Cashing in on Mobile banking

Marrying mobile phones to bank accounts has definitely generated a lot of interest in government and customers alike. " target="_blank">RBI has already relaxed mobile banking policies and increased the mobile payment limit to ` 50,000. This has created a lot of interest amongst large banks and telecom service providers who are fighting to have a share in this booming market, which according to a Tower Group Research,
will grow from 10 mn to over 53 mn active users in India by 2013.

40% of the population in India is un-banked. Of those who are banked, a major chunk of the population is still under-banked, creating an opportunity in both the financial and telecom sectors. Since mobile telephony has evolved as a platform for future innovations that can have long ranging socio-economic benefits for India-mobile banking is one such innovation. Using the existing network and base to offer financial services in backward regions is certainly a boon for India which has over 60% of the population living in rural and backward areas.
“In India, where the population has crossed 1 bn mark-the need for " target="_blank">mobile money, as a financial solution, is ripe and bound to grow. We believe India is the perfect market for mobile payments where we can marry banking and rapid proliferation of mobile phones, and hence also be able to capitalize on the Indian government's dream of 'One Bank Account per Indian', established the fact that mobile banking is the need of the hour in India today,” says Deepak Chandnani, president, Obopay.

It is a very positive sign of how the business correspondent model launched by the Reserve Bank of India four years ago is gaining traction. It is a win-win situation for all concerned. Operators, banks and specialist companies are gradually getting themselves organized to operate mobile banking services. Banks are able to reach remote areas without incurring the heavy expenses that opening a branch entails. Also, the ATM penetration in rural areas is not that high, with only forty ATMs per million people in India. For the customers, it means a safe place to keep their money, an easier access to loans, and a proof of identity by way of their bank cards.

The discussion on mobile banking often leads to issues of ownership of the customers. The telcos by virtue of being the owners of the mobile customers, and their unique position to offer a wide and rapidly growing retail presence view this service primarily as a Value Added Service (VAS). The banks claim ownership of the banking customer and perceive mobile as only being an additional access channel.
Mobile banking requires a cooperative relationship between mobile network operators and banks. The operators have strong distribution networks and banks can add their expertise and knowledge of the domain. The retail distribution networks should be all inclusive, as they will be the point of contact that provide financial services.

There is a huge potential for these services to pick up in the country when the regulatory environment becomes more cooperative. Earlier, only a closed wallet was allowed, and now a semi open wallet has been allowed. However, an open wallet system, which may fuel a rapid success of these services in India, is yet to be opened to the telcos.

" target="_blank">RBI has allowed payment for services which are predefined such as utility bills, etc; The regulator in India is cautiously and step-by-step moving towards such a situation, according to Ritesh Andley,
director product marketing, Utiba.

What is not allowed today is person to person money transfer, which has been done to check money laundering and other criminal activities. So once semi closed wallets see some success, " target="_blank">RBI will allow the open wallet system. The regulatory environment has become more conducive.

“To usher in true mobile commerce for a mass audience, the case for an open wallet account enabling electronic 'stored value' for the users is extremely strong. A mobile wallet service is of prime significance for unbanked users, which comprise a large section of the population in emerging markets such as India. A mobile wallet service can provide users with access to a range of financial services, including money transfers, banking and payments. Also, in a country such as India, where there is significant rural-urban migration, there is major potential for mobile remittances to improve the flow of money to rural areas,” says Manoranjan Mohapatra, CEO, Comviva.

Bharti Airtel was granted the license to use the Semi Closed Wallet by the Reserve Bank of India in this quarter. Semi Closed Wallets are pre-paid payment instruments that are redeemable at a group of clearly identified merchant locations/establishments which contract specifically with the issuer to accept the payment instrument. These instruments do not permit cash withdrawal or redemption by the holder.
“This allows a customer to exchange physical cash for virtual money which can be stored on mobile phones to pay for goods/services for transaction value less than `5,000. This will create " target="_blank">mobile money / payments as a category in our country. It allows Airtel to
offer a safe, secure, convenient, and user friendly medium to our customers for making their payments,” says Airtel's spokesperson.

In another recent development, " target="_blank">RBI issued Semi Closed Mobile Wallet license to Itz Cash as well which is a non-bank semi closed pre-paid payment instrument issuer in India.

m-Banking Creating Global Impact
In western countries, users for mobile payments can already make remote purchases for things such as parking, sports or music tickets via existing technologies including text messages, automated voice services or via mobile applications on smart phones.
Analysts also expect vouchers and coupons which provide price reductions at places such as restaurants and coffee houses to grow in popularity, and especially when that is matched with location services targeting your position.

India: Case Apart
A study by Consultative Group to Assist the Poor (CGAP) convincingly elaborates on how 3 bn mobile users living in developing countries have fewer options of transferring money, and accessing
banks as there is less formal banking infrastructure like fewer branches, ATMs are generally co-located to relieve branches rather than stand-alone and low Internet penetration.
According to Andley, “Mobile banking creates new and convenient financial transactional channels for mobile users which is accessible from anywhere, anytime. Recent report by Celent says India has around 400 mn mobile subscribers, out of which 20 mn to 25 mn are registered users of mobile banking. The penetration of India's active mobile banking user base is predicted to reach 2% (25 mn) by 2012, up from the current 0.2% (2.5 mn).”

