Mobile Banking in India

chillibreeze writer — Vidya Kumar

Tap a few buttons and check your account balance sitting in the comfort of your home or pay your credit card bill while you are commuting to work. The new age Indian customer wants these and even more – s/he wants “Anytime Banking Anywhere”. Rapid strides in technological advancement in the telecom industry have made all this possible via the concept of mobile banking – a channel via which customers interact with banks using handheld devices.

The number of wireless subscribers is more than 650 million in India as of July 2010 and the growth rate is pegged at a massive 18-19 million every month. This is a huge market and every bank worth its salt – be it in the private or public sector, offers mobile banking services such as:

• Update on account balance
• View last few transactions
• Request for check books
• Fund transfers
• Deposits in banks
• Make payments

As per a survey conducted by Vital Analytics, approximately 43 million urban Indians used mobile phones to access banking services during quarter ending August 2009. ICICI bank has the most number of users going mobile, followed by HDFC, and State Bank of India.

ICICI’s mobile banking solution called iMobile can run on low-end as well as high-end devices. Once you register for this service, an ICICI bank customer can transfer up to Rs. 5000 per day to ICICI and other bank accounts. You can pay your mobile bills and insurance premium up to Rs. 10000 per day from each account. Account balance details, demat account details, loan details, and credit card purchase history can be accessed using iMobile. It is a free service for all ICICI bank customers.

HDFC bank also supports mobile banking. Once an HDFC customer registers and downloads the application, he/she can access all HDFC bank services from a hand held device. One can pay mobile bills, book railway tickets, check bank balance, transfer funds to another account, pay credit card bills and insurance premiums, and even shop online.

The government has also done its bit to support mobile banking. The security and technology standards have been drafted in a manner that encourages mobile banking. For example, end-to-end encryption is not required for transactions up to Rs. 1000. This reduces processing costs for banks.

A large section of the population in the rural areas still does not have access to banks. Banks are wary of creating branches or installing ATM machines in rural areas because it is not very cost effective. But the number of mobile subscribers in rural areas is increasing by leaps and bounds and this is a huge opportunity to get rural India to bank via mobile services. Banks are realizing this and are providing their services via wireless communication, which can be easily used by people in rural areas.

Mobile banking in rural areas
Banks and telecom operators are tying up with microfinance institutions, and with local kiranas and Gram Panchayats to enable mobile banking in rural areas. A typical model will be a bank having a local kirana shop as a business correspondent/agent who will have a mobile phone. People can open a no-frills account with the bank through this agent via the mobile phone, which has the facility to conduct transactions with the bank. Once an account is made various credits and debits can be made via the phone. Microfinance institutions can tie up with the bank to provide small credits and get loan repayments via the mobile banking facility.

There are some challenges to a mobile banking solution

1) Handset Operability - There are various types of handsets. They support different technologies -some work on Java, some support only SMS and some others support WAP. There are various protocols for communication. Some interoperability issues have been solved but unified technology standards are the need of the hour.

2) Security – Security of transactions being executed from remote locations and transmission of financial information without loss of data integrity is a complex challenge. It is important to have security for applications downloaded on the handheld device. Any transaction with the bank should require authentication. The data that is being transmitted should be encrypted. Data stored within the device should also be encrypted.

3) Mobile banking not yet popular in rural India – In spite of efforts from different organizations, mobile banking has not succeeded in taking banking to the rural areas the way it is expected to.
There are many reasons for this –

• It is not feasible for all banks as the volume and value of transactions are very low.
• It is not only enough to have simplified offerings but also educate the prospective customers on the same and this is lacking.
• The banking agents have to be aware of products and services and also have enough incentives to get more customers.

The important aspect here is that the concerned organizations are aware of the challenges and are working towards solutions. Once customers’ concerns are addressed through education and they are assured that their money is in safe hands and they get good service, there will be no looking back for mobile banking in India.

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Chillibreeze's disclaimer: This is a contributed article and was published on Chillibreeze in October, 2010. The views and opinions expressed in this article are those of the author(s) and do not reflect the views of Chillibreeze as a company. Chillibreeze has a strict anti-plagiarism policy. Please contact us to report any copyright issues related to this article. The relevance of the facts and figures cited (if any) could change after a period of time.

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—About our writer: Vidya Kumar is an IT professional in a multinational company in Mumbai. She has been in the IT industry for 10 years. She likes writing and has experience in technical writing, article writing (subject -personal finance) and writing shopping guides. She is also the editor for a newsletter in her company.

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