Why mobile banking is more on paper and less on mobile

“There is substantial potential for mobile based payments,” said Raghuram Rajan in his first speech after taking over as the Governor of the Reserve Bank of India. True, there’s surely potential for mobile-based payments in India. But the question is how long will it take for us to fully use that potential?

“There are a large number of registrations, but if you see the number of transactions are not corresponding to the number of registrations. It’s mostly the urban immigrant workers who use mobile payments/banking most,” a head of transaction banking with a PSU bank told_Firstpost_on the condition of anonymity.

Getting registered for mobile banking is as easy as ticking a box on our application form to open an account, but doing the actual transaction is altogether another thing.

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But before we look into the numbers and challenges mobile banking faces in India today, let’s understand the various types of mobile payments out there.

What’s out there:

Mobile banking transactions can be broadly classified into two: push type and pull type. Push type is a one-way transaction where your bank sends you information pertaining to your account via SMS. Pull type is a two-way transaction, where you send a request and the bank replies.

This can be further classified into five types.

First is inter-bank mobile payment service (IMPS), which is a fund transfer service through National Payment Council of India (NPCI). This service lets you transfer funds from one account to another across banks within the country using your mobile phone. You can use the IMPS via your banks’ app, UUDS dial-in number, encrypted SMS banking or net banking.

Second, bank apps. Here you need to download your bank’s application or software on your mobile phone via internet. This works on both GSM and CDMA handsets for Android and iPhone platforms.

The third type, is USSD-based. For this type, all you have to do is dial the bank’s service code and you can ask for information on your bank account. You don’t need a smartphone or high end phone to use the USSD platform. Know more here.

Fourth type is SMS-Based. This is the most popular type of mobile banking. You can get your account information via SMS.

Fifth is Internet-based mobile banking. This way of banking is where you use your mobile screen like a computer monitor.

Apart from these there are more options like the mobile wallets, offered by telecom service provider platforms, for instance Vodafone’s m-pesa, Bharti Airtel’s Airtel Money and Aircel’s Mobile Money. Bear in mind that even an unbanked customer can use this service. A smart phone and an internet connection are not essential.

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What the numbers tell us: As per the RBI’s latest annual report, as of end March, 55 banks with a customer base of around 2.3 crore were providing mobile banking service in India compared with 49 banks and a 13 million customer base a year ago. Last year, 53 million transactions worth around Rs 6000 crore took place, an on year growth of 108 percent and 229 percent, respectively.

The usage is clearly increasing. Until 2013 August, as many as 846,000 transactions have taken place using IMPS, sharply higher than 93,715 as of September 2012, NPCI data shows.

“The numbers are improving , but there is still a long way to go,” A.P. Hota, managing director and CEO, NPCI, toldFirstpost.

India has 55.48 crore mobile users as per this news report. Of this, only 2.3 crore (RBI data) or just 4.41 percent do any kind of mobile banking activities.

**Challenges:**One reason for mobile banking not picking up momentum is the complexity of the systems used.

“Complexity of mobile handset software supplied by the banks is not simple enough for effective adoption,“Hota said.

One type of mobile banking needs you to download the bank’s software on the mobile handset. If the software does not operate seamlessly, adopting mobile banking channel would be an up hill task.

Another type of mobile banking needs high-end mobile phones or at least smart phones, or java phones, as well as an active internet connection. This news report saysonly 2.38 crore individuals access Internet from their mobile phones using a data connection such as GPRS or 3G. Out of this, only 93 lakh access Internet through mobile phones.

“One of the top reasons that mobile banking has not picked up the way it should have is that customers have security concerns,” the PSU banker mentioned above said.

In fact, as per this ToI news report, virus attacks on mobile devicesgrew 122 percent on year in 2012. A good enough reason for people to keep away from this facility.

Moreover, there is a lack of awareness even among the so-called tech-savvy users. Another bank executive tells us that not many employees use their own bank’smobile banking facility. And the truth is that there are so many options and customers are spoilt for choice. But there is no standardisation.

Hota says a lack of cohesion between telecom operators and the banking industry is also playing spoil sport.“Then there are pricing issues as well. Only Government entities such as MTNL and BSLN have been most proactive, with the USSD platform with us,” he said.

“The USSD platform offers a common gateway to customersof all banks to easily access and use mobile banking services,” RBI deputy Governor H Khan had said in a speech October last year. “The major advantage of USSD is that the IMPS could become accessible even through low-end handsets. If USSD-enabled mobile remittance system offers such a potential what is holding up this unique product from taking-off? This is of particular relevance for theIMPS system of NPCI.”

According to Khan, telcos are concerned about the revenue sharing arrangement with NPCI andare keen on negotiating the rates with individual banks.

“While these concerns may be justi?ed, the payments play in India is a volume game and all stakeholders including the MNOs need to dovetail the same in their business plans. If the common USSD platform is offered by all MNOs (mobile network operators), the same is expected to lead to an exponential growth of transactions in the IMPS,” he had said.

Clearly, pricing seems to be a major area of concern.

End note: There is no doubt that mobile subscriber base as well as consumer opting for mobile banking is increasing in India. But, challenges like education and awareness, complexity of operations, handset and security issues along with pricing issues amongst various players first need to be sorted out. We hope with the new Governor on Mint street, in times to come, India will be able to meet her substantial potential for mobile based payments.