Bangalore: India’s second-ranked status among the world’s top mobile phone service markets may present a sharp contrast with the penetration of services such as insurance and banking here. But, put the two together and the opportunity of delivering such services through mobile phones makes the country among the biggest potential markets for banking and other financial services.
The result: The emergence of several tech start-ups in what is called the “mobile banking” business. With nearly 41% of India’s 1.1 billion population “unbanked”, mobile payment platform providers foresee a huge market in facilitating micro-lending services or variants on mobile phones at costs not possible earlier. Jostling with each other in this emerging space are Obopay Mobile Technology India Pvt. Ltd, Jigrahak Mobility Solutions Pvt. Ltd, Eko India Financial Services Pvt. Ltd and Mchek India Payment Systems Pvt. Ltd.
Still settling in: Abhijit Bose (left) vice-president, Jigrahak Mobility Solutions (Photo: Hemant Mishra/Mint) and Abhishek Sinha, chief executive of Eko India Financial Solutions. Firms say their revenue models have yet to take shape (Photo: Sanjay Sharma/Mint).
The companies say though their basic concept is the same, the platform, dependence on phone firms, accessibility and revenue sharing pacts with partners will help them stand apart among themselves. Their investors, meanwhile, are moving cautiously on revenue models and await clarity on regulatory issues.
Industry estimates put customers for mobile banking services at between 50 million and 100 million over the next two years, by when India could be home to nearly half a billion mobile phone users, up from some 300 million today. Mobile phone users from rural areas—ideal customers for banking services on phone—account for about one in five of such customers and are expected to grow rapidly in the future.
For Bangalore-based mobile payment service provider Obopay, a subsidiary of US based Obopay Inc., the differentiator is an offering that is agnostic of any bank, phone firm or handset the customer uses and delivers a bouquet of financial services. In three months, says its chief marketing officer Vijay Balakrishnan, “we will be launching the same application for microcredit that we are currently using for mobile payment services,” adding that his firm will introduce insurance and pension management products soon. Obopay expects to acquire 5-10 million customers in two years.
Eko, which has 2,000 customers from a pilot project with Centurion Bank of Punjab Ltd that has been put on hold since HDFC Bank Ltd took over the lender, is keeping its aim of five million customers over the next year intact, with revenues set for up to Rs50 lakh. “Our business model is sustainable only with a customer base of 20 million to 25 million. We expect to breakeven in three years,” says chief executive Abhishek Sinha, who plans to raise $10 million (Rs45.9 crore) in funding.
Platform infrastructure provider Mchek India is relying on a tie-up with market leader Bharti Airtel for loading its software on the phone firm’s SIM (subscriber identification module) cards. The company, which has four pilot projects on is looking at a customer base of up to two million in two years, says chief executive Sanjay Swami.
Others are preparing to expand beyond financial transactions: booking tickets, bill payments and shopping or mobile commerce, for instance. “We are a mall on the handset,” says Abhijit Bose, Jigrahak’s vice-president.
Jigrahak and its peers do not intend charging customers for most services, instead taking a fee from the service vendors—a bank, for instance—they partner with. The bank, in turn, pays out of the savings it potentially makes, which can be sizeable. A mobile transaction costs between Rs2 and Rs5 compared with Rs30-40 at a bank branch and Rs10-15 for an Internet transaction.
Investors in the mobile banking tech firms estimate their revenue models will take at least a year to take shape—a per transaction charge on partners or a fixed fee or both. “The regulatory issues (first) need to be sorted out. Also, it is yet to be seen how banks, microfinance institutions want to use the technology and pay for it,” says Kanwaljit Singh, managing director, Helion Venture Partners that has invested in Jigrahak.