As any serious Product Manager in Indian e-commerce may have noticed, Flipkart.com, the best online player in India as of today, had introduced a feature called “digital wallet”. Now, the concept of a digital wallet is nothing new in itself. Paypal has one of its own. So does Google have one. Check this article to see what Paypal is up to with the concept of “money”- http://venturebeat.com/2012/03/09/paypal-wallet/. I am not particularly sure who pioneered digital wallet in the first place, but I don’t care much about that. What I do care for is that the team at Flipkart (hopefully a smart Product guy) figured out how valuable and important it is to have a digital wallet system in the Indian e-commerce scenario. The wallet that Flipkart offers is a bit different from the so-called wallet offering of others, but it has definitely been tweaked to benefit the Indian consumer.
Flipkart.com themselves have defined the benefits of a Wallet as the following:
- Make one payment and shop multiple times
- Simpler and faster check-out process
- No more worries of failed payment transactions
While the first benefit is not something that Indian consumers will drool over, the third benefit is in my experience, a very big deal for both the consumer and the company. The first benefit is obvious to the consumer once they understand the basics of what a wallet is used for. The good thing going for Flipkart.com is that it has a music download service called “flyte” that works really well with a wallet. Nobody would care to make repeated purchases of Rs. 6 each for purchasing a music title. A wallet stores funds that can then be released for making these one-off payments. If flyte didn’t exist, the first benefit would rather be an aggressive MBA-trained marketing guy’s sales pitch for corporate glory than anything meaningful from a customer standpoint. Indians take pride in making a profit out of every penny they hold, whether in a bank or through tax savings (or evasions) to avoid paying too much to the government. They wouldn’t be happy parting with their money even before they make a purchase with the satisfaction that flipkart has it with them. Yes, it is true that the above points will be refuted once Flipkart turns into a giant e-commerce player and becomes a household name like Amazon.
Another reason why consumers will not like the idea shared in the first benefit is that the amount that you store in your digital wallet cannot be refunded by flipkart.com in case you no longer want to purchase anything on the website or just plain want your funds back. Flipkart.com is not a bank and RBI regulations does not allow it to function as one unless it applies to become one. It is possible that flipkart.com is currently working towards getting the needed RBI approvals to become one but it would only make sense if the digital wallet in its current sense is really taking off for them and this issue is constantly turning out to be a customer painpoint that needs to be addressed. A look at the digital wallet FAQ on Flipkart.com indicates something very interesting. It has a question that says – What is the change in the refunds policy of the digital wallet?. The answer is “As of 2nd February 2012, the Refunds Policy for the Wallet has been slightly modified. As per the earlier policy, the entire balance in the wallet was fully refundable. Under the updated policy, the Topped-Up balance in the Wallet will not be refundable starting 2nd February 2012.” The top up balance is basically funds that a customer directly puts into the wallet to make future payments and it is not refundable due to the regulations mentioned earlier. The fact that it was changed effective 2nd February indicates that Flipkart.com probably was not aware of the regulations that were meant to be followed and then had to correct their actions after the fact. This single issue with the functioning of a digital wallet turns against the overall benefits of offering one.
Now, coming to the third benefit, the challenge of facing failed payment transactions is very real in the Indian context due to the over-dependence of e-commerce retailers on a third-party gateway run by either an aggregator (CCavenue, EBS, PayU) or a bank supported entity (HDFC, ICICI pay seal). An e-commerce retailer can see about 30-40% of its customers lost at that point after having taken pains to carefully hold their hands and take them through the checkout stages. This is a very painful loss especially for Indian e-commerce retailers. It is not easy getting a customer that far only to see him drop. None of the payment gateways in India have a foolproof method of preventing such issues. The best success rates boasted by the best in the industry comes to about 78%-80%. Gateways like EBS and PayU offer a retry option for helping a customer try a payment again when things fail, but this doesn’t solve the issue 100%. In this context, having funds in a digital wallet ensures that a customer need not go back looking for his credit card, netbanking bank details or debit card and start entering all information in a 3rd party payment gateway only to see that things are slow due to the internet, the banks are not processing their payments or the payment gateway is down for maintenance. For an e-commerce site, on a per transaction basis, we no longer have to deal with bad payment gateways, good payment gateways who still can’t control issues and fickle minded or busy customers who may drop out at the last stage.
The digital wallet system should however evolve to provide more incentives and benefits to the customer to influence them to use the wallet and park funds there. These could be in the form of discounts at the checkout stage for using the wallet or as Paypal is doing, help the customer chose how the funds are used. The question of why build this service in-house when someone like a Paypal or Google may eventually do it better in India is however worth thinking about. Ideally the link with a 3rd party like Google or Paypal would turn out to be more reliable payment instruments in the mind of the consumer and also provide additional benefits that are not easy to replicate. As of now, given the aggressive pace with which Indian e-commerce retailers are racing against each other, waiting for something better to happen may not be a wise option. Getting things out the door and then re-adjusting (like the change in refund policy that Flipkart did) is the way the game needs to be played.