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"I Can Live Without Money, But I Cannot Live Without E-Wallet": Comparing Business Models of E-Wallet*

CASE STUDY, E-COMMERCE
ET Cases - GSMC, 8 Pages
AUTHOR(S) : Jyoti Pandey, Research Scholar, Marketing, IIM Indore, India and Khadija Ali Vakeel, Research Scholar, Information Systems, IIM Indore

Case Preview

“I Can Live Without Money, But I Cannot Live Without E-Wallet”: Comparing Business Models of E-Wallet

 

Since the inception of e-commerce, the trend of virtual money has gained importance due to cashless transactions. Paytm, the leading provider of virtual wallets has 20 million users. E-wallet has become the new buzzword as you can park your money in the account and use it while transacting online (Exhibit I). The anonymity and  delinking from the bank accounts has helped e-commerce users readily adopt it. This prepaid instrument is now changing not only how e-commerce works but also  influencing adopting of m-commerce as easy and user-friendly tool coupled with security and privacy advantages. In addition to telecom-led model, banks are also  coming into play as the number of people using mobile is seeing sharp increase. According to Telecom Regulatory Authority of India, for every 100 people residing, 74 have telephone connections. India is among top 10 countries with highest mobile e-commerce in year 20142. The challenges like lack of standard platform, cost of infrastructure up gradation is now grappling the e-wallet players..........................

E-commerce Industry: An Overview

E-commerce in India is growing at a rate of 34% CAGR. The share of m-commerce is increasing as more than 13% of online transactions are via smart phones, while 17% of transactions use net banking, mobile wallets (Exhibit II). Moreover, the restriction from RBI impedes the development of e-wallets due to the privacy and security issues in fictitious transactions...............

Types of e-wallets

An e-wallet is an electronic card, which works like credit/debit card for making secure online transactions According to Reserve Bank of India (RBI) e-wallet is a kind of prepaid payment instrument that allows the purchase of products and services by the amount loaded on this instrument. E-wallets could be used for paying utility bills, mobile recharge, money transfer, booking tickets for movie and travel, restaurants, taxi service, etc. Generally, e- wallets are of three types namely closed, semi-closed and open...........

Advantages of e-wallet

There are many benefits of having an e-wallet, for instance, it enables customers to travel with no cash and guards money against any theft. Carrying the change will no more bother customers if they are transacting with e-wallet. Even a small amount of money (like some companies could allow to transfer up to INR10) could be transferred. It is one-tap payment solution, which requires only a click rather than other instruments like debit card, credit card where a customer has to provide many details in every transaction. Also, the process of payment is very time consuming with other such instruments...............

Limitations of e-wallets

Only mobile-savvy individuals can use this instrument. Also the infrastructural requirements like mobile coverage with high speed internet connection are the major challenge in expansion of theses instrument. One cannot use e-wallets for high value transactions, as there is a limit on the amount of deposit and usage..........

Operating Process

E-wallet is another instrument for those individuals who do not have any bank account, credit card or do not prefer to use credit card, net banking, or online payments. In next few months, e-wallet industry will see a drastic change in the way the consumers pay for the goods or services they avail. This new payment system is entirely different from the payment system that was prevailing from last so many years (Exhibit III)..............

Interest Income

E-wallets issuing companies must comply with the capital requirements as per guidelines by the RBI. Banks and Non-Bank Finance Companies (NBFC) are permitted to issue e-wallets, as they meet the capital adequacy requirement, other companies should have minimum net owned funds of INR10 lakh..............

Illustration 1: ICICI Bank’s Pocket

ICICI Bank-the largest private sector bank in India, launched an app-based open e-wallet named “Pockets” on 10th February, 2015. The bank calls itself as digital bank as it has all the features that any bank, including payment banks can have.16 Customers can load the wallet from any bank account through debit card or net banking and can use it immediately for various purposes without any documentation.............

