The mobile revolution in India has ushered in a new digital age, which is being driven by growing data consumption, video intake and the proliferation of various smart technologies and devices. As such, new markets and segments have emerged from this ongoing digital revolution. Over-the-top (OTT) content has emerged in a big way in the past few years, driven by the availability of better data speeds, more agile networks, etc. Likewise, the mobile gaming and digital payments markets are growing rapidly and brimming with opportunity. A common thread connecting all these trends is the availability and revolutionisation of mobile telephony. The widespread proliferation of smartphones, coupled with the availability of cheap data, is enabling these digital trends. The Covid-19 crisis has further catalysed this growth.

A look at how various digital trends unfolded in the Indian market during 2020…

OTT sees unprecedented growth

Riding on the digital wave in India, OTT platforms have taken the media and entertainment industry by storm. According to the Boston Consulting Group, there are more than 32 online content and video streaming platforms in India. The market size is expected to hit $5 billion by 2023. As per Statista estimates, the Indian video streaming segment served a large user base of 53 million in 2019, which is expected to grow to 70 million by 2021.

Covid-19 proved to be a boon for the industry,  as billions of people around the world remained at home, glued to their screens. According to data released by Kalagato, user engagement on Netflix shot up to as much as 80 minutes a day as of March 28, 2020, from 50 minutes on February 5, 2020. Further, ZEE5 reportedly recorded a growth of around 80 per cent in subscriptions and 92 per cent in movie streaming during the first month of the lockdown.

As per market reports, revenue in the video streaming segment is expected to grow to $30.4 billion by 2024. Owing to its highly lucrative nature, the Indian OTT industry is highly competitive. While several local players are trying to establish their audience, major platforms from the US have also entered the Indian market. According to a recent report by PwC, the OTT market is set to grow at the rate of 22 per cent in the next three years. The roll-out of 5G networks will give a further shot in the arm to these platforms. The key elements driving these businesses are uninterrupted connectivity, mobile devices, value pricing for end users and personalised content offerings.

One of the key trends grabbing people’s attention in the OTT segment is the advertising avenues in this space. Options for apps that might be interested in advertising in the OTT space are currently limited. However, with cash-strapped consumers voting with their wallets, advertisement-backed video-on-demand is seeing a huge boost in the current crisis, recording a growth of 148 per cent. This low inventory problem is something that will change, going forward. There is already plenty of ingenuity in terms of ad formats on OTT platforms, with Hulu Sling TV offering pause ads and introducing a prime time “happy hour” for free to households. This freemium model is likely to become more common going forward, leading to a more diverse marketing mix for the OTT space.

Digital payments surge

Over the past few years, the digital payments space has grown at a significant pace in India. In February 2020, the Reserve Bank of India’s (RBI) governor, Shaktikanta Das, had noted that digital payments accounted for almost 97 per cent of daily payment system transactions in terms of volumes. In fact, Credit Suisse predicts that India’s digital payment industry is set to grow fivefold to reach $1 trillion by 2023.

Covid-19 seems to have provided a further impetus to this growth. QR codes have come back to life in the wake of the crisis. During the lockdown, the average business per merchant on the BharatPe QR payment app went up by 60-70 per cent. In June 2020, Amazon Pay launched Smart Stores, an app that lets customers explore products from offline stores by scanning QR codes and buy them via Amazon Pay. Meanwhile, in order to abide by social distancing rules, the airlines and Indian Railways started using these codes to check tickets and check in passengers. The railways also modified its reservation system and now issues a unique QR code against every ticket.

Further, in the aftermath of the pandemic, banks and card companies are pushing near field communication (NFC)-based payment options, as they reduce the cost of merchant acquisition. For instance, Google Pay has partnered with several banks such as Axis Bank, State Bank of India, Kotak Mahindra Bank and HDFC Bank to launch a tokenised card option. These tokens enable users to make safe transactions with their cards and use the tap-to-pay feature on NFC-enabled point-of-sale (PoS) terminals. Likewise, in June 2020, MasterCard, in partnership with Axis Bank and Worldline India, launched a soft-PoS solution allowing merchants to transact through BharatPe QR codes and NFC payments, among other services.

The Unified Payments Interface (UPI) market, too, has been teeming with opportunities and has contributed significantly to the growth in the digital payments ecosystem. Starting with just 21 member banks and fewer than 1 million transactions in August 2016, the number of live banks on UPI grew to 189 by October 2020. According to recent data from the RBI, the total volume of transactions via the government’s UPI platform crossed 1.12 billion in the first 15 days of November 2020, amounting to Rs 2.06 trillion. The UPI market share is mainly driven by Google Pay and PhonePe, which provide around 80 per cent of the total transaction volume, with PhonePe holding the largest market share of 40.3 per cent, followed by Google Pay with 39.5 per cent. Paytm comes in third. However, market dynamics could undergo some changes over the coming months, and is expected to intensify further following WhatsApp’s entry into this market. In November 2020, WhatsApp got National Payments Corporation of India’s (NPCI) approval to launch its WhatsAppPay feature across India. Industry analysts have highlighted that WhatsApp’s massive existing base of over 400 million users is perhaps one of its biggest advantages over its rivals, which will make this market highly competitive following its entry.

