Updated : India Witnessing New Dawn Of Mobile Banking !

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India witnessing new dawn of mobile banking

18 Jul, 2008, 0026 hrs IST, ET

NEW DELHI: You can find pictures of Abhishek Bachchan, Aishwarya Rai and Shahrukh Khan at Suresh Photo Studio in West Delhi. Business has been unusually brisk at Suresh’s studio since last two months.

And he can cope with the rush, thanks to extra hours that he’s been able to save from the ritual of queuing up at banks to withdraw money. Now, he withdraws money via his mobile phone.

Opposite Suresh Photo Studio, adjacent to a temple, 38-year old Kamla sells roses, marigold and orchid garlands. Back home in Muzaffarpur, Bihar, Kamla’s mother now receives Rs 200 every week on her mobile sent by Kamla.

India is witnessing a new dawn of banking with mobile phone. From a rickshaw puller, a florist, a pan shop vendor to a truck driver, cash transactions are going mobile for all and sundry. “Our target is to achieve 10 million mobile subscribers hooked onto mobile banking by end of this fiscal year,” says Bharti Airtel CEO Manoj Kohli.

Four banks, SBI, HDFC, ICICI and Corporation Bank, have partnered with India’s largest operator Bharti Airtel to offer m-banking. RCOM has tied up with ICICI Bank, HDFC Bank, Axis Bank and IDBI Bank. Bharti Airtel has launched its mobile banking late last month and plans to rope in about 100 major banks in India by end 2008.

“Over the coming months, customers will be available to open their bank accounts at authorized Airtel outlets just by submitting a photo ID proof. Subscribers can now deposit, withdraw, transfer, pay bills or remit money through their mobile phones,” Mr Kohli adds.

A pilot phase has already been successful between HDFC and Bharti Airtel in West Delhi. Chemist shops, general stores, residents, NGOs, anybody can register to become an authorized outlet.

ET spent a day with one such outlet, Gupta Medicals doubling as an authorized mobile banking outlet in West Delhi to find out how the system works.

A customer (Kamla) comes to the shop in immediate need of Rs 200. She comes to the outlet and asks for withdrawal from her mobile bank account. Sumit Gupta, the outlet owner SMSes from Kamla’s mobile phone the following code, “*543*123*(the outlet’s mobile number)*200*Kamla’s 10-digit Pin code#”. He sends the SMS to 54321. Instantly, Rs 200 get deposited into the outlet’s account withdrawn from Kamla’s HDFC account.

Mr Gupta hands over Rs 200 to Kamla with which she goes and buys fresh flowers for garlands. The transaction takes less than five minutes.

In order to confirm the transaction, HDFC bank sends an SMS to Kamla’s phone, “Balance in your HDFC account as of 3/7/2008 is INR 900.” Kamla’s account is a no frills account. To graduate to a savings bank account she will have to submit additional documents.

For remitting to India, one can just go to a Western Union (WU) outlet overseas and deposit forex. Instantly, a transaction ID will be generated on the receiver’s mobile which he can show to collect the amount at a WU outlet in India.

While the SMS is free, for a person-to-person transfer, a fee of Rs 20 is charged which is shared amongst Airtel, VISA, Mchek (platform provider) and others in the chain. Airtel CEO Manoj Kohli declined to disclose the revenue share arrangements.

With Mobile Money Transfer (MMT), the user can transfer funds to a mobile number, that is registered with mChek with a valid VISA card or to any 16digit VISA card number in the country. About Rs 20 is charged for a card-to-card transfer.

In it’s draft guidelines last month, the RBI has mandated to implement a minimum four digit mPIN for such transactions. However banks like HDFC have gone ahead and implemented a six digit mPIN.

ICICI’s Sachin Khandelwal terms mobile phone as more secure as in case of loss of a phone, there’s no way a person can use your cash. “In comparison, during loss of a card, there is always a risk of leakage,” he adds.

