Mumbai: Stuck in traffic at a time you want to trade in shares? That would soon be no longer a bother with most private and foreign banks in India planning to launch broking services on mobile phones by the end of the year.
Mobile phones are graduating beyond standard banking services—from providing account details and utility payments to money transfers and, later this year, buying and selling of shares.
India is one of the fastest growing cellphone markets in the world, with about 261 million users at the end of March, and growing at about eight million users a month.
The Reserve Bank of India (RBI) last week issued draft guidelines to ensure secure mobile banking.
Currently, ICICI Bank Ltd, HDFC Bank Ltd and Standard Chartered Bank, besides others, allow customers to use mobile phones for basic banking functions such as monitoring savings accounts, placing cheque book requests as well as checking payment due dates and reward points status on credit cards.
Customers with loan accounts can request and view income-tax certificates, copies of loan agreements, and reschedulement and reset letters. Some banks even allow customers to pay life insurance premiums and fund transfers on cellphones. Demat account holders can check transaction status on their mobile phones.
Ringing in: With India being one of the fastest growing mobile phone markets in the world and RBI drafting guidelines for secure mobile banking, mobile phones are graduating beyond standard banking services. (Photograph by Madhu Kapparath / Mint)
Most of these facilities are powered by mobile payment companies in the country such as mCheck India Payment Systems Pvt. Ltd, Obopay Mobile Technology India Pvt. Ltd, atom Technologies Ltd and PayMate India Pvt. Ltd.
Their technology provides the platform for mobile banking and encrypting text messages, or converting regular text to a format that cannot be read by humans or computers. This is to ensure that data such as account numbers or PIN (personal identification number) codes are not misused.
“Companies use various techniques like encryption and two-factor authentication that involve validation of the mobile number and the PIN number by customers to ensure security,” said Mitish Chitnavis, head (operations) and chief information security officer at Obopay Mobile. “Transactions on mobile phones are conducted through various front-end channels... All channels have similar level of security, but the mode of implementation can vary,’’ he added.
“For instance, in SMS-based transactions, there is a possibility that select legs of the transactions can be hacked. But in GPRS (general packet radio service) and Java-enabled transactions, information is encrypted, making the transaction more secure,’’ said Ravishankar (who goes by one name), country head of cash management and direct banking at Yes Bank Ltd. The bank has tied up with Obopay to offer mobile banking.
Already, 80-90% of banking transactions by customers of private and foreign banks are done on alternative channels such as automated teller machines (ATMs), Internet and mobile phones. However, the share of mobile phones is minuscule till now.
This will change soon with RBI’s go-ahead.
For instance, Citibank India plans to go beyond the SMS (short message service) alerts it has been providing since 2000, and enable its customers to access account details and transact from their cell phones before the end of this year.
Standard Chartered Bank, in association with PayMate, has launched mobile banking. Its customers can make payments through SMS for purchases such as flight or movie tickets, and pay utility and grocery bills through their cellphones.
Axis Bank Ltd, along with atom Technologies, a subsidiary of Financial Technologies India Ltd, is running a pilot for a technology that will allow mobile phones to be used like credit or debit cards.
The bank has issued 500 debit cards to its own employees as well as Financial Technologies and the pilot, which started in June, is expected to run for a month. The debit card is downloaded on the customer’s mobile phone through Java applications.
To facilitate card payments from mobile phones, atom Technologies’ application has to be downloaded on GPRS, or Internet-enabled mobile phones. Credit or debit card details have to be entered and a verification code has to be set for the atom technology.
The bank will then send a virtual card to the mobile phone after verifying the details.
On the other side, retailers, restaurants and other stores need to install point of sale (PoS) terminals, on their mobile phones or computers. PoS terminals are the equipment used to swipe credit or debit cards for payments.
“Currently, it is a pilot and we expect to launch it on a full scale in two or three months. We have tied up with merchant establishments like cinema halls, restaurants, medical shops, florists and other retailers,’’ said Aspy Engineer, vice-president of alternate channel management at Axis Bank.
According to Engineer, almost 92% of Axis Bank’s transactions are conducted through ATMs and phone banking. “We push out close to nine million SMS transactions on our mobile banking platform daily.” It has close to 1.8 million mobile banking customers.
“Atom Technologies is the only company that initiates card present transaction in India. Which means to execute a transaction, you need a card on your mobile,” said Niranjan Gosavi, head of marketing at atom Technologies. “We execute around 3,000 transactions every day with a ticket size of around Rs1,200. The mobile PIN is very crucial in such transactions.”
“As these transactions are conducted through atom applications, the security level is high as records of past transactions are not available on the phone. All transactions are PIN (or code) protected even if the phone is lost or stolen.’’
Atom Technologies uses an application-based technology, which means the data transmitted is encrypted before it can be sent from one’s mobile phone. PayMate uses a non- application-based technology.
“Chip dependent service like the M wallet proposition is highly handset- and telecom operator-dependent, which will cater to about 5% of the population. If we want mobile banking to be a mass-market proposition, SMS-driven payment option is the best option. However, the SMS security is not the best,’’ said C.D.K. Sai Narain, general manager of transaction banking and strategic initiatives at Standard Chartered Bank.