Mobile banking potential far greater than PC banking

08 May 2010

1

Since the Reserve Bank of India's mobile banking guidelines came out in October 2008, more than 32 banks have been given clearance for some form of mobile banking or payment service to be offered to their customers. The annual value of transactions using the mobile banking channel is in the region of Rs150 crore, involving about two to three million transactions. But let us put this in perspective - after all it has taken more than two decades for credit card penetration to reach just about 3 per cent of the population, or about 30 million people!

Since it does take time to go from giving approvals to actually getting the service to the market in any meaningful way, it is clearly still early days for this new alternate channel. But a quick litmus test indicates three things.
 
Run Rate:
Experience so far within a year or so of the mobile, prepaid and other concomitant directives is that the run rate for our mobile transactions has grown by six times, whilst pure banking customer related transactions in Nepal and India have grown 10 times.

The latter is growing at more than 100 per cent a month! With the further policy fillip being constantly given to financial inclusion, I see a further 100 per cent growth by mid-2010. It must be noted that whilst the base was obviously low (as this is a recent market space), and volumes are still relatively low, the growth factor has been remarkable.

Nonetheless, by the middle of this year the monthly run rate for all our types of mobile related transactions will exceed that of any well-established travel portal in the mature travel market.

As a benchmark we can take the State Bank of India, which has the largest number of active customers in mobile or m-banking, and hopes to hit a million customers shortly. And with about 10,000 transactions a day this is now proving to be an integral part of strategy for any bank to move a large part of their hygiene banking transactions over to alternate channels – all electronic.

Risk:
Clearly at the end of the day any financial product is about three key attributes - trust, faith and benefit - and this is reflected in perceptions and actual riskiness of using this channel.

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