The growth of mobile remittances has been equally spectacular, and is forecasted to touch £6 bn by 2012.
India as a country becomes quite favorable to this kind of technology which will not only benefit the masses, but will also take the country's development to the next level. What has been followed now is customization of this technology keeping in mind the complexities which it faced for its growth. So, the eco-system of telcos, banks, and small enterprises to make " target="_blank">m-banking beneficial and successful in India, is the next big step in " target="_blank">m-banking.

What is now seen as the most favored next step is a tie-up with local kiranas, transportation authorities, NREGS, government bodies, and Gram Panchayats to enable mobile banking to reach the grass-root levels for basic services. In short, an entire eco-system will be created so that the application or the solution can become popular.

The government is trying to evolve a framework for using the mobile platform to improve the access of a large section of the population-especially the poor to banking and financial services. The " target="_blank">RBI has so far permitted thirty-two banks to provide mobile banking facility in India, and twenty-one out of them have started providing these services. With the mobile device penetration in India at an all time high, mobile phones are also gaining traction in the rural areas and market dynamics shifting, mobile banking is finally poised to thrive in the Indian market.

Operators like BSNL, Airtel, TTSL, and Reliance are showing interest in this space.

Customer Service Points in India (CSPs)
'Imagine a scenario where more than a million people across the length and breadth of the country are merchants, and can also act as cash-in/cash-out points, financial service points or business correspondents,” agrees Probir Roy, MD PayMate.

In India, grocery stores and medical shops have a very important role, especially for the poor and rural people, which sell medications by the pill, shampoo in tiny sachets, cell phone minutes by the paisa, and frequently extend credit when needed.
Mobile as an access channel has the potential to bring a whole host of people that have no/little access to land lines/Internet connections onto an electronic branchless banking platform-an innovative way to generate financial inclusion.
These shops are known as Customer Service Points (CSPs).

The retail distribution network can potentially become a point of service that provides financial services, and act like bank branches. Therefore, mobile banking rural India will mean creating a mobile wallet (quasi/no frill bank account) ecosystem being served by the retail presence.

“600 mn mobile subscriber base in India, 70,000 bank branches, and 60,00,000 villages. It is increasingly difficult for banks to expand in rural areas because of various infrastructure, manpower, and operations problems,” says Chandnani.
Helping achieve this eco-system are enterprises like Obopay, Oxygen, Eko, m-check, Utiba and PayMate, now playing very crucial roles in this space. They are bridging the gap which telecom companies and banks were unable to fill for all these years to make " target="_blank">m-banking possible in India.

Green Money Transfer is another " target="_blank">mobile money transfer service piloted in a partnership between Corporation Bank, Tata Indicom and Pay Mate. It is primarily targeted at the un-banked population of the country by providing them a branchless banking service to send and receive money effortlessly. Current transaction limits are `5000 per transaction and as the service operates on a wireless transaction platform, this amount can be transferred instantly. With this service, it is possible for any mobile phone to send or receive money instantly using their mobile phones.

BSNL recently announced the launch of its 'Billpay' services in the West zone. The service has been introduced by Obopay, and is available to mobile consumers through all channels including SMS/IVR, WAP & J2ME application.

Elaborating on the service, NK Yadav, PGM, VAS, BSNL, said, “We would like to go a step ahead and introduce this service to our landline customer base also. With this, our aim is to enable 100+ mn BSNL customers across the country to use this convenient service.”
Nokia recently has teamed up with Yes Bank and Obopay, to launch a live commercial pilot scheme of 'Nokia Money' in India. The 'Nokia Money' initiative based on Obopay platform is initially targeted at growth markets, and designed to work in partnership with multiple network operators and banks, involving distributors and merchants in a dynamic open ecosystem to seamlessly provide the new services.
Obopay's unique service enables consumers to transfer money to other individuals, pay utility bills as well as recharge pre-paid SIM cards (top-ups), by using their mobile devices. Subsequently, consumers can also pay their merchants for goods and services through their mobile devices and person-to-person transfers. This is a first-of-its-kind service providing customers the ability to initiate mobile payments through multiple channels ie, SMS, IVR, WAP, JAVA, and FIRE. Obopay's platform is universal in nature. It is platform agnostic, and hence can work on any mobile handset, service provider and financial institution. This provides consumers with greater 'Anytime Anywhere' convenience and is a significant milestone on the path of financial inclusion as stated by the Reserve Bank of India.

It is high time that " target="_blank">RBI considers more pragmatic reforms in the mobile money segment. We want more people to bank and the economy to grow faster. We have been going slow with innovative services to customers. If mobile wallet is opened up further, it will encourage service providers to tap rural market in a big way.

Akanksha Singh
akankshas@cybermedia.co.in