The SMS receipt can also be treated as a legal document under the new IT Act. Overall, while operators seem gung-ho on the service, it remains to be seen how much popularity mobile banking will find amongst India’s 270 million odd mobile subscribers and whether it will encourage 90% of the population which uses no bank to open a bank account.

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Hold mobile payment service: RBI

23 Jul 2008, 0058 hrs IST, TOI

NEW DELHI: The Reserve Bank on Tuesday asked banks to hold their mobile payment services till the apex bank comes out with final operating guidelines on the service.

"Banks are advised to keep on hold their mobile payment services till issuance of the final guidelines," the RBI said in a notification to all scheduled commercial banks.

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Mobile payments require a legal framework as well

6 Aug, 2008, 1200 hrs IST, ET Bureau

Mobile payments, the new age payment system syndrome. Do we need regulations for these payments or do we need technological standards than operational guidelines.

In case we need regulations and guidelines for mobile payments; we also need regulations for internet and phone banking. The lack of technology standards will give rise to a lot of local and fragmented versions of m-payments offered by different service providers or banking service providers. Standards need to address security and privacy concerns of consumers as well as interoperability between various implementations. First movers benefit from this situation by creating de facto standards and major market share. There may not be consensus among the early players in terms of m-payments standards. The battle over standards occurs at the firm level and at the inter-consortia level for ease of use.

Although m-payments may allow parties to make economic exchanges, it is not legal tender in the sense that it lacks the status of other payment instruments such as cash, which is a medium of exchange that is authorised, adopted and guaranteed by the government. At best, m-payments will have to be backed by the issuer’s promise to pay. To overcome this problem, legislation has to be put in place that will make m-payments legal tender. Else, mobile payment by itself may become an eventual unofficial tender.

Strong payer authentication is the pre-condition to prevent consumer fraud and to keep the number of disputes low. This is why most schemes that provide a payment guarantee for the payee demand strong consumer authentication. Measures for integrity, non-repudiation, confidentiality and persistence further reduce the number of disputes and increase consumer trust.

Financial networks follow the three domain model in order to implement interoperability. Brand and business rules are defined in a payment scheme. Issuers hold contracts with consumers, maintain consumer accounts and issue, for example, credit cards. Merchant acquirers deliver services tailored to merchants’ needs. The interchange domain ensures interoperability, computes fees and settles funds between issuers and acquirers. Stakeholders are not restricted to a single role, eg, some banks issue cards and acquire merchants at the same time. Technically, interoperability is achieved by standardised protocols like ISO 8583.

Operational standards should be consumer-centric rather than being banker-centric. Consumers are reluctant to use and subscribe for a new payment method, as long as acceptance is limited to a small subset of merchants; merchants hesitate to accept a new scheme as long as the consumer base is small. Leveraging the existing infrastructure can overcome this problem. Consumers and merchants are familiar with use in cases like registration, confirming payments with a PIN, transactions (e.g. credit and debit) and account statements. Ease of use can be achieved if a mobile payment scheme copies the known payment transaction types, use cases and business relationships. Moreover, a payment system of international scope is expected to provide foreign currency conversion during the payment flow.

The need of additional devices or software poses a barrier for introducing a new payment system, especially to consumers. Further, consumers prefer payment systems that provide ubiquitous access. A method bound to limits usage to home banking on / or web payments and is likely to remain in this niche segment. Since these make the consumer feel secure as well as anonymous.

Cost for deploying and maintaining a new payment method as well as subscription and per transaction fees must compete with costs of existing payment schemes. On the other hand, fee distribution among the service providers must cover their efforts and risks.

Educating the customer on this payment system is a compelling necessity. The majority of poor clients, who cannot read or write, only trust voice services or what the sales agents say. Prospective customers, who might be a good match for the product, may feel that the product is technologically too complex for them. The target customers may often be unaware of the terms and conditions that underlie the financial agreements. This experiment has not been so successful elsewhere across the world. Standards, therefore, become an inevitable key to the success factor.

