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M-banking
Mobile banking (M-banking) involves the use of a mobile phone or any other mobile device to undertake financial transactions linked to a client’s account. M-banking is one of the newest approaches to the provision of financial services through
ICT, made possible by the widespread adoption of mobile phones in developing and under-developed countries. The roll out of mobile telephony has been rapid and has extended access well beyond already connected customers in these countries.
RBI gives go ahead to mobile banking
MUMBAI, October 8, 2008: Customers will now be able to credit and debit money from mobile phones sitting at their homes as the Reserve Bank of India today
approved mobile banking norms for the banks with immediate effect. Core banking solutions (CBS) enabled banks, would be allowed to offer mobile banking services to customers having debit or credit cards, the regulator said in a notification here.
However, the banks would not be allowed to use mobile banking services for cross-border inward and outward transfers, RBI said.
Initially the banks would be allowed to offer this facility up to Rs 5,000 per
customer for funds transfer and Rs 10,000 per customer for transactions involving purchase of goods or services.
They, however, would be permitted to increase the monthly transaction limit depending on the credit profile of the customer. The banks have to follow
know-your-customer and anti-money laundering norms to provide mobile banking facility to customers. Also, they have to file suspicious transaction report to the
Financial Intelligence Unit for mobile banking as applicable in case of normal banking operations.
Customers have to register with the banks to avail the mobile services, the apex bank said adding there would be a document-based registration and physical presence of the customers would be mandatory. Banks would be required to communicate complete details of the service offered to the customers at the time of registration. In addition, the banks have to insure themselves against risks
arising out of unauthorised transfers through hacking.
RBI guidelines for mobile banking
MUMBAI, Septembr 20, 2008: 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.
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. Source: The Economic Times
Mobile Technology
A mobile network offers a readily available technology platform onto which other services can often be provided at very low cost to deliver an effective result. Mobile data channels are often under-used and therefore may be offered at low cost by the network operator.
M-banking services which use channels such as SMS can be carried at a cost of less than one US cent per message. The low cost of using existing infrastructure makes such channels more amenable to use by customers with lower purchasing power and opens up possibilities of access to services, which till now have not reached them due to high cost of service delivery.
Although M-banking is one channel in the wider domain of e-banking, there are reasons to single it out for focus — especially because there are a lot more people with mobile phones than bank accounts in India as well as developing and underdeveloped countries in Asia and Africa.
Bringing more “unbanked” people to the financial mainstream is important because without access to mainstream banks, the “unbanked” end up using fringe financial service entities to conduct routine transactions. The fringe service providers offer no opportunity to build a credit history, which then
becomes essential for accessing other affordable financial products, such as loans or low-interest lines of credit.
Without traditional credit, individuals are vulnerable to exploitation by abusive lenders offering high-interest short-term loans and very expensive rent-to-own products. Also of considerable importance, but often overlooked are the public safety implications for the “unbanked”. These individuals are often the victims of crime because many operate on a cash-only basis, and end up carrying significant amounts of cash on their person or store cash in their homes.
M-banking could provide cost-effective solutions to address some of these disadvantages. The emerging models of M-banking can be placed in different categories, based on the dominant roles played by the parties involved: the bank, the mobile operator, the customer and in some cases, a third party product provider.
The models vary from one in which a bank adds on a mobile channel to its existing distribution channels, through hybrid models where a mobile operator may bring different branding, product set and/or distribution system to a bank-based product to a operator-dominated model in which the operator itself is responsible for the deposits taken.
M-banking is new in most countries and outside of East Asia, most
M-payment models even in developed countries to date have operated at limited scale. However, micro-payments connected to the purchase of premium rated services on a mobile phone have relatively grown faster.
Mobile Banking in India
India is marching towards m-commerce - a world where you can make all payments by keying in instructions on your mobile phone.
In India, however, there is a limitation on the availability of functions that can be deployed by banking customers.
Most m-banking transactions today are ‘information-based’ -- customers engage in m-banking services like balance enquiry, last three transactions, "alerts" for strange activities in bank accounts etc. Some banks like IDBI Bank are also offering bill-payment services to customers through m-banking.
However, actual cash transactions like fund-transfer, payment of bills at a restaurant among others have not yet been introduced in India. There are many reasons for this.
Firstly, as m-banking is currently SMS-based, the transaction delivery time is not guaranteed since it is dependent on factors like SMSC (short message service centre) congestion and network strength in the area where the customer is located.
Secondly, there is an issue of repudiation as till date there are no clear
guidelines on wireless payments.
In the very near future, one can see m-banking leaping into a new phase. With the advent of Java-enabled mobile devices, the shape of m-banking services is in for a change.
One would also be ensured the same amount of security and comfort as one would be when using internet banking.
M-banking Implications
Micropayments
In the more affluent economies, a good infrastructure for a cashless environment
is already prevalent and most people have bank accounts and access to both debit
and credit facilities. These factors are incentives in the developing countries to move the population at large away from cash with
introductions of low cost solutions such as micro-payments to further efficiency
gains.
SMART Money
The service was launched in December 2000 in co-operation with First E-Bank,
which has since been acquired by Banco de Oro, and MasterCard, one of the
world’s leading payment services providers. According to SMART, SMART Money was
the world’s first re-loadable electronic cash wallet, linked together by their
cellular network. Once cash has been transferred to the SMART Money account, it
can be used in thousands of shops and restaurants. The cash value can also be
used to load airtime, pay utility bills, or transfer money from one SMART Money
card to another.
G-Cash
The service was launched in October 2004, with an initial set of three anchor
services; international and domestic remittance, P2P (phone-to-phone or
person-to-person) transfers and payments for retail purchases. With G-Cash, all
of GLOBE’s subscribers are m-Commerce-enabled. As users do not need to have a
card or bank account to be part of the service, G-Cash is able to provide
M-Commerce capability to a previously underserved segment of the market,
including those who currently do not do banking. Unlike SMART’s approach whereby
it operates the service jointly with BDO, GLOBE on its own maintains records of
all transactions and arranges settlement between the retailers and the G-Cash
customers. G-Cash provides services through close to 4,900 retail outlets
nationwide and more than 500 G-Cash partners.
Mobile Remittance
Migrant remittances, which are personal flows from migrants to their friends and
families, have become a major source of external development finance, and in the
process, play an effective role in reducing poverty. Capitalizing on the benefits of such a system, remittance services can become
cheaper and more convenient, thus improving financial access of migrants, their
beneficiaries and the financial intermediaries in the origin countries.
Microfinance through Mobile Technology
Currently, a major constraint to microfinance is the high cost of operating in
remote areas. Many institutions are now working toward low-cost delivery options
such as Internet banking and cashless transactions to help the rural poor.
The mobile devices that could be a more efficient tool for such transactions. For people in such rural areas, using
computers is often a problem due to faulty Internet connections and frequent
power failures. Hence, providing microcredits through a mobile platform
(SMS-based) could be the best way to reach out to the poor.
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