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: What role will telecom companies play in financial services? Will banks be able to continue to do their business in the era of mobile phones? Recently, The Economist did an insightful review of the prospects of mobile money. Come to think of it, banks must feel really very threatened in some product categories. Areas that spring to mind are payments, savings account, and even personal loans. These are some very attractive revenue pools in financial services and provide a significant component of Indian bank profits. But telecom companies can start changing that.
Already, Filipino maids working in Singapore today send money back home by simply transferring minutes from their cellphones to those of their families in the Philippines who redeem these minutes from the local office of the mobile company for cash. The demand draft just cannot compete with the convenience of a one-touch transfer on the mobile phone. You don’t go to the branch, wait for a draft to be made, collect it and then post it home, where somebody must go to the branch to encash it. Now take this analogy forward. Those who own mobile phones tend to carry it with them all the time, the youth especially so. So, any transaction that you can conduct on the credit card, do note, can now be done by a chip-enabled mobile phone. The follow-through settlement can be done at the end of the month with the phone bill or by using a prepaid phone card by debiting the money stored on the phone.
Take the savings account, in which most Indians store their money. Its basic value proposition is still thought to be deposit insurance. If the bank fails, people are insured up to Rs 1lakh. Other than that, everything that a savings bank is normally used for can be achieved by money stored on a phone card. Given that balance enquiries, payments instructions, direct debits, bill payments and viewing statements can all be done easier on the mobile handset, the only function remaining would be cash withdrawals through ATMs. Here, mobile phone technology can just as easily be used as the debit card at an ATM. Thus telecom companies can join an ATM network and provide cash dispensation facilities. Security issues on a mobile phone will also be easier to manage as a phone can be deactivated remotely; it can also have multiple layers of...
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