Creating new payment choices for mobile data

On March 24, 2020, in a country of 1.38 billion, India’s prime minister Narendra Modi ordered a national, mandatory 21-day lockdown in response to the COVID-19 pandemic. The initial 21-day lockdown was eventually extended through May 31, 2020. Lockdown measures from March 25-April 14 included a total ban on leaving the home and closure of commercial establishments. There were some exemptions to the closures including, but not limited to: telecommunications, internet services, broadcasting, cable services and some grocery stores and pharmacies. Mobile recharge shops were not included in the exemptions. Some grocery stores and pharmacies provide mobile recharge services, but the shutdown of mobile recharge shops would have greatly reduced the accessibility of in-person, cash payments for mobile recharge services.

The alternatives to mobile recharge shops include online and over-the-phone recharge services. Online recharge options are only accessible to people with internet access, devices capable of connecting to the internet and have the digital literacy skills necessary to conduct the recharge transaction online. These conditions pose significant barriers for millions of people. According to the Internet and Mobile Association of India, 92% of overall internet consumption happens in the home and 99% happens on mobile devices. However, the mobile internet penetration rate, the number of broadband subscribers, and the number of smartphone users remains low. According to data from the GSMA, mobile internet penetration in India was at 35% in 2019. Only about half the Indian population (681.11 million) have broadband subscriptions, and about 38% of the population (or 500 million people) have smartphones. A 2019 report from the University of Delhi in collaboration with the Ministry of Women and Child Development found that almost 90% of Indians lack digital literacy skills. Furthermore, internet accessibility and digital literacy vary drastically by gender and location (urban vs rural dwellers). According to a 2019 report from the Ministry of Statistics and Program implementation, 43.5% of urban men and 30.1% of urban women are able to operate a computer and access the internet. For rural men, this number drops to 17.1% and it is the lowest for rural women at 8.5%.

As an alternative, it is possible to make over-the-phone payments for recharge services, but this method requires the subscriber to have a credit card. The ability to make card payments in India is very low with just 0.64% of the population owning debit cards and 0.02% of the population as credit card owners. Therefore, for many mobile subscribers, neither online nor over-the-phone recharge services are viable substitutes for in-person, cash payments at mobile recharge shops.

Indeed, from February 29 to March 31, 2020, mobile phone subscriptions declined at a rate of 0.24%, equivalent to a loss of 2.84 million mobile subscribers. Correlated to the trend of declining subscriptions, Jio, India’s top telecom operator, reported losses of 10.8% in the first quarter of 2020. Vodafone Idea, India’s third-largest telecom operator, reported a 5.4% decrease in its first quarter revenues. Conversely and counterintuitively, Bharti Airtel, India’s second-largest telecom operator, reported a 7.8% increase in revenue in the first quarter, despite 48% of its revenue coming from mobile services in India and South East Asia.

In April 2020, India’s top three telecom operators – Jio, Bharti Airtel, and Vodafone – all launched peer-to-peer recharge schemes specifically aimed at benefiting users who do not know how to recharge online or do not have internet access. The common feature of all three recharge schemes is that they enable customers nationwide with smartphones, mobile internet access, and digital literacy skills to download an app on their phones to recharge other customers’ phone plans, and in turn, earn a commission for doing so. In effect these recharge schemes circumvented the closure of mobile recharge shops by enabling customers to collect payments from friends and family in exchange for recharging their phone plans. Jio asserts that the company’s peer-to-peer recharge app is part of a multi-pronged effort to promote digital recharge services with the goal of creating innovative alternatives to traditional physical channels.

The three peer-to-peer recharge schemes feature slight differences. Jio’s app, JioPOS Lite, offers a commission of 4.16%. In order to recharge other Jio phone numbers, a Jio customer must download the JioPos Lite app, register as a “Jio channel partner,” and transfer an initial minimum of ₹1,000 to their wallet. The customer’s commission is then automatically added to their wallet where it can be used for future recharge payments.

Airtel’s “Earn from Home” program, hosted on the airtelThanks app, offers a commission of 4% on recharges of ₹149 or above. Similar to Jio’s program, the Airtel “Earn from Home” program requires the customer to download the airtelThanks app and register as an Airtel Superhero, but does not require the customer to maintain a balance on their account in order to recharge other Airtel prepaid phone numbers. Instead, Airtel customers may pay using a number of online payment options. Unlike Jio’s peer-to-peer recharge which has no limit on how much one can earn, Airtel limits customers’ earnings to ₹15,000 annually.

Jio’s and Airtel’s programs are ongoing, while Vodafone’s recharge scheme was active only April 9-30, 2020. Vodafone’s #RechargeforGood program featured the highest commission at 6%. Unlike the other two apps, Vodafone’s #RechargeforGood program compensated customers using discount coupons that could be applied to their next recharge.

According to data from the Telecom Regulatory Authority of India, mobile phone subscriptions continued to decline through June 2020, which saw 1.7% fewer mobile phone subscriptions than in February of the same year. Corresponding with the trend of declining subscriptions, Jio and Vodafone continued to report losses in the second quarter of 34.8% and 9%, respectively. The declining trend in mobile subscriptions finally turned around in the third quarter of 2020, coinciding with the easing of lockdown measures.

Despite a net decrease in mobile subscriptions over the period of the lockdown, statistics varied in rural versus urban areas. From March to May 2020, rural mobile phone subscriptions increased at a rate of 1.2%. Over the same period, urban mobile phone subscriptions decreased at a rate of 3.4%. The uptick in rural phone subscriptions could be the result of a number of factors such as urban workers relocating to their home provinces to work remotely during the lockdown. It is unclear to what extent the peer-to-peer recharge schemes may have contributed to the increase in rural mobile subscriptions.

It is difficult to quantify the extent to which the three companies’ recharge schemes lessened the negative impact that the lockdown had on Indians’ ability to access recharge services. Nevertheless, in its 2020 annual report, Bharti Airtel reports a staggering increase in online recharge penetration correlating with the lockdown and the “Earn from Home” recharge scheme. Before the lockdown only 35% of Airtel’s recharge services were being performed online. This figure doubled after the enactment of the lockdown with 70% of recharge services being performed online.

At the end of 2019, there were 500 million smartphone users in India, accounting for about 43.4% of all mobile phone subscriptions. It is a reasonable assumption that nearly all smartphone users would have accessed online recharge services during the lockdown. As an example to bolster this assumption, figures from Bharti Airtel showed that 43.4% of the mobile phone subscriptions in their customer base accounted for 70% of the online recharge penetration during the 2020 lockdown period.

Given the need to recharge phone plans safely and in light of mobile recharge shop closures, telecom operators may implement peer-to-peer recharge services as a way to ensure continued connectivity when circumstances mean people are unable to travel or transact in person. Even in the absence of lockdown conditions, peer-to-peer recharge schemes can diversify payment options, and in doing so, expand the accessibility of telecommunication services.