Mobile Banking is the hottest area of development in the banking sector and is expected to replace the credit/debit card system in future. In past two years, mobile banking users have increased three times if we compare the use of either debit card or credit card. Moreover 85-90% mobile users do not own credit cards . Mobile banking is a term used for performing balance checks, account transactions, payments etc via a mobile device such as a mobile phone. Mobile banking is most often performed via SMS or the mobile internet but can also use special programs called clients downloaded to the mobile device . Mobile banking is one of the three major pillars of revolutionary improvement in the quality of service delivery of banks.
Mobile banking can be defined as “mobile banking refers to provision and availing of banking and financial services with the help of mobile telecommunication devices.” The scope of offered services may include facilities to conduct bank and stock market transactions, to administer accounts and to access customized information. So mobile banking is all about performing banking transactions such as balance checks, account transactions, payments with the help of mobile phone. The services offered by mobile banking include getting account information, transferring funds, sending check book request, managing deposits and so on. This type of service has been a hit with the youth, who find it an easy and convenient way to carry out the transactions. However, mobile banking is also used by others belonging to different age groups. The “any time- any where” banking feature of the mobile banking is making it very popular among all the categories. Commercial banks are exploring this avenue to make their services more convenient for their customers. The growing no. of mobile subscribers in the country forms the most valuable support base for the growth and success of mobile banking .
Mobile banking has lot of advantages for both service providers and those who avail services. It has really become multi beneficial. Banks do not require investment, and they do not even have to modify their existing infrastructure. Banks can send the message in fewer efforts to a huge no. of people. It also helps banks to form good relations with their customers. The advent of the Internet has revolutionized the way the financial services industry conducts business, empowering organizations with new business models and new ways to offer 24×7 accessibility to their customers .The ability to offer financial transactions online has also created new players in the financial services industry, such as online banks, online brokers and wealth managers who offer personalized services, although such players still account for a tiny percentage of the industry . Over the last few years, the mobile and wireless market has been one of the fastest growing markets in the world and it is still growing at a rapid pace. According to the GSM Association and Ovum, the number of mobile subscribers exceeded 2 billion , and now exceeds 2.5 billion .Mobile devices, especially smart phones, are the most promising way to reach the masses and to create “stickiness” among current customers, due to their ability to provide services anytime, anywhere, high rate of penetration and potential to grow. According to Gartner, shipment of smart phones is growing fast, and should top 20 million units (of over 800 million sold) in 2006 alone . While internet penetration and use in India is relatively low, mobile phone penetration is much higher and growing rapidly. There are over 200 million mobile phone subscribers in India and the number continues to explode. Financial services companies are now working with mobile payment players like m Check to offer innovative mobile phone solutions to urban and rural Indian population. Reserve Bank of India has restrictions on non-bank involvement in money transfer. Therefore, development of mobile financial services applications is being sponsored primarily by banks in India. Mobile banking has the potential to bring a whole host of people that have no/little access to land lines/internet connections onto the electronic platform – an innovative way to generate financial inclusion. To do so successfully will require customer training, technology stabilization and managing carefully the ‘know your customer’ issues. In mobile banking, banks get valuable data about the customers which help them in effective customer relationship management practices. It helps in quick feedback and help in retention and customer loyalty. Mobile phones provide a way to reach out to people in isolated areas. When banks have consumer database, they can use SMS advertising to give information about their services to their existing customers. Customers enjoy “Anytime-Anywhere” banking services with their mobile phones. They need not stand in queues or Face the employees whom they don’t want to face and need not worried if the branch is not at a convenient location. It is cost effective for both the bankers and the customers.
