With upward of 600 million potential prepaid cardholders in the South Asian country, VRL concludes that India has an "untapped target audience with huge potential for profit."
VRL said payroll cards dominate the prepaid card market with a 34 percent share, with travel cards and general-purpose reloadable cards holding 24 and 22 percent market shares, respectively. Cards used for money transfers account for 14 percent, VRL estimated.
VRL cited ICICI Bank analysis that the Indian prepaid market is expected to grow 75 percent in 2010, from a $2.9 billion market in 2009 to a $5 billion market this year. A significant part of that growth will come from the Indian middle class, which is somewhere between 200 and 300 million people.
"With sufficient disposable income to spend on goods and services, the middle class is an attractive target for prepaid cards," VRL said.
Mobile money transfer specialist Obopay Inc. is going after another target, the country's unbanked population, which VRL put at approximately 400 million. In partnership with mobile device supplier Nokia and India's YES Bank, Obopay is piloting a mobile money service with two main components: bill pay/retail payments and money transfers.
David Schwartz, Vice President of Product and Corporate Marketing at Obopay, said the service will leverage Nokia's 200,000 retail locations across India, where customers purchase phones and sign up for services. As alternative financial service centers, the Nokia stores will become places where Nokia customers can reload stored-value accounts and pick up funds sent by other Nokia phone users, Schwartz added.
"For those that don't have bank accounts, it can become their first financial services account," he said.
The Obopay/Nokia initiative is part of a nationwide mandate called financial inclusion. The Reserve Bank of India is granting operating licenses to alternative financial service providers, such as Itz Cash Card Ltd., Bharti Airtel and The Western Union Co., to provide the unbanked access to financial services.
In India's urban centers, ATM providers are expanding their networks, with 40,000 ATMs and 450,000 POS terminals now across the country, according to VRL. But the report said a telecommunications network is another important infrastructure requirement for the development of banking services and prepaid card businesses.
India is the world's fastest growing market for mobile phones, with almost 95 percent of all phones in India being mobile, and approximately 57 percent of the population carrying them, VRL said; that statistic is particularly important for the rural areas of India, where 236 million mobile phones have been distributed but only 187 million adults have access to bank accounts.
VRL expects this gap to only increase, as millions of mobile phones are added monthly. "This is an attractive backdrop for starting mobile banking services in rural India," VRL said. "'Mobile wallets' would bring low-cost banking and remittance services to millions for whom banking services are not readily available or easily accessible."
With a well-developed mobile telecommunication infrastructure in place, an opportunity exists to open "new markets and business opportunities for service providers, banks, mobile operators and merchants," VRL added.
Schwartz said the discrepancy between mobile phone users and bank account holders in India mirrors the global equation. ABI Research reported that, by the end of 2010, there will be 5 billion mobile subscriptions worldwide. Meanwhile, the Consultative Group to Assist the Poor said nearly 3 billion people globally lack access to basic financial services.
"And so there's a big opportunity to bridge that gap," Schwartz said.
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