When Mobile=Wallet

It is no more an urban phenomenon to carry money on mobile. Sitting in
chaotic, war torn Afghanistan or some village in Bangladesh, mobile subscribers
are able to pay their loans and receive their wages on their phones.

Witnessing a huge traction in few of the developing economies in Southeast
Asia and Africa, mobile commerce is looking good to take on the SAARC now. Some
of the most active countries have been India, Sri Lanka, Pakistan, Bangladesh,
and Nepal. Also the regulators in these countries, including India, have now
geared up to make the ecosystem conducive. This is helping mobile phones to
prove its prowess as a tool for financial inclusion. This trend holds a pot of
gold both for operators and banks.

To the total population spread across urban and rural areas and a
considerable section of the population, though in need of banking services, is
devoid of such services, SAARC offers a huge opportunity for mobile commerce
services.

Gartner estimates that the users of mobile payments are likely to double by
2012, and the impact will be felt in the developing world where access to
banking is limited.

According to the Bangladesh Bank, during the last sixteen to eighteen months,
Bangladesh received $685 mn per month in remittance from abroad. With the
convenience of mobile payment, it would be simple to send and receive funds,
saving trips to the banks.

“In the SAARC region, m-payments is in an early phase. I think for a country
of India's size and seeing the kind of banking culture it has, there is fairly a
robust response to mobile payments. On an average, there are a few thousand
transactions every month and this is growing every month,” says Probir Roy,
co-founder and MD, Paymate, a financial solutions company that is working with
about twenty-eight banks worldwide of which twenty-three are in India, one in
Sri Lanka and two in Nepal.

Existing banking infrastructure is such that there is a huge population that
needs to be covered. There are successful examples of mobile payments in the
SAARC region, the Grameenphone's initiatives in Bangladesh and the combined
efforts of M-pesa and mobile operator Roshan in Afghanistan can be referred to
as great case studies,” says, Ritesh Andley, director, product marketing, Utiba
Mobility, adding that each of these SAARC nations are so similar, yet distinct
that it is difficult to draw parallels.

“In Pakistan the dynamics are different. We have sold our platform there to
the mobile network operator, Mobilink, and are offering mobile wallet services.
We also have a retail presence there. We have tied up with the post offices and
gradually plan to expand services. As for Bangladesh, we have started
negotiations there. We have not begun services there yet,” he says.

Interestingly, in Pakistan, there are about 50 mn people who have mobile
phones, digitized national ID cards, but no bank accounts. There are dozens of
banks, five mobile operations, which make mobile services cheap.

Last year, the World Bank granted $7.7 mn credit to the Government of
Maldives intended to provide better access to financial services by allowing
users to access any bank accounts using their mobile phones. The mobile phone
banking project intends to create a single currency payment system which
provides a set of mobile telephone based accounts. The system will enable
customers to transfer funds to and from bank accounts and to and from telephone
based accounts. Besides, the project plans to build an enabling environment and
the capacity to support successful mobile phone banking systems. The initiative
will especially benefit the people who live and work in the widely dispersed
island.

Bhutan Telecom has also introduced M-money or mobile money payment, a
one-stop shop for making payments of all utility bills including telephone,
electricity, and water bills. The service has not yet shown a great impact.

According to Roy, mobile could be the game changer for bringing about
financial inclusion. “I think Bangladesh is a good example where the mobile has
helped supplement efforts of Grameen Bank. Clearly, while all wage earners carry
mobiles, not all wage earners will have a bank account or even want to step
sideways through the portals of a bank branch,” he says.

Mobile is being looked upon as an efficient tool for financial inclusion as
its reach is ubiquitous and provides for a low cost point of service (PoS) for
all forms of inclusive banking-be it low frills banking, credit, insurance,
pensions, NREGA social payments, etc.

It reduces the distance between the depositor/beneficiary and service point.
It costs far less to use a mobile phone (less than a rupee) as the medium rather
than smartcard, Internet, telephone or branch. Most importantly, every NREGA
beneficiary, with a job card and/or in time UID, can be linked to a no frills
account and a mobile number.

The Indian Prime Minister's office has asked the Department of
Telecommunications to find ways to expand mobile banking services to the
remotest corners of the country. A pilot project to take financial services to
the poorest of the rural poor through mobile banking is likely to be launched in
2012 to cover select villages.

