatrend stories.
Note that I am referring to technology adoption. Where something is invented matters a lot less than where and how it is adopted, as Steve Jobs taught us after wandering around Xerox Parc and seeing the first graphical user interface. Network effect has replaced patents as the technology moat.
What really matter is innovative customers. Eons ago, in 1997, I wrote this article about Indian entrepreneurs playing against 5 Aces. Ten years later I wrote on ReadWriteWeb how 4 of these big issues were solved. The last and most intractable one was innovative customers. The Paytm story shows that this problem has been solved by the leapfrogging to mobile and to mobile wallets.
The big new story that people in the West hear about India is the growth of e-commerce. The media loves the big funding rounds of Flipkart and Snapdeal. That story had a subtle subtext. The West was funding this wave – big Sand Hill Road VC and Amazon are big beneficiaries.
The Paytm story is different. This is a Chindia story. The big investors in Paytm are Tata (a great Indian success story, conglomerate and trusted brand among both foreigners and the masses in India) and Alibaba. The trade flow between India and China is bigger than the trade flow with America or Europe. Entrepreneurs in both countries look to each other and to ASEAN and Africa as much of not more than they look to the West.
Why is Paytm taking off? The simple answer is leapfrogging. The rise of Flipkart demonstrates this.
The simple insight behind Flipkart was that they needed to offer cash on delivery as a payment option because credit card adoption was weak.
Literally, the customer paid in folding notes when the delivery arrived. That is a logistical issue that Flipkart solved.
Credit card adoption maybe weak in India but mobile adoption is super hot.
Having lived and worked in India I can attest to that anecdotally. I cannot recall calling to or from a landline in India in the last 15 years, but the mobile phones work better and cheaper than they do in America or Europe. If you love statistics, check out this page of mobile phone adoption by country – China a tad ahead of India and America a distant third.
Entrepreneurs are adapting to this reality. Flipkart switched off its web product on mobile phone browsers.
Paytm is a bigger beneficiary of this mobile adoption. Think of that e-commerce customer paying in old folded Rupee notes at the door to the delivery person. Now they can pay using their mobile phones. Topping up a mobile phone is easier than going to an ATM. Paying is quicker and simpler (for both buyer and seller) than using folding notes. The buyer may not have a credit card and the seller may not want to pay credit card fees and when you have a hungry family to feed with the time taken to process a credit card at the door is not good. This is solving a real pain point.
The story that would not mean anything unless you have lived in India was Paytm partnership with IRTC. First you would have to understand that IRTC is Indian railways. This is like my SBB app in Switzerland or the Oyster Card in London that I wrote about on my toothbrush test article. Lots of Indians go to work on trains (iconic images here).
The Paytm mobile wallet is going mainstream at a very rapid pace. Right after IRTC they did a partnership with Café Coffee Day and Dominos. Train, coffee, pizza is a mainstream urbanized Indian middle class daily experience. The beauty of mobile is that the sellers can just as easily be thousands of micro entrepreneurs selling via road side stands. This is the Mpesa story but without it being controlled by one mobile phone operator.
There is another reason that Paytm is taking off like a rocket in India – Apple has messed up in India. iPhone market share in India is a measly 2%. So Apple Pay is not a contender.
I am not sure who the mobile wallet winners will be in other countries. When and how Paytm moves to other countries, is unclear and who they will have beat when they do that is all in the future. What I do know is that Paytm is winning big in India and that market alone makes Paytm a massive success story. The big megatrend that Paytm illustrated is “first the Rest and then the West”. The emergence of bilions from subsistence living to a global middle class is a huge future shock for the West and a big opportunity for entrepreneurs, investors and corporates who understand this.
Daily Fintech Advisers provide strategic consulting to organizations with business and investment interests in Fintech.