Airtel, Vodafone and Idea are rolling out mobile banking services, but it remains to be seen how the concept catches up with consumer interest in 2011.
Mobile phone penetration is set to reach 60 per cent of India's population in 2011, but banking touch points lag at about 0.07 touch points per 1,000 people, said a Deloitte-Assocham's estimates.
However, with telecom and banking majors stepping up mobile banking services, 2011 is poised to be the year that would transform your banking habits - making payments or checking your account balance on your mobile.
Yet, currently just about five per cent of all mobile subscribers are registered for mobile banking and more significantly, only 0.5 per cent actively use mobile banking (as per industry estimates), the customer base is woefully small.
But telecom players exude optimism about the platform providing business, financial services and insurance (BFSI) on mobiles.
Ambrish Jain, director (operations), Idea Cellular says, "At Idea, we have an agreement to run a pilot project for various banking applications like branchless banking, payments etc. At an industry level, we add about 15-20 million new mobile subscribers every month. Even if a fraction of the over 700 million subscribers in the country take the service, it will be a good beginning."
Recently, Bharti Airtel and State Bank of India announced a deal to offer mobile banking services. Separately, Vodafone Essar, too, tied up with ICICI Bank to offer mobile banking products.
Axis Bank has signed a Memorandum of Understanding (MoU) with Idea Cellular where Idea will act as a Business Correspondent of Axis Bank to provide a range of financial products and services offered by the bank, through the mobile operator's retail outlets.
Not to be left behind, Union Bank of India recently tied up with Nokia and Obopay to roll out their mobile banking services.
Deepak Chandani, CEO of Obopay says, "Mobile banking is going to be the next revolution in the telecom and banking sectors and almost all companies are tapping this segment for its obvious advantages."
Most banks in India, including Standard Chartered, HSBC, Kotak and Yes Bank, provide SMS alerts on your mobile: credit/debit information and cheque status.
The good news is
Banks are clearly kicking their heels to service new customers on the mobile network. S K Mitra, president (agri business & rural banking), Axis Bank says: "We were keen to adopt additional delivery channels to drive financial inclusion and particularly keen on a mobile-based channel, considering the reach and the low-cost service delivery platform."
Mitra says only 41 per cent of the adult population has bank accounts, whereas more than 70 per cent of adults own a mobile connection - associating with a telecom service provider is therefore the right choice.
"Parents and the elderly are more likely to use mobile banking to pay utility bills, person-to-person payments to merchants and send money to their relatives. Youngsters use mobile banking primarily to recharge or top-up their cellphones or pay for caller tunes etc," says Chandani.
In India too, remittance services via mobiles, banks and other financial institutions can attract new customers to related financial products such as deposits, loans and insurance, articulates the Deloitte-Assocham report.
Samaresh Parida, director corporate strategy of Vodafone is hopeful that the company can leverage "a few thousands" of the 1.5 million retail outlets as Business Correspondents who are empowered to make or receive payments on behalf of the bank.
"We will roll out the first phase of the mobile banking services along with ICICI Bank this year. The focus will be the unorganised sector like migrant labours that need money remittance services," says Parida.
Countries like Africa are a successful example for most Indian telcos where mobile banking gateways have seen great success.
A case in point is Vodafone's mobile payment solution M-Pesa in Kenya, which has been cited as a driver for the doubling of bank accounts from six million to 12 million in a year.
Device diversity, Paperwork might play a spoilsport
Telcos are concerned that the existing identification processes (i.e. Know Your Customer or KYC norms) might keep the rural or semi-urban users away.
"A mobile account, which every user has to open for mobile banking and transactions, should be approached differently than opening a bank account to ensure profitability," says Parida of Vodafone.
RBI requires all banking customers to abide by strict KYC and anti-money laundering norms.
"These norms will be a major challenge for rural customers to fulfil as they usually do not have the requisite identification documents (address proof, ID proof, etc.) Although, the Unique Identification Authority of India (UIDAI) will start issuing unique identity numbers to Indian residents by February 2011, the government may consider relaxing KYC norms for the rural population in order to promote financial inclusion," suggests Sachin Sondhi, senior director, Deloitte, India.
But the solutions are being worked out. Recently, an Inter Ministerial Group (IMG) constituted by the Cabinet Secretariat said mobile banking users should be provided a mobile linked no-frills account (like a regular 'No-Frills' bank account) where the maximum value of each kind of transaction (deposit/withdrawal/transfer) will be Rs 5,000 per day and Rs 25,000 per month.
IMG has also suggested that the 1.55 lakh post offices across the country should be used to provide banking services with the help of mobile phones the rural populace.
Sondhi of Deloitte estimates that SBI usually opens two million no-frills accounts every year. "With the scale that Airtel (telecom partner for mobile banking) brings, they are hoping to open approximately five million no-frills accounts."
As most of these new customers would be first-time banking users, they would need to be made aware of the mobile banking platform as well as about the best ways to use this innovative platform (this will help banks as the cost of serving a customer on mobile banking channel is typically 1/10th of the cost of serving them using traditional channels like bank branches).
Another worry is the diversity of devices and different mobile operating systems that exist today. Banks and telecom companies are expected to launch mobile apps, WAP sites that will run on all handsets and OSes, feel experts.
Jain of Idea agrees: "Handset and OS diversity does pose a challenge. To overcome that, we plan to offer services via device and OS agnostic bearers like voice, Unstructured Supplementary Service Data (USSD, which is session oriented unlike SMS that is a store-and-forward, transaction-oriented technology) and SMS."
Idea will also deploy delivery channels like WAP portals and App Stores that dynamically identify the handset and offer the right compatible banking application for download.
But Sondhi of Deloitte warns: "There are genuine concerns about the security aspect of mobile banking and hence the rate of adoption will be gradual over the next five years."
Plus, issues like complex and non-standard services, reluctance of customers to learn new technology, lack of pertinent initiatives from banks to move people to mobile banking channels, limited incentives for customers to use a new channel may also limit wide-spread adoption of mobile banking channels in the next two to three years.
Piloting a success story in mobile banking
Axis bank and Idea has flagged-off a "remittance pilot" between Dharavi in suburban Mumbai and Allahabad in Uttar Pradesh, which will enable money transfer using the mobile platform.
During the "remittance pilot", a remitter in Dharavi will be able to send money back home to his family in Allahabad. The remitters have the option of sending money to the beneficiary through either of the following routes:
* Through 'Account to Account Transfer' whereby the remitter, having an account with Axis Bank, deposit money to the beneficiary's account with the Axis Bank.
* Through the Empays Payments Systems' Instant Money Transfer (IMT) module whereby the remitter, with an Axis Bank account, remits money to the beneficiary, who has a registered mobile connection, even if he/she does not have a banking account.
Idea and Axis Bank will also explore extending the association to include other banking products and services like savings, credit, micro insurance, micro-SIP and micro-pensions in a phased manner.
