Mobile Money: Waiting in the Wings

There are no doubts that mobile service operators are an ideal channel for banks to take their services to remote areas of the country as part of their financial inclusion programs. RBI amended the rules for banking correspondents in September 2010 to allow 'for profit' companies to do the job, besides individuals, non-governmental organizations, cooperative societies, and post offices. Following these guidelines, 2011 saw many collaborations of banks with telecom operators. Operators are looking at tapping m-banking stream as one of its resources for revenue generation; mapping immense potential for demand and growth.

Success in the mobile banking market will help mobile operators shore up their ARPU even when the mobile voice traffic slows down. The market for the mobile transactions is theoretically as big as the economy of India as it has the potential of moving all payments on mobile phones. In particular, the consumer spends in India is estimated at $500 bn annually; 80% of these spends are done at unorganized retail.

However, mobile money is a very fragmented market right now, in terms of service types, geographic regions, enabling technologies and participating players. Consequently, leading operators are evaluating all aspects of the market in an effort to determine their individual business strategies and to select their preferred technological approach to supporting those strategies.

Big Tie-ups

'Idea MyCash', a facility aimed at providing basic banking services including money transfer, using the mobile platform, was flagged off by IDEA Cellular, in association with Axis Bank. Himanshu Kapania, MD, Idea Cellular says, “This is a mobile based financial inclusion initiative which besides providing basic banking services to the 'Unbanked' like cash deposit, cash withdrawal and balance inquiry, will also enable money transfer between the migrant population in urban areas to their beneficiaries back home.”

The remittance facility is currently being offered on a pilot basis from Mumbai (Dharavi) to UP East (Allahabad) remittance corridor. State Bank of India and Bharti airtel early this year announced that they have entered into a joint venture agreement to make available banking services to India's unbanked millions. The JV will become the business correspondent (BC) of SBI and offer banking products and services at affordable cost to the citizens in unbanked and other areas.

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Sriram Jagannathan, CEO, airtel M Commerce Services says, “The market for the mobile transactions is theoretically as big as the economy of India as it has the potential of moving all payment transactions on mobile phone. In particular, the consumer spent in India is estimated at $500 bn annually; 80% of these are done at unorganized retail.”

ICICI Bank announced a tie-up with Vodafone Essar, the Indian JV partner of Vodafone, to offer financial products such as savings accounts, pre-paid instruments, and credit products through a mobile phone platform. The two have also partnered to offer financial services through the mobile phone. Vodafone Essar will also become a banking correspondent for ICICI Bank.

Marten Pieters, MD and CEO, Vodafone says, “Mobile banking is still at a very nascent stage in India. We see immense potential in this service to reach out to our audience in tier 2 & 3 towns. This is a great opportunity for a country like India to improve financial inclusion. In a country where the banking penetration is low, mobile technology will play a big role in bridging this gap.”

Along with ICICI, Vodafone inked a partnership with HDFC Bank as well to offer mobile banking services to the rural masses. The pilot for these services has been started in 10 villages in the Sikar district of Rajasthan. As of now, HDFC has appointed 54 BCs in these villages, leveraging manpower on Vodafone's retail network.

Corporation Bank in association with Tata Indicom and PayMate announced the launch of 'Green Money Transfer'-a unique person-to-person mobile money transfer service, in early November 2009. “We tied up with Indian Bank for green money transfer. We have got the license for mobile money through prepaid card and we will rollout mobile money soon,” says Pankaj Sethi, head, TTML.

Handset players are also not far behind to get the pie of this attractive sector.

Nokia is building an open ecosystem for mobile payments in India with multiple partners (banks, merchants, billers, service providers), to drive mobile money services across the country. In March 2011, Nokia partnered with Union Bank of India to launch Union Bank Money Services across the country. The services are currently Live in the National Capital Region, Mumbai and parts of Maharashtra and will be launched across the country by 2012.

“Our partnership with Union Bank of India and Yes Bank will help us connect the unbanked population in the country by leveraging the wide reach of our combined networks and the deep penetration of mobile services in the country,” confirms Gary Singh, general manager, Nokia mobile payment.

Many collaborations are on pilot stages. Many operators have launched them in phased manner or in certain corridors to test their efficiency and latency.

Gurdeep Singh, COO, Aircel says, “We are foraying into mobile money transfer and mobile banking. Presently, ICICI pilot is underway which will get completed in November. We are also tying up with other banks and 4 alliances are at an advanced stage. We expect that in 2012 mobile money would be a big thrust area since our network focuses on younger generation and youth who will quickly adopt internet based service.”

