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For millions of urban Indians mobile has not only revolutionized their communication process but also changed their banking habits. At the same time millions are still left out of the formal banking system. There are nearly 600 million mobile subscribers in the country but only half of that number has got a bank account in their name.
It is far easier to reach them over the mobile network rather than bringing banking services physically to them. According to a recent PWC report, the total revenue from mobile banking is expected to reach Rs.2,600 cores by 2015. Thus it provides a great opportunity to the banks as well as telecom operators to facilitate service through mobile banking system. Keeping this fact in mind, recently RBI raised the limit for the amount which can be paid through mobile phones 10-fold, to 50,000 rupees. But there are challenges in terms of usability of technology platforms, convergence of service providers and data security concerns.
International Experience
Concept of mobile payment originated in Finland as telecom firm Sonera, launched a mobile payment system as early as 1999 (Sonera Mobile Pay or SMP). Since then mobile banking has come a long way. Today mobile banking is a way of life for urban banking customers throughout the world. At the same time for people outside the formal banking network or microfinance customers across Asia and Africa a host of new generation services like MPesa in Africa has changed the definition of banking. A new research from TNS reveals that over 50% of consumers in emerging economies want to use mobile phones for greater access to financial services. In countries like China, Brazil and Kenya the number of new users of mobile banking soared over 100% in 12 months Emerging markets outpace the West in usage and demand for mobile wallet.
Mobile Banking : Yet to take off
Currently mobile banking in India is confined only to what is known as Interbank Mobile Payment Service (IMPS). In May this year the number of bank customers registered for Interbank Mobile Payment Service (IMPS) has crossed then 10 million mark. The number is very small considering the large base of 350 million account holders with banks.
What is IMPS ?
IMPS or Inter-bank Mobile Payment Service is an instant inter-bank electronic fund transfer service through mobile phones. IMPS allows customers to use mobile instruments as a channel to access their banks accounts and remit funds from there. IMPS operates on a 24X7 basis and money transfer takes just 20-30 seconds. A bank customer needs to register as a mobile banking customer to avail of the benefit of this service. On registration the bank provides MMID to the customer. Till now IMPS service is limited to person to person payments. Reserve Bank of India has now permitted merchant payments also to be routed through this channel. Utility Bill payment, payments at shop floor, payment of various type of fees to various agencies, donation payments etc can now be made through this channel. RBI has also permitted transactions initiated through ATM and internet channel to be routed through IMPS platform. The customer can transact on IMPS subject to a daily cap of Rs 50,000 per customer overall, for transactions for funds transfer through mobile.
Currently, the Reserve Bank of India has allowed 39 banks to launch mobile banking services and recently raised the limit for the amount which can be paid through mobile phones to Rs 50,000. As per the latest report released by Telecom Regulatory Authority of India (TRAI), India has 538.38 million urban subscribers while 267.74 million rural subscribers. With just 19-20% of urban subscribers using smartphones, there is an urgent need to reach out to other subscribers and enable them to use IMPS and PayMate’s application will put IMPS within the reach of millions.
Technology Hurdles-
There are two ways of banking through mobile - Application based and through SMS. Applications provide better user interface and you do not have to remember short codes like the SMS medium. Application, however, are not supported by low end handsets. It doesn’t mean that you need a smart phone for mobile banking, any phone that supports J2ME application, or provides GPRS access, mostly supports these applications. Besides there are some other problems also, as refund service is very poor in the m-banking. If customer makes a wrong transaction by mistake, then the refund process takes time. Stipulated time for refund such money is defined maximum 15 days. Breakdown of M-banking also creates inconvenience for customers.
Mobile Banking as a tool for Inclusive Growth-
Though only 5% of nearly 600 million strong mobile subscriber base is currently using mobile banking services, there is a vast potential for mobile banking in India as it is easier to bridge the physical distance with newer technology platforms. In near future, more and more people are likely to use their mobile phones for transferring money, booking tickets, stock market updates and availing a variety of services.
According to estimates, 41% of the urban population and 60% rural population in India do not have access to bank accounts. In such a scenario mobile banking is an opportunity to bring vast population in the fold and increase financial inclusion. Millions of poor Indians who have no access to financial services could benefit from mobile banking as nearly two-thirds of the population now using the technology. Mobile banking could transform the rural economy as it will enable a farmer to auction his mangoes or grapes by just making a call and the money earned would come to his account automatically. Bur for that industry also needs to allay fears about transaction security and overcome low literacy and banks' limited reach in remote areas.
New Initiatives-
According to an estimate, just five percent of mobile phone subscribers are registered for the service and of them, a tiny 0.5 percent uses it regularly. So both telecom companies and banks are trying to vow consumers. Airtel Launched Airtel Money, India’s First Mobile Wallet Service in Jan 2011. Vodafone has tied up with ICICI Bank while Bharti formed partnership with State Bank of India, the nation’s biggest lender to offer phone-banking services. Now almost all the banks in India offer mobile banking facility and these facilities are not restricted to basic functions such as viewing bank accounts, demat and credit card accounts, transfer of funds to other banks in India. You can also pay utility bills, top up prepaid mobile phone, and book air tickets etc. Recently Standard Chartered Bank launched their mobile banking platform in India and Canara Bank launched its mobile banking product “CanMobile”
In India, the younger generations, who are fast joining the rank of productive population, are already mobile savvy. They are likely to use their phones for many a purpose. Very soon for a large population in India their mobile phone is likely to become their virtual wallet. And both banks and financial services companies on one hand and telecom service providers on the other hand are rushing in to encash that opportunity. Similarly such convergence of technology and services opens new vista of opportunities for all service providers.
Article was published in The Financial Express.
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