COMPARATIVE ADVANTAGES OVER INTERNET BANKING
Mobile banking is different from internet banking and ATMs. Mobile banking provides ‘anytime- anywhere’ facility in true sense as compared to internet banking. Mobiles are more accessible than the internet. Still in India we have comparatively less internet users. Further out of these users a huge chunk of them uses internet through public cyber cafes. Using internet banking through cyber cafes is not considered as safe for various security reasons. The confidential information regarding personal accounts of the use may be stored in the network connection of the cyber café and hence is unsecured. Using internet from Cafes cannot be considered as ‘anytime-anywhere’ banking!. To use internet banking through private networks one need to have devices like desktop or laptop, which are not so cost effective as compared to mobiles? With the introduction of affordable handsets and reasonable tariffs by the telecommunication companies these problems of internet banking are overcome by Mobile banking. Today we can even see mobile phones in the hands of the Rickshaw pullers! Truly anywhere-everywhere! However ATMs have an advantage over the Mobile banking in the sense that cash can be withdrawn by the customers through ATMs but the same is not possible through mobile phones. However mobile banking facilitates certain transactions, payments and in beneficial as it one need not to find out its location, like that of an ATM, or stand in the queue!
PRESENT SCENARION AND FUTURE PERCPECTIVE
India has about 207 MM mobile phone subscribers, a number that is larger than the number of bank accounts or Internet users. Given the mobile tele-density of about 20% and development of secure mobile technology solutions, banks are well-positioned bridge the digital divide and introduce the unbanked sector to the financial mainstream. Mobile banking is enjoying a rapid growth in India. It has successfully crossed the introductory stage and has now widened its scope from metropolitan cities to urban and semi urban areas and now even expanding to the rural areas. Studies and surveys show that in India, customers opt for a bank on the basis of two criteria: 1. Convenience i.e. nearness of the branch office of the bank from their place. 2. Behavior of the Bank’s employees Both the above two criteria are fully satisfied by the Mobile banking. With mobiles in their hands there is no relevance of terms like ‘convenience’ and ‘behavior’ while opting for mobile banking. Even the other forms of banking which have revolutionized the banking sector in India are proved to be effective in this regard. But there are still considerable difference between these which decides their relative importance.
. FUTURE PERSPECTIVE
Mobile banking has taken a great start in India. It has already crossed the initial stages and is gaining popularity among masses. The advantages like affordable handsets, low tariffs, easy accessibility, no convenience problems have given a good initiation and take off to mobile banking but its future perspective depends upon several factors: • Security concerns • Service providers and facilitators • Regulators • Customer Awareness First and most important thing is that the customers and people must be fully informed and aware about the Mobile banking. RBI and Banks should organize Seminars, Conferences and come out with publications in this regard to raise the customer/people awareness for Mobile banking. These seminars and interactive conferences can be proved to be of great help on overcoming the issues of mobile banking like security, reliability, etc. Practical training should be provided by the Banks and RBI. RBI should issue strict security guidelines to overcome the increasing frauds in Mobile banking. Guidelines by RBI, efforts of Banks and Awareness would certainly lead to a bright and welcomed feature of Mobile Banking in India. RURAL AREAS Statistics says that only 34% of the population of India have access to banking services. More urban population will constitute ~50% of the above value. So, the % of rural people having bank accounts are very minimal. But 80% of India’s population is living in villages. Why are people in rural not having bank accounts? Banks are not accessible to the people. No. of branches in villages are very minimal. So, people haven’t seen banks in their villages. Banks are hesitant to open branches there which will eat their cost w/o any revenues. 30% of all new mobile subscribers are from rural areas . The rural market would become a huge opportunity for these mobile payment companies. The mobile phone culture is growing and has penetrated the urban and semi-urban population in India and developing in rural India rapidly. Business & Legal Issues • Considering the legal position prevalent, there is an obligation on the part of banks not only to establish the identity but also to make enquiries about integrity and reputation of the prospective customer. Therefore, even though request for opening a savings / current account can be accepted over Mobile Telecommunication, these should be opened only after proper introduction and physical verification of the identity of the customer .