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Mobile banking guidelines likely in a fortnight

Business Line, Mumbai, Aug. 26

As Indian banks gear up to offer mobile banking as the next step in payment systems, they also need to address customer concerns with regard to security.

The dependence of banks on mobile payment service providers would place the knowledge of customers in public domain. Therefore, banks would need to take adequate risk control measures to manage such risks and protect sensitive customer data.

This was the opinion shared by speakers at a seminar on mobile banking organised by Banknet here on Tuesday.

With mobile subscriber base touching 300 million in India, banks are increasingly exploring ways to adopt mobile banking practices.

Most of the banks are waiting for the issuance of final guidelines from the Reserve Bank of India to roll out mobile banking services in India. The bankers are expecting the final guidelines to be released within a fortnight.

Expansion opportunity

Bankers were of the opinion that mobile banking gives the banks an opportunity to expand their customer base without incurring additional infrastructure costs. It would also help in financial inclusion as it would provide a large number of unbanked people access to banking services.

Banks could save a huge amount of money on card issuance and merchant acquiring with zero point of sale cost. Mobile banking could be used to make remittances from person to person, banking purposes and to make payments for purchases or services provided.

However, the banks would need to allay customer fears on account of hacking, breach of service, denial of service and other technological failures. Also, plain text SMS is prone to tampering and needs to be complemented with an interactive voice response system (IVR) or some other measures.

Areas of concern

There was also a lack of consensus among bankers on the need for banks to converge on a common platform to set up an integrated network regarding the usage of mobile commerce. There is also a conflict of interest between the banks and the telecom provider, as banks would be using the customer base of the telecom companies.

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Cell banking only for card holders: RBI

20 Sep, 2008, 0054 hrs IST, ET

MUMBAI: Small-ticket payments and remittances from mobile phones will become a reality soon. Keeping in mind the superior reach of mobile phones as a delivery channel, the Reserve Bank of India on Friday released its final operative guidelines for mobile banking.

The central bank has decided to keep the limit on the ticket-size for mobile banking at Rs 2,500 per transaction, and Rs 5,000 per day. Banks have also been allowed to put in place a monthly transaction limit, depending on the bank’s risk perception of the customer.

While the guidelines will enable lenders such as State Bank of India and Axis Bank to go ahead with their launch of mobile-banking services, the central bank has decided to restrict the services only to holders of debit and credit cards. The card user base in the country is 80 million, with 55 million debit card users and 25 million credit card users.

However, it comes as a blow to players who intended to use mobile banking to reach out to the underbanked in rural India. A number of microfinance institutions and mobile payment operators such as mChek, PayMate and Obopay had tied up to offer mobile-based financial inclusion products in the hinterland. Banks, however, have been allowed to use the services of banking correspondents for extending this facility to consumers.

Only Indian rupee-based domestic services shall be provided on the mobile-payment platform, and the use of mobile-banking for cross-border transactions have been strictly prohibited. Banks which are based, licensed and supervised in India will be allowed to offer such services. Further, only banks which have implemented the core banking platform will be allowed to offer mobile banking.

At the same time, the RBI has recommended that all mobile banking transactions are validated through a two-factor authentication system, thereby complying to the latest security and encryption standards. The RBI has also said the long-term goal of the mobile-payment framework in India would be to enable funds transfer from and account in one bank to any other account in any bank on a real-time basis, irrespective of the mobile network the customer has subscribed to.

The guidelines also recommend that banks do not compromise on their know-your-customer and anti-money laundering guidelines. They will also be required to file suspicious transaction reports (STRs) to the Financial Intelligence Unit for all mobile banking transactions, as in the case of regular banking transactions.

It has also been recommended that banks explicitly state the risks to the customer and also get them to sign a contract before the service is adopted. It has also asked banks to make their mobile-banking services available across all phone networks.

