Bank in your mobile phone

Deepak Chandnani

Since mobile telephony was introduced in 1994, the growth in India has been phenomenal and so has been its positive impact on economic development and poverty with immense potential untapped till now. Initially perceived to be a luxury product, mobile phones have moved from being style statements to being social and economic necessities.

Currently, India is the second largest mobile phone nation worldwide with over 600 million subscribers with 100% penetration in the urban market and over 31% fast growing penetration in the rural regions.

On the other hand, more than 40% of the population in India is un-banked. Of those who are banked, a major chunk of the population is still under-banked, creating an opportunity in both financial and telecom sectors.

In this backdrop, mobile telephony has evolved as a platform for future innovations that can have long ranging socio-economic benefits for India. Mobile Banking is one such innovation. Using the existing network and base to offer financial services in backward regions is certainly a boon for India which has over 60% population living in rural and backward areas. More so because of infrastructure challenges in rural areas, people crunch as well as increased operational costs. For example, a bank has to invest a significant amount of money to start a bank branch. Also, the ATM penetration in rural areas is not that high, with only 40 ATMs per million people in India.

Marrying mobile phone to bank accounts has definitely generated a lot of interest in government and customers alike. RBI has already relaxed mobile banking policies and increased the mobile payment limit to Rs 50,000/-. This has already created a lot of interest amongst large banks and telecom service providers who are fighting to have a share in this booming market which, according to a TowerGroup Research, will grow from 10 million active users in 2009 to over 53 million active users in India by 2013. RBI has given the go-ahead to banks and mobile operators to roll out their services in rural areas by July 31.

But where will this growth come from?

The obvious answer here is rural market where mobile banking can go a long way in realizing the Indian government’s dream of ‘1 bank account per India’ as well inclusive growth. It is estimated that there are more mobile users in the rural areas than bank account holders and this fact can be utilized to expand financial services without actually having to open bank branches. Millions of migrants will be able to easily transfer funds to their families in far-flung rural areas using simple SMS services. The rural customers will turn to local business correspondents for withdrawing and submitting money.

Working closely with microfinance institutions, banks, and telecom operators will, thus, be the agenda of mobile banking providers. Next step will be to tie-up with local kiranas, transportation authorities, NREGS, government bodies and Gram Panchayats to enable mobile banking to reach the grass root levels for basic services. In short, an entire eco-system will be created so that the application or the solution can become popular.

Another success mantra will be customization to suit the diverse geographical and segmental (urban and rural/ financial status) needs. What works for the urban rich, may not necessarily appeal to the rural rich or even the urban poor.

That said, technology will play a big role in making this service accessible and simple to use. The mo bile banking solutions should be able to run on low end handsets, across all mobile services provider, must be localized and have a safe, simple and quick user interface. Security of the transactions should be a given and customers should be assured of strong regulatory hold to extend trust in one and all. Easy KYC norms should be implemented so that unbanked population can benefit from basic financial services.

A major relief came in the regulation area when the Telecom Regulatory Authority of India (TRAI) and RBI reached an understanding about their respective roles in mobile banking. This will not only make the roll out of services smoother, but will also help in avoiding regulatory crossfire which was witnessed between capital market regulator Sebi and the Insurance Regulatory and Development Authority over regulating unit-linked insurance products.

A need for a holistic mobile banking solution in India was felt for quite some time now. Obopay, a pioneer in mobile payments service in US, entered India with a different approach. We have partnered with Nokia and Yes Bank to launch Mobile Money Services to the Indian market. These partnerships have enabled us to penetrate faster in this market.

Obopay brings in the expertise from global markets such as USA and Africa. It is platform agnostic and hence can work on any mobile handset, service provider and financial institution. It works on all forms including SMS IVR, External Application download and Mobile Web Browser.

In India we have already launched our service in Pune and Chandigarh with more cities to be roped in soon. The service has been accepted very well in Pune and Chandigarh and both our partners as well as customers are excited about the service.

Mobile banking and money transfers will be one the top 10 mobile applications by 2012 globally and India, world’s second largest mobile market, will remain the most strategic market for Obopay and rest of the mobile banking operators.

(Chandani is President of Obopay, a company chosen as 2010 Technology Pioneer by the World Economic Forum and leading mobile banking services in US and now India.)