• In India, the Information Technology Act, 2000, in Section 3(2) provides for a particular technology as a means of authenticating electronic record. Any other method used by banks for authentication should be recognized as a source of legal risk. Customers must be made aware of the channel risk prior to sign up.
• The Consumer Protection Act, 1986 defines the rights of consumers in India and is applicable to banking services as well. Considering the banking practice and rights enjoyed by customers in traditional banking, banks’ liability to the customers on account of unauthorized transfer through hacking, denial of service on account of technological failure etc. needs to be assessed and banks providing Mobile banking should consider insuring themselves against such risks, as is the case with Internet Banking.
• Under the present regime there is an obligation on banks to maintain secrecy and confidentiality of customers’ accounts. The banks should, therefore, institute adequate risk control measures to manage such risks.
• Banks are permitted to rely on Financial Intermediaries as recommended by the relaxed KYC guidelines issued vide RBI. A Bank can sponsor the small value remittance service by entering into arrangements with intermediaries in order to manage distribution, technology and scale • Only such banks which are licensed and supervised in India and have a physical presence in India will be permitted to offer Mobile banking products to residents of India.
• The ‘in-out’ scenario where customers in cross border jurisdictions are offered banking services by Indian banks (or branches of foreign banks in India) and the ‘out-in’ scenario where Indian residents are offered banking services by banks operating in cross-border jurisdictions are generally not permitted and this approach will apply to Internet banking also. The existing exceptions for limited purposes under FEMA, will, however, be permitted.
• The guidelines issued by RBI on ‘Risks and Controls in Computers and Telecommunications’ will equally apply to Mobile banking. The RBI as supervisor will cover the entire risks associated with electronic banking as a part of its regular inspections of banks
• All banks, who propose to offer transactional services on the Mobile services, should obtain prior approval from RBI. Bank’s application for such permission should indicate its business plan, analysis of cost and benefit, operational arrangements like technology adopted, business partners, third party service providers and systems and control procedures the bank proposes to adopt for managing risks
Mobile banking is getting wider acceptance, but the convenience it offers has its own share of risk. With the introduction of any new channel or technology such as the use of mobile devices for banking activity, financial institutions (FIs) must ensure that the perceptions and the realities surrounding security are successfully managed, both to ensure adoption and protect customers and the institution from emerging threats. Security of financial transactions, being executed from some remote location and transmission of financial information over the air, are the most complicated challenges that need to be addressed jointly by mobile application developers, wireless network service providers and the banks’ IT departments . There is a lack of common technology standards for mobile banking. Many protocols are being used for mobile banking – HTML , WAP , SOAP, XML to name a few. It would be a wise idea for the vendor to develop a mobile banking application that can connect multiple banks. It would require either the application to support multiple protocols or use of a common and widely acceptable set of protocols for data exchange. There are a large number of different mobile phone devices and it is a big challenge for banks to offer mobile banking solution on any type of device. Some of these devices support J2ME and others support WAP browser or only SMS. Another challenge for the CIOs and CTOs of the banks is to scale-up the mobile banking infrastructure to handle exponential growth of the customer base. With mobile banking, the customer may be sitting in any part of the world (true anytime, anywhere banking) and hence banks need to ensure that the systems are up and running in a true 24 x 7 fashion. As customers will find mobile banking more and more useful, their expectations from the solution will increase. Banks unable to meet the performance and reliability expectations may lose customer confidence. Due to the nature of the connectivity between bank and its customers, it would be impractical to expect customers to regularly visit banks or connect to a web site for regular upgrade of their mobile banking application. It will be expected that the mobile application itself check the upgrades and updates and download necessary patches (so called Over The Air updates) Other than above there are certain other concerns, though sound minor but are of considerable importance, are like Consistency in the Standards of service provided by Banking companies. Banks must provide proper service and also maintain its quality. Delays and below-quality service should not be there. Further a very important concern is the lack of awareness about mobile banking especially in rural areas. Village customers should be properly made aware and educated about the use of mobile banking. This can be done through the promotional programs of banking companies. This would help not only the customers by using the service effectively but also the companies as it would lead to reduction in complaints and problems from the side of customers.