The number of mobile phone connections in the country was at about 296 million at the end of July this year and it is growing at about 8-9 million per month, according to telecom regulator Trai. Banks have been exploring the feasibility of using mobile phones as an alternative channel of delivery of banking services. Some banks have also started offering information-based services like balance enquiry, stop payment instruction of cheques, transaction enquiry, location of the nearest ATM or branch, etc. Acceptance of transfer of funds, instruction for credit to beneficiaries of same or another bank in favour of pre-registered beneficiaries have also started in a few banks, the RBI said.

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You may soon use your mobile phone as credit, debit card

Economic Times l 28 Sep, 2008 l New Delhi

In a development that could completely liberalise mobile commerce, the department of telecommunication (DoT) will soon write to the Reserve Bank of India (RBI) seeking guidance on linking telephone networks with banking services.

While the RBI recently announced certain guidelines for mobile banking in India, it only provides for a few basic banking services which can be undertaken through mobile phones. The new DoT move will allow consumers to virtually use mobile phone as a debit or credit card.

Sources told SundayET that the ministry would seek RBI's consultation to provide full-fledged mobile banking services to the customers, in line with discussion held between the 13th Finance Commission team and DoT officials on September 18, 2008. According to a senior DoT official, the ministry has so far not taken any initiative on linking telephone networks with banking services, but is keen on it as it will generate revenues, in addition to giving more value to telephone customers. "These services can increase the share of value-added services from the existing 7-8% of total revenues from the sector to almost about 25% which is the case in the developed countries," DoT said to the Commission's team. SundayET has a copy of the discussion paper prepared by DoT.

Explaining how the new initiative would help Indian consumers, Romal Shetty, director at KPMG India, said it would change the entire face of banking in the country. "So far, consumers can make only a few basic transactions through the mobile, but this will mean using your mobile as your credit or debit card. All you have to do is to send a message to make a payment," he said.

Mobile commerce in India has been limited primarily to basic banking transactions, purchase of travel tickets and payment of some utility bills, checking your account balance and last few transactions. Sanjiv Mittal, vice-chairman, Bharti Telesoft, that provides mobile banking facility to the customers in collaboration with Barclays Bank feels that both, banking and telecom industry, will have to come together to make mobile commerce a success in India. "There are certain laws to be considered regarding money remittances. Considering the IT security condition, coming together of both is a good sign," he said.

Vodafone also offers services like querying bank balance, requesting for cheque book, making stop payment etc. These services are available in association with banks such as HDFC Bank, ABN AMRO and Kotak Mahindra Bank. "Mobile banking is necessary to create access to the remotest of areas. Any kind of convergence is good for promoting mobile commerce. There is nothing better than both the systems coming together to provide a framework," said a Vodafone official.

The DoT's interest in the matter is sending positive signals to industry. "If the ministry takes up the matter with the RBI, it will definitely speed up the process. It will not only help the mobile users but will boost banks and even mobile operators to grow further," added Mr Shetty.

The DoT has informed the Finance Commission's team that revenues from auction of spectrum for 3G and BWA services could go up to Rs 30,000 cr. The 13th Finance Commission asked the DoT to give the revenue projection from the telecom sector between 2010 and 2015.

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Oxigen makes payment transactions on mobile easy

29 Sep, 2008, 0000 hrs IST, ET

Driving down the Delhi-Gurgaon expressway, you realise that you haven’t recharged the digital smart tag that enables you to zoom past the toll booths. Your only option—stop and pay in cash...right? What if you could whip out your cell phone, push a few buttons and wait as the balance on your smart tag is digitally refilled for the desired amount? You’d probably have a company called Oxigen Services to thank.

