In a predominantly cash-run economy, electronic payment methods that provide convenience to users while lowering the transaction cost of banks make immense sense. Mobile banking, or m-banking, that started with small SMS transactions, is one such mechanism. Today, with more than 900 million cellphone subscribers in the country and hundreds of tablet PCs, there should ideally be many takers.
According to a August Reserve Bank of India (RBI) report, in fiscal 2012, however, only 13 million people across 49 banks used m-banking services, and made 25.6 million transactions valued at Rs.1,820 crore.
The numbers are small in a country where 67% of the overall transactions are still carried out in cash, according to a 2011 Assocham-Deloitte report, and especially when m-baznking can reduce the costs to one-tenth of what a bank spends for a similar transaction through a branch. Moreover, mobile-enabled business correspondents, authorized to conduct business on behalf of banks, can serve a customer at a fraction of the cost at a branch, according to a 2011 Boston Consulting Group report.
There are reasons for the slow growth. Globally, the delivery of mobile payment services has been either bank-led as in India, South Africa and the Philippines, or non-bank led as in Kenya and the Philippines. Regulators in India are not comfortable with giving too much license to mobile payment companies. Also, as with the concerns during the early days of Internet banking, users wonder how secure m-banking is. But banks use protocols like SSL and HTTPs (that encyrpt data during transfers) and good encryption (128-bit and above). But users need to be educated, too.
Meanwhile, developments such as the Inter-Bank Mobile Payment Service payments platform created by the National Payments Corporation of India in collaboration with 50-odd banks will help. So will the fact that RBI has doubled the limit on daily transactions in cash to Rs.5,000 and that in goods and services to Rs.10,000. Given that India is a young nation with tech-savvy youth at home with apps, tablet PCs and Internet-enabled phones, the target appears achievable given that in July alone both m-banking transactions and their value grew 198% and 174%, respectively, over the year ago period.
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