If India’s digital wallets do not evolve, it will see itself replaced by easier digital platforms like UPI.

According to the Economic Times, the mobile wallet systems in India need to improve in three areas. These are interoperability, usability, and reach.

Interoperability

Current mobile wallets like Paytm and Mobikwik cannot send and receive money to and from different accounts. In order to transfer money, users have to be using the same account.

So, Paytm cannot send to Mobikwik, and neither can Mobikwik send to Paytm. UPI or Unified Payments Interface is more desirable and useful seeing as it allows for interoperability and that is the future, says MobiKwik founder.

With this, one does not need to transfer money to a wallet company and then to the receiver, but rather the movement of money is direct. PayPal, for instance, can transfer money directly using one's balance, but if that runs out, it still has to get its source from the linked bank account and credit card account. 

It is difficult and challenging to achieve, however, seeing as banking sector does not want too many transactions via mobile wallets because it would limit their reach. Furthermore, banking is a regulated industry.

Reach

Not only is interoperability a problem, but mobile payment by definition, is limited to those who own smartphones. In India, only 27% of more than 1 billion mobile phone owners have smartphones, and as such digital wallets may not be as ubiquitous as traditional forms of payment. 

Limited reach will continue to pose as a challenge until more people own and use smart phones. 

Usability

According to the managing director for India and South Asia at FIS Global, the future is frictionless payment. This refers to any payment platform that does not require the users to remember too much passwords.

Remembering passwords seems to be a difficulty. A study conducted by students of Vallabh Vidyanagar showed that 27% of men and 59% of the women surveyed have trouble with remembering their passwords. 

UPI is looking to be the best platform for frictionless payment. Of course, the platform that provides the best merchant and user protection will survive, says the director of PayPal India.