SL NO. STAKEHOLDER EXPECTATION
i. Consumers • Personalized service • Minimal learning curve • Trust, privacy and security • Ubiquitous – anywhere, anytime and any currency • Low or zero cost of usage • Interoperability between different network operators, banks and devices • Anonymity of payments like cash
ii. Merchants • Faster transaction time • Low or zero cost in using the system • Integration with existing payment systems • High security • Being able to customize the service • Real time status of the mobile payment service • Minimum settlement and Payment time
iii. Telecom Network Providers • Generating new income by increase in traffic • Increased Average Revenue Per User (ARPU) and reduced churn (increased loyalty) • Become an attractive partner to content providers
iv. Mobile Device Manufacturers • Large market adoption with embedded mobile payment application • Low time to market • Increase in Average Revenue Per User (ARPU)
v. Banks • Network operator independent solutions • Payment applications designed by the bank • Exceptional branding opportunities for banks • Better volumes in banking – more card payments and less cash transactions • Customer loyalty
vi. Software and Technology Providers • Large markets vii. Government • Revenue through taxation of m-payments • Standards SAFEGUARDS It is therefore even more important to be aware of the safeguards for the secure usage of this medium for financial transactions. Use the phone-lock function on your mobile device when it is not in use. Choose passwords which are difficult to crack and keep them safe. Strong passwords have eight characters or more and use a combination of letters, numerals and symbols. Never disclose via text message any personal information. Make sure your phone is configured securely, especially when it comes to configuring the Web browser and email software. Security and privacy settings can be configured without any special expertise, simply by using the ‘Help’ feature of the software, or visiting the vendor’s website. Protect the phone with security software, including a software firewall and antivirus protection. Download files only from a trusted source. Also, make sure the Bluetooth is switched off while not in use to avoid viruses. Before letting someone else have access to your device (lending it to another person, discarding, or selling your mobile device) ensure that you have deleted all personal account information. Keep the device always up-to-date with the latest patches and updates including antivirus updates. CONCLUSION The emergence of several tech start-ups in what is called the “mobile banking” business. With nearly 41% of India’s 1.1 billion population “unbanked”, mobile payment platform providers foresee a huge market in facilitating micro-lending services or variants on mobile phones at costs not possible earlier. The banking business has always been Different from other businesses because it comes under the services industry and financial services category. Everyone making a financial transaction is anxious about the security of his money. Hence, the banks, regulatory authorities and other organizations must try their best to make mobile banking system as secure as possible. The system should be error free and provide maximum security and reliability to the users. Service providers should keep in consideration the efficiency of “connectivity strength” so as not to create a bad publicity and fear among the users. The time has come for the banks to scale up their mobile banking infrastructure to handle the exponential growth in the customer base. Since it is anytime-anywhere, banks need to assure that their system remains ready for the same. As the system is proving to be more and more useful, banks must be ready to meet the expectations of customers and provide them a hassle free mobile banking experience
SERVICES PROVIDED BY MOBILE BANKING ACCOUNT INFORMATION PAYMENTS &TRANSFERS SUPPORTING SERVICES
Transactions statements Account history Transaction alerts Monitoring of deposits Loan statements Mutual fund statements Check status/ stopping payment • insurance policy management • Pension plan management • Status on cheque, stop payment on cheque • Ordering check books • Balance checking PIN provision
1. Domestic and international fund transfers
2. Micro-payment handling
3. Mobile recharging
4. Commercial payment processing
5. Bill payment processing
6. Peer to Peer payments
7. Withdrawal at banking agent
8. Deposit at banking agent Request for credit Cheque book request Locating ATMs General information Loyalty-related information Various promotional and other offers and services exchange of data messages and email, including complaint submission
By– Priyesh Sharma