Illustration 2: Paytm

Paytm is the largest growing e-wallet payment system in India, having more than 100 million subscriber base. It is a subsidiary brand of India’s mobile Internet firm - One97 Communications. Paytm is an acronym for “Pay Through Mobile”. Initially, it was offering the facility of mobile recharge and utility bill payments, but today it has become Indian’s one of the largest e-commerce market place. It is processing more than 60 million orders per month...............

Assignment Questions

I. Which business model would best suit a new e-wallet company?
II. What are the criteria to decide the market segment via segmentation, targeting and positioning of ewallet?
III. ..................

Exhibits

Exhibit I: Different Payment Channels in Online Commerce

Exhibit II: Mobile Wallet

Exhibit III: Operating Process

Teaching Note Preview

“I Can Live Without Money, But I Cannot Live Without E-Wallet”: Comparing Business Models of E-Wallet

 

Synopsis

The case study is designed to make students aware about the e-wallets in the industry. The case study puts students in the shoes of Chief Technology Officer (CTO) of a company, who is responsible for the start of e-wallet for his company. The case study helps discuss the e-commerce industry in India, boom of e-wallet as means to cashless transactions and two illustration of ICICI pockets and Paytm. The two studies of ICICI Pockets and Paytm are two different kinds of model, their advantages and disadvantages are discussed. Finally, analyzing the industry and taking decisions regarding the new proposal of e-wallet project to be started by their company.

Expected Learning Outcomes

  • • Advantages of new technology and barriers to technology adoption
  • • Business models for new technology companies starting e-wallet services
  • • Marketing approaches for changing the mindsets of consumers towards new technology

 

Case Positioning and Setting

The case study is suited for MBA Program in E-Commerce, Strategy, Marketing and Information Technology course. Moreover, it can also be brought into the  coursework as a business models suitable for new technology companies.

Assignment Questions

I. Which business model would best suit a new e-wallet company?

• Different e-wallet model like bank owned model and telecom based model should be highlighted

  • • Advantages and disadvantages of open, semi-closed and closed models should be discussed

 

• Importance of service differentiation through e-wallet and its benefits should be highlighted. Service differentiation can be the key to competitive advantage by  providing value added services and improving its quality. The main components of service differentiation includeordering ease, delivery, installation, customer training, customer consultation, maintenance and repair and returns

• Reliable, resilience and innovativeness by having low error rate, high uptime, emergency handling, payment channel issue handling, etc., should be modeled properly.

II. What are the criteria to decide the market segment via segmentation, targeting and positioning of e-wallet?

• Need for STP as users vary in requirement according to the demographic, psychographic and behavioral differences
• Targeting early adopters who can communicate the advantages of e-wallet service though positive work of mouth though weak and strong ties in their group

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Abstract

The recent shift from brick and mortar stores to e-commerce has resulted in cashless transactions. In this digitization age, e-Wallet has become the new trend. An e-wallet is an online prepaid facility, which offers an online account where customers can park their money, to be used when required. This has created a completely new space where everyone including banks has come forward with new value propositions. Though, the industry is in its nascent stage in India a surge of mobile wallet users has been already witnessed in the recent past as there are 115 million e-wallet users since its inception in 2007. Companies are yet to exploit the untapped market of online mobile users, which currently is 975 million in India, growing at a rate of 140% in the urban areas. The benefits of e-wallet include ease of use, reduced risk, accessibility, and anonymity among others. The opportunities and challenges of the upcoming industry have been discussed in detail in this case study. The case study also helps to compare the business models of the leading e-wallet companies in India. The comparison of these companies is based on business strategy, cost, revenue, sustainability and target segment.



Pedagogical Objectives

  • To gain an insight on the advantages of new technology and barriers to technology adoption
  • To understand the business models for new technology companies starting e-wallet services
  • To understand the marketing approaches for changing the mindsets of consumers towards new technology

Case Positioning and Setting
The case study is suited for MBA Program in E-Commerce, Strategy, Marketing and Information Technology course. Moreover, it can also be brought into the coursework as a business models suitable for new technology companies.


* GSMC 2016, IIM Raipur

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