India has the second largest mobile phone subscriber base with over 900 million subscribers and a tele-density close to 74 per cent. It is expected to soon surpass China that currently has over 1000 million subscribers.
The tele-density in India is a bit skewed with over 61.87 per cent subscribers present in the urban market followed by the rural market that has a tele-density of 38.13 per cent according to the latest data from TRAI (Telecom Regulatory Authority of India).
Besides being a leading user of mobile telephony, India is the highest remittance receiving country in the world. In 2012, India received $70 billion with majority of the flows coming from the Middle East region or GCC market (the other markets being US, UK, Canada, etc).
Indians constitute nearly 25 percent of the UAE population of over seven million. Of this, about 65 percent are blue-collar workers employed either in construction, health, utilities industries or municipalities.
These two facts together raise an interesting opportunity to utilize the reach of mobile telephony for delivering remittance services to Indian consumers. The service has seen reasonable success in various parts of Africa with similar market situations. However, let’s see if that’s the case for the Indian market?
According to the World Bank Report 2012, it is estimated that close to $55 billion will be remitted via mobile phones by different diaspora across the globe during 2016. This is four times the amount that was transferred through this technology in 2011.
In developed countries like US, UK, Australia, mobile technology has evolved around smart phone usage. Innovative applications on these smart phones have replaced wallets.
For example, in Japan, mobile service NTT DoCoMo started offering “mobile wallet” services in 2004 that allows users to shop at departmental stores, pay parking charges or local train tickets, movie tickets and even remit money.
Mobile remittance is today allowed in emerging economies like Philippines, Bangladesh, Tanzania, Kenya, Nigeria, etc where it has generated close to 85% of transaction value last year.
The emerging world is growing faster in mobile technology as they don’t carry any baggage of plastic cards infrastructure, banking penetration is low, and are able to utilise the latest technological options.
However, for India which has a large mobile subscriber-base and is also the largest remittance market, the benefit of this technology is yet to evolve. While Indians are increasingly using mobile platforms and technology for various financial transactions and purchases like bill payments, ticket bookings, entertainment, travel and banking transactions, cross border mobile remittance is yet to see the light of the day.
This is largely due to regulatory and operational challenges and concerns over money laundering and terrorist funding activities etc.
In October 2011, RBI relaxed the money transfer guidelines for domestic remittance enabling authorised entities (banks and non-banks) to increase domestic remittances through formal payment channels.
Domestic remittance is the transfer of money within the same country. A few M-wallets like Airtel Money by Airtel, M- Paisa by Vodafone, and Mobile Money by Aircel are currently offering these domestic remittance and payment solutions services.
Their success highlights the fact that the efficiency and convenience of money transfer through mobile phone has already made its inroads in the interiors of the country.
With domestic remittance enjoying this success, the environment for the entry of cross border remittances is in the process of slowly gaining acceptance. Though there is still some skepticism and short term challenges, like overcoming operational and regulatory hurdles, mobile remittance remains the potential game changer to enable grass-root penetration in even the remotest of Indian remittance pocket.
The key reason being, with the advancement in technology, these migrants’ workforce - mostly contractual workers - has a higher chance of accessing a mobile phone than a bank account.
As this medium of money transaction is faster, cheaper, more convenient, secure, and accessible, mobile remittance offers an edge over other modes of remittance like bank transfers or demand drafts.
This will be especially beneficial for rural recipients who otherwise have to travel long distances and carry cash. A successful international mobile remittance case study for India can reap tremendous benefits for the country on similar lines with other international examples like M Pesa in Kenya.
Philippines and Tonga that are heavily dependent on remittance inflows have successfully adopted mobile platform to address the issues of high costs and informal channels of money transfer.
With the regulator working towards putting proper guidelines, and security checks in place, there is no doubt of India growing into a bigger market for remittance that would in turn provide a boost to the telecom market as well as the economy.
For the moment, it’s a wait and watch for banks, money transfer companies and the telecom industry.
Sudhir Kumar Shetty is the chief operating officer, Global Operations, UAE Exchange.
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