Mobile banking set to grow

01 May 2008


Probir RoyTwo important yet quite unrelated events in the evolution of mobile payments in India  occurred in 2008.

Firstly, the new credit policy of the RBI came along with guidelines for facilitating mobile payments. Secondly, Dr Raghu Raghuraman's CSFR report  states  that ''Mobile banking is the most promising front end technology'' for broadening the access of finance in the country.

These two taken together are defining moments in the (a) recognition of mobile now as an accepted channel for banking & commerce, and (b) clearing the way for its rapid and mass deployment across the country by the Financial sector.

Technology related regulation can never keep pace with the fast pace nature of tech innovations and progress, nor fully define it. Regulation here has to have a light touch, so as not to throttle innovation, yet which serves public interest.

The use of mobile for financial and non financial transactions has had a chequered past. Several initiatives over the last ten years (overseas) have come and gone, and as we speak several more initiatives into the future related to NFC, contactless are emerging. The difference between now and then is mobiles have come along way. They find themselves in the hands of a third of humanity, and have pipped the internet in penetration!

Several initiatives in Sub Saharan Africa, Eastern Europe and Far East have been popular and working well for the last few years. So its time has come, and the RBI guidelines are recognition of  homegrown initiatives over the last year or so which have pioneered the new paradigm.

Mobile payments are a wireless consumer product or service. In short a benefit - convenience, as is, search, escalators, ATM's, etc. Methods and approaches for mobile commerce will differ across region, country and even service providers. As each stakeholder has its own assessment of what works best and what value proposition appeals to the consumer.

The key takeaways from the guidelines are that appropriate levels of security and safeguard need to be adopted. Which already have been done by all banks which do deploy these services. So, whether it be a SMS, USSD, GPRS, Smartphone, WAP medium – all such delivery mediums are acceptable.

Basic principles of PIN management, customer confidentiality, KYC, ALM, customer registration, risk mitigation, consumer protection, etc are applicable. Just as they would apply to credit cards, ATM cards, ATM's, collection boxes, internet banking, internet e commerce, telephone banking, cheque books, bank web site, etc. Which is not to say that there is a fool proof system for any of these, but they are as 'safe' as long they generate enough 'trust' and convenience to offset perception (and actual) of risk so as to be pervasive in the financial system. After all a wallet with cash is only as safe as you keep it. Neither cash nor wallet can be pilfer (tamper) proof!

Indian banks and payment service providers have been by and large dovetailing their mobile payment initiatives under the umbrella of mobile banking even before the guidelines were out. The banking system has already been in conformity with these suggested guidelines,which now have the sanction of the Reserve Bank.

Banks' own operating experience and other payments systems prevalent have provided the necessary grist for the RBI mill, and as time goes on hopefully these will evolve and become far more enabling for stakeholders. Rather than favor one approach or another or cripple themselves in strangulated regulations.

On the financial inclusion side if we go strictly by Dr Raghuraman's recommendations of creating a 'national electronic financial inclusion system' (NEFIS) then the backbone of such a system would be in its is ability to carry out small value transactions (Rs100) at limited transaction cost (sub Re1). And the only way that can be done on a mass acceptable basis is via SMS, which is the single most pervasive feature in mobile technology revolution, cutting across all SEC's, geographies, handset vendors, MNO;s etc.

The humble SMS along with dynamic authentication does indeed have pride of place in the scheme of things.

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