Mobile banking can change your life. Today you can pay your postpaid phone bill, recharge a pre-paid phone and transfer money?-the revolution has begun in a small way with a couple of operators already offering mobile banking services. Soon, each of the 278 million mobile subscribers in India will be in a position to use the phone for a variety of banking needs. At a later stage you could do most of the purchases using the phone. As the mobile phone morphs into a mobile wallet, it would simply change the way India buys. That?s because India has many more mobile subscribers than the combined bank account holders and credit/debit card users. It is estimated that over the next three years, there will be over 816 million mobile phone users globally accessing banking services using their mobile phones.
While mobile banking is just beginning in India, it has been around globally for sometime. In the Philippines, mobile operators like SMART and Globe have close to 4 million subscribers who use their mobile phones to pay utility bills, remit money both domestically and internationally and even pay tuition fees. South Africa-based MTN has joined hands with Standard Bank to offer access to complete banking on the mobile phone. MTN Banking applications include pre-paid airtime recharge, bill payments, person-to-person payments and electricity payments. In Kenya, Vodafone through its subsidiary Safaricom has launched mobile banking services.
One of the biggest markets for mobile banking will be global remittances. During 2007, over $318 billion was remitted and India topped the list with inward remittances of $27 billion. Over the next couple of years, quite a bit of that money would flow wirelessly on mobile networks. Like it has done to telephony, the mobile phone can change the face of banking in India. Reserve Bank of India (RBI) has already specified guidelines for mobile banking. For that, banks need to be licensed in India, the services will be provided only in the Indian rupee, banks need to register customers before offering services and these services should be open to subscribers of any mobile network. For the bulk of India, the real gains will come from the cash in-cash out model. Here a worker in a big city can remit money from his phone account to that of his family members in the village. He can remit the money using his mobile phone. All his family needs to do is go to the closest retail bank outlet and encash the amount credited to their account.
That?s a sea change from the initial impression that such a service was meant for customers in developed nations. Today, it is emerging as a handy tool for meeting the needs of the unbanked millions across the developing world. Hundreds of micro transactions are happening on the mobile phone in the poorest regions of the world.
The biggest gainer in mobile banking is undoubtedly the customer. It provides him with a tool to manage his funds at any point of time. But for the banks it is an opportunity to access a whole new set of customers who would have other wise not entered a bank by themselves. By simply owning a mobile phone, today anyone can be a bank customer. Second, the cost of doing a financial transaction over the mobile network will be substantially lower than what it costs the banks today. As a result, these banks can cater to more people without actually opening branches in remote locations, thanks to the presence of the mobile network. It?s the next step for banks after the emergence of the ATM.
However, while mobile banking sounds good, most people are wary of using the phone as an instrument to do financial transactions. For mobile banking to take-off, it is imperative to build in adequate security measures. Protection of consumer data will be critical to the success of mobile banking. Since mobile banking covers banking, telephony and payment systems, there is a need to have a comprehensive legislation that looks at all the regulatory issues. Also, in case of any disputes, the customer should be able to redress his issues from a single authority.
The author is a partner at Ernst & Young, India. These are his personal views
