India recently overtook the United States to become the world’s second largest smartphone market after China. More than 400 million Indians now access the internet through their mobile phones, and more than 1 billion are enrolled in Aadhaar. And throughout 2017, India experienced an increased usage of the large, low-cost digital payment infrastructure built in recent years.

All of this means that populations that businesses couldn’t reach before are now easily accessible, leading to a new wave of entrepreneurship. These purpose-driven innovators are looking to build businesses that will ultimately improve the lives of the estimated 500 million low- and lower-middle-income people coming online over the next five years in India. By understanding this customer segment—India’s “next half billion”—and finding innovative solutions to the unique barriers they face, entrepreneurs can profitably serve this population with basic smartphone services that range from education and job placement to healthcare, transportation, and financial services.

The next half billion are not the same as earlier mobile internet users. They have very different income profiles, education levels, language skills, and social and cultural milieus. This population includes a range of people, such as a young BPO worker, a middle-aged grocery (kirana) shop owner in a metro/Tier 1 city, an autorickshaw driver in a metro, and a college student in a small town.

Despite accelerated smartphone adoption by the next half billion, very few users conduct financial and commercial transactions on their mobile devices. The first step in innovating for this population is to bring them online.  The next step is to build their comfort with using the internet so that they can feel confident to transact online.  

To succeed with this group, there are three keys for entrepreneurs:

Localization leads to greater trust

English is not the first language for many in the next half billion, making much of today’s digital content inaccessible to them. Local language content will be key in building confidence and trust—an estimated 70 percent of Indians find local language digital content more reliable. Entrepreneurs that provide digital content in a variety of Indian languages have the greatest potential for success.

Another significant opportunity is introducing local social and entertainment apps. Today, several global apps see far greater market dominance in India than they do in the U.S., where many of these apps originate. WhatsApp, Facebook, and Instagram account for 95 percent of social and communication app usage in India compared to only 55 percent in the U.S. Similarly, YouTube accounts for 47 percent of entertainment app usage in India and only 17 percent in the U.S. These figures indicate that U.S. consumers have other appealing options beyond Facebook and YouTube for their social and entertainment needs, which raises the important question, “Is there room for local innovators to enter this space in India?” I would argue yes.

Social and cultural perceptions drive adoption  

Much of today’s internet experience would feel inaccessible to someone in India’s next half billion. Many believe that transacting online is a complex process that requires special skills. Consider the example of the “shopping cart” symbol and “proceed to checkout” language common to e-commerce sites. They replicate the offline experience of shopping in a supermarket. In contrast, the shopping experience of many in the next half billion is walking up to a counter at a store and being counselled and served by the shop owner. Online user experience, including symbols and terms, must be relevant to the next half billion. Entrepreneurs should build apps and sites that help consumers complete registration and guide them through the first few transactions, which can go a long way in building user confidence.

Cultural perceptions across the country must also be taken into account. Smartphones are primarily associated with entertainment and social media, which has restricted women’s participation in the mobile internet. Particularly outside the metros, many believe smartphones will expose women to “bad influences” and lead to harassment or broken marriages. Many men refuse to provide women in their family a smartphone, and many women have internalized these perceptions and are self-restrictive in their use of the internet. To make headway with female consumers, repositioning the mobile internet away from entertainment and social media and toward socially acceptable use cases, such as education and health, is critical.

Access and offerings must be affordable

The next half billion have lower purchasing power compared to the initial internet users. Although data service costs are declining rapidly, it is still a top consideration for consumers. Indians are highly frugal in their mobile data usage. In Mumbai’s lower-income neighborhoods, households will share access to a Wi-Fi router instead of using 3G data. Indian consumers prefer apps that minimize data consumption and function even in poor network conditions. Low-cost, ubiquitous Wi-Fi can change the game.

In addition to access, affordability is also key for the goods and services targeting this population. Entrepreneurs must make their offerings highly affordable via frugal innovation – with low cost of customer acquisition and low ticket sizes – to expand access and ultimately scale.

Over the next few years, thousands of new start-ups will spring up to serve the next half billion. Those that will succeed will be the ones who truly understand their audience—which means home grown entrepreneurs, particularly women, are poised to make the greatest impact for India’s next half billion and the country’s future economic growth.