“In the SAARC region, m-payments is in an early phase. On an average, there are a few thousand transactions every month and this is growing every month” Probir Roy, co-founder & MD, Paymate	“The Grameenphone's initiatives in Bangladesh and the combined efforts of M-pesa and mobile operator, Roshan, in Afghanistan can be referred to as great cases” Ritesh Andley, director, product marketing, Utiba Mobility

The move is part of the government's initiative to ensure financial inclusion
of the poor. The government is keen to make sure that poor people with mobile
phone connections can carry out financial transactions using their handsets,
including receipt of wages and payments, even if they do not have bank accounts.
So much is the power of a simple handset that the cell phone manufacturer Nokia
recently introduced Nokia Money, a new mobile financial service offering
consumers with mobile device access to basic financial services.

“What is important to understand here is the fact that financial inclusion is
needed for not only those living in the rural areas, but also those who live in
urban areas, but can not frequent banks for every small transaction that they
make,” says Sanjay Swamy, CEO, mChek that operates in India and Sri Lanka and is
planning to launch services in Nepal and Bangladesh. Rushing to banks every now
and then is cumbersome for small merchants.

The service providers are making efforts to make the users go around cashless
and make any kind of payment-be it P2P, person to merchant, ATM to person, or
any other way, he says.

Operators and Banks

The solution providers are working closely with banks and mobile network
operators so that the benefits of mobile payments can trickle down to a larger
number of people. While banks bring with them the expertise on the financial
domain, the customers in the sub-continent have shown great faith in the
operator's retail network to perform financial transactions and the phenomenal
success of electronic top-up is a classical example of it.

Andley says, “We do believe that retail-led strategy could work very well to
introduce such services in this region and we therefore see banks and operators
working very closely with each other.”

“The sheer success of a wallet-based mobile commerce ecosystem originates
from unparalleled penetration of mobile services coupled with MNO's retail
presence. The traditional banking channels have so far failed to reach out to
the masses because of their restricted reach and cost of servicing a low income
customer, a gap which a typical mobile commerce ecosystem can potentially
bridge,” he says.

However, huge geographic distances, some terrains even difficult to reach;
wide demographic differences; multiple languages spoken in a single country and
number of banking as well as MNO players, there is no single player poised to
offer these services single-handedly. Therefore, the products developed should
be immune to who is offering these services and can work well in different
amalgamated service offering scenarios.

Mobile financial service providers have to be creative in their approach. For
example, Mobilink in Pakistan, is using Utiba's platform to offer domestic
remittance services in partnership with Post offices and has now brought
Citibank onboard to widen the range of services it can offer to its customers.

In SriLanka, U:Gen, one of Utiba's customer has partnered with bus transport
service provider's association and Bank of Ceylon to offer these services.

Tech Trick

Any technology that is simple and does not require long procedures works
with any kind of consumer. In the SAARC region, where the demographic patterns
are formed of people who are gradually turning tech-friendly, and who want to
stick to simpler ways of transactions.

“IVR and SMS based services are simple to use and hence popular with the
users,” says Swamy of mChek.

“It is an interesting observation, that in all these SAARC countries, there
is a higher percentage of numeric literates, than the albhabetically literates.
For them, simply dialling a number and responding to IVR is simple and most
satisfying,” says Andley.

A mobile operator that is also a mobile payment service provider (MPSP) can
hamper connectivity to a competing MPSP to force its customers to switch. It may
provide preferential routing and better quality for its own MPSP, or provide
bundled pricing for its mobile customers.

Legal Ayes

Reserve Bank of India's (RBI) latest guideline, permitting non-banking
finance companies (NBFC) to issue semi-closed system prepaid payment instruments
will boost the growth of m-commerce in the country. Industry sources estimate
that, in the next three years, India could have 25 mn m-commerce users up from
the current 5 mn. The industry currently stands at a market size of $10 bn.

Bangladesh Bank has a huge role to play in shepherding mobile payments in the
country. It is hoped it will soon come out with guidelines for mobile payments
solution providers licensing that sets the criteria for capability and security.
The guidelines would pave the path to wide adoption of mobile payments in
Bangladesh.

Sri Lanka's Central Bank is working on policies for mobile payments. As the
island country enjoys a reputation of a trendsetter in the region vis-a-vis
information communication technologies, it is expected that the proposed
framework would help the country capture a similar space in mobile banking and
mobile payments as well.

Heena Jhingan

heenaj@cybermedia.co.in