The mobile phone is a versatile gadget. It could soon replace your bank branch—at least partially.
The Reserve Bank of India last week released draft guidelines for mobile payments in India. A mobile owner can transfer money from his bank account to the bank account of another person through his mobile phone. Small payments of up to Rs1,500 can be made through short messaging service (SMS).
The central bank has quite reasonably been cautious on this front. The attempt right now is to use mobile phone technology to allow bank customers to zip money across different banks and telecom networks. Banks have also been asked to ensure that they do not become lax on issues such as customer identity.
These are important first steps—but only first steps. Many banks already offer some types of mobile banking to their customers and the new guidelines will encourage these activities. But, the biggest opportunity is to offer these services to the unbanked poor.
More Indians have mobile phones than bank accounts. Those who own phones but do not have bank accounts will derive little benefit from these new draft guidelines. As we said earlier, the central bank has good reason to be cautious since mobile banking the world over is a regulatory minefield. Financial regulators usually keep a wall between deposit-taking banks and other financial intermediaries. That wall is unlikely to come tumbling down any time soon.
But mobile payments will not touch their potential unless those without bank accounts are allowed to “buy” money from telecom companies and use this “money” to make payments.
Some countries in Africa are trying to figure out ways to let non-banks move money around on their own.
A lot of fuss is made about financial inclusion these days. But bank branches are an expensive way to reach out to people in poor and isolated villages. There are serious issues about viability associated with the creation of more branches. More innovative solutions, such as barefoot bankers, will be needed. The humble mobile phone, too, could be thrown into the battle.
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