Many vendors are also coming forward to technologically support the entire system. Ericsson will be adding Ericsson Money Services to its expanding range of managed offerings for carriers. This is not just a hosted service, but an end-to-end process that the company is set to create a global ecosystem that makes sending money person-to-person as simple as sending an SMS.

Many operators are in the process of setting up the right system and platform to tap this sector. Sayed Safawi, president, wireless, Rcom says, “We have also made significant financial commitments in this space through investment in a mobile money platform and have already signed MoUs with a couple of banks. You will see an active rollout in the market from Reliance within the current calendar year (2011).”

Airtel, on other hand, has also started semi closed mobile wallet system as well this year. The service will enable airtel mobile customers to use mobile platform to make payments the easier way anytime, sitting anywhere.

“The technology solution is concentrated currently on developing expertise on mobile wallets. We are examining consolidating the technology solutions for multiple m-commerce offerings with a key partner who has the ability and domain experience to implement all mobile wallet features,” confirms Sriram Jagannathan, CEO, airtel M Commerce Services.

In India, where still citizens use cash for most of their financial transactions, about half the population is 'partially banked' meaning, they have some access to traditional financial services; however 50% to 70% have mobile phones, mobile-wallet services constitute 'the sweet spot' of the mobile money market right now.

If this segment is to grow sufficiently to become an attractive target for mobile operators, merchants, and retailers must incorporate within their electronic networks point-of-sale devices that are capable of supporting mobile commerce transactions.

The Banking Opportunity

With the penetration of mobile teledensity standing at a strong 60%, the market possesses great potential for a collaboration that combines the strengths of both banking and telecom sectors.

Only 43% of India's population has access to the banking services, it leaves a major portion of population un-banked. The banking infrastructure extends to 88,000 bank branches, 70,000 ATMs which leaves majority of unbanked population to rely upon unorganized methods like cash transactions and money orders. India has 100 mn migrants spread across the country, remittance being their primary need who have to pay premium for such a basic service due to lack of required infrastructure.

Consequently, many mobile operators have moved into the vacuum created by the lack of banking infrastructure and created a distribution network of mobile retailers through which they reach their customers. Their subscribers rely heavily on the SMS function of their 2G phones to obtain a wide range of basic financial services: Putting cash into their mobile accounts and getting it out; making remittances, or person-to-person transfers of money, often across national borders; paying bills; and even receiving their paychecks.

Mobile payment services and the initial part of mobile commerce services are where the biggest opportunities lie for mobile operators. Mobile payment stands out as the most lucrative area for growth in the mobile-money market, proving to be the best near-term opportunity for operators.

Hurdles to Counter

The international remittances arena-already large-is becoming larger still every year, primarily because the ability to transfer money quickly and securely is absolutely essential to the target customer base.

To participate in those arenas, they first need to put in place the appropriate technology-a mobile-payment platform in the network.

Vikas Jain, business director, Micromax Informatics insists, “As an industry, the handset manufacturers can take up the challenge to contribute to the task of setting up an effective mobile banking system. What is needed is to get guidelines/framework of the ecosystem to be formed mutually between operators, handset manufacturers, and system/application developers.”

Another challenge is to create consumer awareness and adoption. Arguably, mobile operators' success in competing in the mobile money market will depend, both in the near and long term, not just on technology but also on marketing.

Sriram Jagannathan, CEO, Airtel M Commerce Services says, “With the enabling regulatory environment laid by the central bank, there are no major hindrances expect for business model and related compulsions.”

Security is another issue. Mobile banking is often viewed as lacking in security and users' labor under the misconception that their personal information will be divulged to third parties.

“Security needs to be at the forefront for both operators and banks and it should not be looked at as an afterthought. Malware, frauds and Trojans like Zeus have already created havoc in the mobile space. Once mobile banking grows in India, it will be very important to remain secure and also prevent leakage of data,” insists Kartik Sahni, country head, RSA.

Need to Rollout

Major roles await operators in the mobile money market. What is the need of an hour is to reduce time between what is in the pilot stage to the commercial rollout of the services. Currently, the status card of the operator and their mobile money operations are stuck at pilot stages only. Most of the operators are taking immense time to commercially make this system viable for consumers as well as open up new revenue opportunities for operators to grow.

Akanksha Singh
akankshas@cybermedia.co.in