Mobile is getting more sophisticated in India but focusing on local needs will win.
For the most part, the desktop revolution skipped the overwhelming majority of India’s 1.3 billion people. But with three quarters of the world’s Internet traffic now coming from mobile, skipping a legacy technology looks like an advantage, and it might be one reason why India is on the verge of becoming a totally mobile society within the next few years.
Earlier in 2016, India passed a milestone when the country reached 1 billion mobile subscribers. For Indians, owning a mobile phone isn’t a luxury, or even an alternative to a computer; owning a mobile phone is a necessity. And increasingly, citizens are seeing mobile internet access as an essential part of that necessity. According to a recent report from Ericsson, smartphone ownership in India is expected to reach 810 million people by 2021. Even more telling, Ericsson predicts that mobile broadband traffic will increase 15-fold during the same time period.
In many countries around the world, mobile payments are seen as a convenient alternative to cash. But in India, it’s a different story. This summer, India's outgoing central banker cited information, incentives and transaction costs as the key obstacles for the hundreds of millions of citizens who live and conduct commerce without access to a bank. (According to World Bank data, 21% of the world’s 2 billion-strong unbanked population resides in India). For a while now, many have speculated that the rise of mobile payment solutions will be their best tool for addressing the problem of the unbanked; some have even wondered
whether they could become one of the world’s first large-scale cashless societies. But as it turns out, India looks to be heading in that direction faster than some may have thought, thanks in part, to a recent currency crisis that resulted from the government’s decision to take popular notes out of circulation.
Not surprisingly, domestic mobile payment companies have seized on this opportunity. In the wake of the cash crunch, those firms have seen a surge in both new subscribers and transaction volume. This is good news for India’s economy because a system of commerce based on mobile payments will not only help Indians better engage in commerce today, but it will spur new economic development going forward. But we shouldn’t expect their mobile developers to take their eyes off the domestic market; if anything, mobile payments will likely help fuel what comes next for India.
Even before the cash crisis, India’s mobile developers were focused on domestic needs. In China and the U.S., there’s a strong incentive for developers to focus on games because those markets, to varying degrees, see mobile as a source for entertainment and amusement. But because mobile is a necessity in India, domestic developers have consistently made local needs a top priority, and they’ve built solutions accordingly.
Small businesses proliferate throughout India. But because many of those businesses are run primarily from a phone, those business operators will need more than just mobile payment solutions. On the B2B side, small business operators will require a full business software suite for mobile, and they will look to India’s developers to build those tools to local
specifications. On the B2C side, Indian developers have already focused on d-commerce, a subset of e-commerce that centers on content companies selling a variety of products, often through micro-payments.
In time, as India’s economy matures, it will find itself in the middle of an e-commerce boom. But unlike much of the world’s consumers, the vast majority of Indian consumers will start from a place where mobile e-commerce is the norm.
Global outlook, shift to a performance-based model
Although India’s developers are primarily concerned with building domestic solutions, they haven’t ignored larger global trends. This is because Indian startups aren’t likely to go public in India; instead, they’re much more likely to exit the startup phase by being acquired by a foreign investor. As a consequence of this, India’s developers have paid close attention to the growing demand for performance-based tracking required to support a CPE model where the advertiser pays only for the engagement, registration or purchase.
Already, some of the largest app developers have begun shifting all of the risk to the media partner, and that trend will only continue as India embraces the performance-based mobile model that’s becoming the standard for the rest of the world.
What does all this mean for the future of India’s mobile technology sector? In the short-run, India has some clear advantages. The size of India’s domestic market means there’s tremendous opportunity to scale. That’s both a critical advantage for a data-driven industry as well as a sign that foreign investors may someday soon find the growth they seek by investing in India. Just as important, those investments are likely to pay global dividends, not because India’s technology scene is an incubator for invention—that role is still dominated by the U.S., Israel and increasingly, China—but because India has a cultural advantage.
Unlike most developing nations, India’s tech talent is fluent in English, and therefore well positioned to make significant contributions to the business and implementation of mobile technology around the world. For now, Indian mobile technology firms will focus on India’s domestic needs, but keep a close eye on India as conditions are lining up for a global shift.
Hagai Tal is CEO of Taptica.