Indicus in News

Mobile Transaction - The last frontier

At a time of increasing convergence between telecom and financial services, especially in the developing world, where far more people have access to cell phones than banks, the imperative should be to promote mobile transaction. The spread of mobile communications enhances economic growth by lowering the cost of interaction, expanding market boundaries and creating better flow of information.
Countries like India have skipped land lines in favour of installing mobile phone technology only. They need to embrace the mobile transaction opportunity similarly. It's far easier to boost rural cell coverage than it is to build so many bank branches to serve a billion people in remote areas. Already more than 200 million people have mobile access in India.

The potential is large, and not only in India. People who are now "unbanked" in China, India and Brazil (three of the BRIC countries) alone could generate US$85 billion in banking revenue by 2015, according to an estimate by the Boston Consulting Group.

Hurdles remain for wider use of mobile banking. Mobile carriers must have broad enough coverage to connect urban and rural users, as many remittances come from urban migrants sending money back to their family villages. 

The Reserve Bank of India recently issued mobile banking guidelines. The guidelines permit only licensed banks with a physical bank presence in India to launch mobile banking. The service should be available to their customers regardless of their cell phone service. Only domestic Indian rupee transactions are permitted and are capped at Rs. 5,000 per customer per day for funds transfer and Rs.10,000 per customer per day for transactions involving purchase of goods/services. This facility would be restricted to only bank accounts and credit card accounts, which comply to know your customer (KYC) norms. This would cover a customer base of around 80 million people in the country.

There is also a requirement of interoperability which means third party providers who have previous experience as USSD gateway operators,  are likely to be in a favourable position. The guidelines state that banks offering mobile banking service must ensure that customers having mobile phones of any network operator are in a position to avail of the service. Interoperability may slow down the time to market but should ultimately benefit the customers.

While the service needs to be widened, the first step is welcome as the big move towards a more inclusive society. Mobile banking and payments should be high on priority given the fact that India records 8 to 9 million new customers every month, people are taking to mobile phones in a big way and vast areas of the country are financially underserved.

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