Owing to the steep growth trajectory of the UPI payments market, it has attracted the attention of many stakeholders, including the government, which has been making concerted efforts to ensure that the UPI ecosystem does not slip into a monopoly. To this end, in November 2020, the NPCI placed a 30 per cent cap on the total volume of UPI transactions through third-party payment apps (TPAPs), starting January 2021. With this move, India has managed to navigate the risk of WhatsApp potentially monopolising the market with its massive user base. While existing TPAPs, such as Google Pay and PhonePe, have been given two years, starting January 2021, to comply with the regulation, new entrant WhatsApp Pay will have to comply with it from 2021 itself. Further, the NPCI has directed WhatsApp Pay to launch its service in a graded manner, starting with a maximum of 20 million users.

Given how the digital payments market is growing in size and scale, the need to regulate this segment as a separate entity has become necessary now more than ever. In September 2020, the RBI finalised the guidelines for a new umbrella entity for the operation of payment systems. It will complement and supplement the NPCI’s role in expediting innovation in the digital payments landscape. Prior to this, in June 2020, the RBI had set up a Payment Infrastructure Development Fund worth Rs 5 billion, with the aim of supporting and improving the development of the digital payment ecosystem in the rural and north-eastern areas of the country.

Mobile gaming gains ground

In recent years, India has emerged as one of the top five markets for mobile gaming in the world. Mobile gaming is riding on the back of low-cost smartphones, high speed internet, democratised data and the proliferation of virtual payment mechanisms, among other factors. The smartphone revolution has been driving the rapid adoption of online gaming among millennials. Smartphone games have advanced to a whole new level, where they are capable of console-quality graphics and gameplay mechanics through multi-point touchscreens. The advancement in graphics processing units has unlocked the potential of the mobile gaming market, allowing smartphones to run AAA titles. This has been further aided by declining costs, improved pixel ratios, better processors and larger screens. Complementing the growth in smartphone usage is the declining cost of data services. With the sharp rise in internet penetration and the availability of low-cost data, India has seen a surge in online gamers, strengthening the demand further. Internet penetration has also led to a rise in media consumption, thus supporting new concepts such as game streaming. With the availability of high speed Wi-Fi and the impending roll-out of 5G networks, streaming games with advanced graphics will soon become a reality.

Given India’s large youth population and second largest internet population, the country is emerging as one of the world’s leading markets in the gaming sector. According to KPMG, 60 per cent of India’s online gamers are below the age of 24. Not only is India becoming a lucrative market for games, it is also witnessing a huge growth in game development companies, with 275 companies currently operating in the country. The Indian gaming market has also witnessed an increase in foreign investment. Chinese internet giant Tencent, which has stakes in several popular games, is planning to invest in the gaming industry in India. Further, Vietnam-based StomStudio recently partnered with mobile game developer Gamesbond to create mobile games in India.

As per Statista, the overall gaming industry is expected to reach over Rs 250 billion by 2024. Covid-19 has also acted as a driving force, adding to the growth. The Indian mobile gaming industry has benefited considerably from the Covid-19-induced lockdown. During the initial few weeks of the lockdown, the industry witnessed an uptick in the number of users and hours spent on online gaming. According to a joint report by BARC India and Nielsen, there has been an increase of 26 per cent in the time spent on gaming platforms. WinZO Games says online traffic on its games has increased three times. Further, Games2Win witnessed around 1.5 million gamers daily, against an average of 1.1-1.2 million earlier.

Wearables segment achieves new milestones

The wearables segment has gained maturity over the past few years. According to the International Data Corporation (IDC), the Indian wearables market posted the highest quarterly shipment to date in the quarter ended September 2020, growing by 165.1 per cent to 11.8 million units. This growth can be attributed to strong demand for earwear devices and watches.

The IDC report noted that in the past couple of quarters, the prices of wearable devices have dropped significantly. For instance, the average selling price of watches has fallen from $175 in the third quarter of 2019 to $111 in the third quarter of 2020. Likewise, the average price of true wireless stereo (TWS) dropped by 48.6 per cent year on year in the third quarter of 2020, to $57. As per IDC, TWS now constitutes 39.7 per cent of the overall earwear market. As per IDC estimates, around 4 million TWS devices were shipped during the quarter ended September 2020. Meanwhile, the wristbands market witnessed a growth of 83.3 per cent quarter over quarter in the third quarter of 2020, after seeing a sequential decline in the first half of the year. In terms of market share, Xiaomi maintained its lead, accounting for more than half of the category shipments with a 52.4 per cent share in the quarter under consideration, followed by Realme. The watches segment observed a year-on-year growth of 119.9 per cent, with 778,000 units shipped during the quarter ended September 2020. IDC noted that this was the biggest quarter in terms of units shipped since the launch of this category in India. As far as market share is concerned,  home-grown brand Noise led the segment with a 28.5 per cent share, followed by Realme with a 24.2 per cent share.

This unprecedented growth in the wearables segment has been attributed to the work-from-home trend that became a norm in 2020, as people remained indoors amidst the Covid-19-induced lockdown. IDC noted that virtual meetings, online classes and increased time spent on entertainment have led to an intensified demand for earwear devices and other smart devices. Further, as people became more health conscious during the pandemic, it provided an impetus to the fitness devices segment, contributing significantly to its growth.

By Diksha Sharma