The 23rd governor of the Reserve Bank of India (RBI), Raghuram Rajan, has introduced a series of mobile commerce proposals, including a Giro-based payment system, an encryption-based SMS fund transfer facility, and white-label ATMs. These should be of interest to CIOs in retail and financial services.
An RBI committee has been set up to look into the feasibility of enabling mobile-based payments through encrypted SMS. The proposal is to develop and deploy an app that can run on any type of handset and will enable fund transfers and payments across telecom providers.
Both mobile banking and mobile wallet services are available in India. The most popular mode for payments and fund transfers is the Immediate Payment System (IMPS) backed by the National Payment Corporation of India. More than 8 million transactions have taken place through IMPS, and there is no doubt that there is rich potential.
On the downside, the RBI allows only banks to offer mobile payment services, but that has not deterred new entrants. Mobile wallet services allow people to load cash on to their phones through service agents. This makes mobile services available even to the unbanked, but unless a service is tied to a bank and the customer holds an account with that bank, there is no cash withdrawal. This makes many wallet services semi-closed and unattractive to consumers.
Another obstacle to mobile money in India is two-factor authentication. Instead of using the global practice of one-time registration on a payment gateway, providers generate a one-time password and the 3D secure verification. India already follows strict know-your-customer norms while granting mobile connections, but a faster mobile payment solution would be welcome. Rajan has already suggested linking the unique Aadhaar identity to mobile connections and thereby to bank accounts and credit cards. However, as E2 has reported before, Aadhaar is rather controversial.
With person-to-person electronic transfers and a bill payment system also on the horizon, India is about to take a major step forward in mobile commerce. Not only is this a good internal step to take, but these initiatives could also serve as an example for other countries (including the US) with large populations of unbanked citizens. Financial and retail institutions in other developed economies (again, like the US) have ignored the feature phone in favor of smartphones, leaving some customers without access to convenient (and, for the banks, lucrative) features. This might pave the way for those banks to serve those customers. Many players in the industry will likely be watching what happens.
The smartphone market has really taken off and has surpassed featured phones this year. Global growth has yet to penetrate in the market. Constant innovation is critical for enterprise infrastructure functions.
Now India Post has launched the mobile money transfer service through which money can be remitted and received across 400 post offices in Karnataka. The remitter has to deposit money in the PO, and an SMS will be sent to both remitter and receiver --a secret code in both will be matched before the receiver gets the money,
Mobile Network Providers would have to facilitate maximum services to both the banks as well as to the common customer as it is through them that these fund transfers are taking place. Linking the Aadhaar would be a nice move. However an email-like approach would be feasible enough. With the number of users gradually on the increase, network providers can issue "user profiles" that'll be linked directly to their bank accounts. Such "profiles" would have entire details of an individual but the details would be only accessible to the bank/office, and network providers would only act like a platform.
Yeah --wallets are one way to go about it. Airtel Money had a pre-paid payments wallet --money could also be withdrawn, but only because it had tied up with a bank. BeamMoney, Obopay,MChek and Paymate have not met with much success. So what is required is a killer app/solution that will really work with consumers, RBI, banks, telcos and so on.
"In my understanding, it could be a wallet kind of service app offered by service providers and may even bypass the Net. As of now, the bank account and bank is a must --but what if a telecom operator can offer some limited bill payment kind of service independent of banks?Of course through some pre-paid kind of mechanism. Think about it."
Sudha, thanks for the clarification. Then it will be exactly like Airtel Money, a prepaid wallet like mechanism, which can be recharge through any net bank or credit card. Airtel money is useful for mobile recharging, online payments and other bill payment services.
I agree, this technology is very encouraging, it will allow people to enhance how they manage their finances. specially in a country like india with a large amount of people and a high penetration of cell phones it makes sense to support such technologies.
It may well be that. Since it is just a proposal mooted by the RBI governor and the panel will deliberate on how, I would not like to hazard a guess. In my understanding, it could be a wallet kind of service app offered by service providers and may even bypass the Net. As of now, the bank account and bank is a must --but what if a telecom operator can offer some limited bill payment kind of service independent of banks?Of course through some pre-paid kind of mechanism. Think about it.
"As mentioned, the proposal is to develop and deploy an app that can run on any type of handset and will enable fund transfers and payments across telecom providers. Rajan hinted at ensuring better co-operation between banks and mobile operators in rolling out such systems. "
Sudha, now all banks have their own internet banking apps and account holders can login through the app, to perform transactions. Did you mean that the new initiative is a single app, which can use for all banks?
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