Oxigen was founded in 2004 by Pramod Saxena, a telecom veteran, who had previously served as CEO of Essar’s telecom business and President of Motorola Asia-Pacific. “I wanted to leverage my telecom expertise to virtualise payment systems for people belonging to the middle and lower income segments,” he reveals. This vision was crystallised when he met an executive from South African telecom company Blue Label Telecoms (then called The Prepaid Company) in 2004. Oxigen Services, a 50:50 Joint Venture, was thus born in New Delhi. “The business model evolved around connectivity through small stores,” Saxena explains.

The initial payment platform was provided by Blue Label and later modified by Oxigen to make the software as simple to operate as possible. At the store, a customer pays the store-owner for a particular service–say, mobile balance recharge. The storeowner then uses an Oxigen terminal, Internet-enabled computer or an ATM/cash till wired to an inventory management and billing software. He keys in the customer’s requirements (e.g. a recharge worth Rs 100) using a menu on the screen. The transaction is executed in real time and a voucher for the specified amount printed out. The same process is followed to pay electric or utility bills, DTH services, etc.

The first benefit is that payment is instantaneous and so is the billing and retailer commission. This, Saxena feels, could go a long way in a country where buying and selling is still a physical activity, as opposed to online transactions. “Therefore, we need to reach out to people at as many touch points as possible,” he says. Today, Oxigen gateways are available at over 50,000 locations across the country. Saxena elaborates, “Our platform is flexible enough to quickly incorporate new service providers. Because of that, we have rapidly integrated a wide bouquet of services with Oxigen.”

In 2006, Citi Venture Capital came in as a private equity partner in Oxigen, and took up a 26% stake. The next year, Oxigen launched MobiBuzz, a downloadable mobile VAS prepaid service that enables users to access various entertainment options and phone tools. These Java applications are sourced from various third parties and put onto one server by Oxigen so that users with even basic GPRS phones can access them, regardless of which operator they subscribe to.

In mid 2008, Oxigen also launched OxiCash, a first of its kind ‘mobile wallet’ operated via SMS or WAP on users’ phones, or via the Internet. Money can be transferred to an OxiCash account from a bank account or from an Oxigen outlet. The transaction takes place digitally on a server and the service is bought in real time. OxiCash is designed for payment of utility bills, toll charges and mobile or DTH bills. It has so far garnered 100,000 active wallets and seen transactions worth Rs 15 crore in the last three months.

In January 2008, Microsoft picked up 36% in Oxigen as Citi Venture exited the firm. Saxena reveals that Microsoft’s expertise has helped make Oxigen’s user interface more efficient and soon, many Microsoft applications will be integrated with Oxigen’s services. Looking ahead, the $150 million company is continuing to focus on the online payments arena. “We plan to take the number of Oxigen outlets to 2,50,000 in the next two years and also integrate financial services such as insurance payments into the system,” Saxena concludes.

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Mobile banking likely to take off within a year

Press Trust of India l 18 Nov l Mumbai

MUMBAI: High-tech mobile payment with secure transactions at lower costs is expected to start within a year, a top industry official said.

"We are working with the Reserve Bank of India (RBI) and other members, namely telecom operators, banks and service providers, to enable mass adoption of mobile banking and mobile commerce," MPFI (Mobile Payment Forum of India) Chairman Ashok Jhunjhunwala told reporters on the sidelines of a conference here on Tuesday.

"We expect to enable mobile payment with secure transactions at lower costs through robust technology to start within a year's time," Jhunjhunwala said.

A technology, regulatory and business committee, along with a few sub-committees focussing on specific issues, have been set up, he said.

"The Forum has worked closely with the regulator and been responsible for formulation and release of the final operative guidelines for banks on mobile payments issued by the RBI on October 8," Jhunjhunwala added.

The regulatory committee of MPFI has prepared a report on "Mobile Banking Transactions in India-Operative Guidelines for Banks" in consultation with RBI.

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India is witnessing a new dawn of banking with mobile phone. From a rickshaw puller, a florist, a pan shop vendor to a truck driver, cash transactions are going mobile for all and sundry.

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