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Business News/ Industry / Banking/  SBI, ICICI lead the pack as m-banking gains currency
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SBI, ICICI lead the pack as m-banking gains currency

Mobile banking is emerging as a credible payment method in India, which has at least 900 million cellphones

In terms of volume, SBI is ahead of all other banks in India in mobile banking, but as the ticket size of the transactions is small, the value is low. Photo: Pradeep Gaur/Mint (Pradeep Gaur/Mint)Premium
In terms of volume, SBI is ahead of all other banks in India in mobile banking, but as the ticket size of the transactions is small, the value is low. Photo: Pradeep Gaur/Mint
(Pradeep Gaur/Mint)

Mumbai: Anand Chaturvedi, a 27-year-old analyst with a brokerage firm in Mumbai, started using his mobile phone for banking about six months back “because it is easy to use and accessible from anywhere". When in office, he does Internet banking, but uses the mobile banking (m-banking) services of ICICI Bank Ltd and HDFC Bank Ltd when travelling.

Vinaya Venugopalan, a 26-year-old information technology (IT) manager with an Indian bank, started using m-banking in May. He is comfortable with the service, but limits it mostly to checking his bank balance.

M-banking is slowly emerging as a credible payment method for hundreds of users in India, a country that has at least 900 million cellphones, of which around 700 million are active. Many of these phones are Internet-enabled and most are capable of handling basic financial transactions.

According to a 23 August Reserve Bank of India (RBI) report, 13 million people used m-banking services in fiscal 2012. Forty-nine banks were involved in 25.6 million m-banking transactions valued at 1,820 crore in the same period.

State Bank of India (SBI), the nation’s largest lender, and ICICI Bank Ltd, the second largest, led the pack, accounting for about 80% of the value between them.

Indeed, there is no comparison between m-banking and the use of credit and debit cards, but experts say the potential of the handheld device in the banking space is significant even as RBI is cautiously moving ahead.

The apex bank doubled the limit on daily transactions in cash to 5,000 and that in goods and services to 10,000 in December 2011.

Not even 4% of savings account holders have registered as customers for m-banking services, said Monish Shah, senior director (strategy and operation) at Deloitte Touche Tohmatsu India Pvt. Ltd. However, with an overall mobile penetration of at least 75%, it is the unbanked that represent a significant untapped market for the m-banking platform, he said. “It is a matter of time before the m-banking and other emerging channels gain increasing acceptance in a young nation," Shah added.

With the proliferation of apps, tablets and Internet-enabled phones (many of them smartphones) and service providers making innovative offerings, the numbers are bound to increase.

A July 2011 report, titled Digital India: The Rush to Mobile Money: Madness or Master Stroke?, by the Boston Consulting Group (BCG) forecasts that by 2015, $350 billion ( 18.7 trillion today) in payment and banking transactions could flow through mobile phones.

The business, according to the report, would come from government payments; peer-to-peer remittances—with the largest share being the transfer of money from workers in urban India to their families in rural areas; bill payments and point-of-sale purchases; business payments; and consumer banking.

ICICI Bank launched its m-banking application, iMobile, in January 2008. It is compatible with approximately 1,200 phone models with GPRS (general packet radio service).

Rajiv Sabharwal, executive director of ICICI Bank, said innovations in m-banking have transformed the cellphone into a personal banking assistant. “The rising popularity of data-enabled phones and services will intensify the demand for banking applications on the mobile," he said. M-banking “will also help us reach out to the unbanked segment and serve as a tool to facilitate financial inclusion".

Movida, a mobile payments joint venture backed by Visa Inc. and London Stock Exchange-listed m-banking solutions company Monitise Plc, signed an agreement in February with HDFC Bank Ltd, India’s second largest private bank, to introduce a mobile payment service that uses menu-based USSD (unstructured supplementary service data) mobile technology.

The Movida mobile payments platform will go live in October, according to a 20 September PTI story. It will allow even basic phone users to transact in real time.

In July, ICICI Bank customers engaged in 340,167 mobile transactions that had a value of 125.16 crore.

SBI customers performed 2,762,262 transactions for 120 crore. In terms of volume, SBI is ahead of all, but as the ticket size of the transactions is small, the value is low.

Overall mobile transactions in July amounted to 338 crore.

M-banking costs one-tenth of what a bank spends for a similar transaction through a branch. According to the BCG report, mobile-enabled business correspondents (BCs), authorized to conduct business on behalf of banks, can serve a customer for 8-15 cents per transaction, far below the $1-1.50 cost at a branch.

The number of notes in circulation in the Indian economy is about 49 billion, increasing at a rate of about 10% per year. Cash continues to be the only mode of transaction for the 40% unbanked population in the country. Overall, 67% of transactions are carried out in cash, while only 33% are made through electronic means, according to a 2011 Associated Chambers of Commerce and Industry of India-Deloitte report.

In June, My Mobile Payments Ltd, a mobile payment service provider, announced the launch of Money-on-Mobile (MoM)—an m-wallet service that allows consumers to load their mobile phones with cash of various denominations, starting from 20, at retail touch points and then use this virtual money to recharge prepaid phones and DTH (direct-to-home) subscriptions, besides paying postpaid mobile bills, etc.

MoM was first launched for the B2B (business-to-business) market in 2010. In 2011, it received RBI’s permission to offer the semi-closed m-wallet for the consumer market nationally.

The Muthoot Group has also launched a Muthoot Group Apps for iPhones and Android-based phones and tablets to enable consumers to purchase gold and silver coins, besides delivering investment reports, according to its website.

In August, Geojit BNP Paribas Financial Services Ltd launched a new version of Flip Me, its mobile trading platform created for the Android OS. Flip Me allows clients to place orders on the National Stock Exchange as well as BSE.

There are 12,000-15,000 logins for m-banking daily, of which 1,500-2,000 conduct mobile transactions, said A. Balakrishnan, chief technology officer at Geojit BNP Paribas. The transactions are mostly for buying shares in the range of 10,000-25,000 and for systematic investment plans with an average ticket size of 2,000.

While m-banking won’t be an overnight success, work has been going on in the background. In June, Fino, a banking technology provider and India’s largest BC, announced the acquisition of the Nokia Mobile Payment Services prepaid mobile payment business. The new entity, Alpha Payment Services India Pvt. Ltd (APSIPL), now operates as a 100% subsidiary of Fino.

“The mobile money service market is still at a nascent stage and the regulator has permitted prepaid mobile payment licences," said Shweta Aprameya, who heads APSIPL. “Any new regulation requires time to get accepted... We feel that awareness and education will surely lead to a quicker adoption."

Indeed, the signs are that customers are adopting m-banking. Earlier this month, the Inter-Bank Mobile Payment Service (IMPS)—a payments platform created by the National Payments Corporation of India in collaboration with member banks—enabled customers to make payments via cellphones.

Currently, 50 banks are enabled for the IMPS P2P (person-to-person) service.

The global delivery of mobile payment services has been bank-led, as in India and South Africa, non-bank led as in Kenya, or both, as in the Philippines.

Banks in the country are heavily regulated and allow for the addressing of concerns on know-your-customer norms and anti-money laundering laws as well as customer service. As mobile payment companies do not face such regulations, BCs will remain the conduit for some years to come.

Users have concerns about the security that m-banking provides.

Ashwin Rajurkar, a 33-year-old senior relationship manager with a foreign bank, said he had been using phone banking and even downloaded the ICICI m-banking app, but eventually stopped because “it is not safe".

“I have still kept my old phone with me because it has all sensitive information regarding account details. Now I only stick to Net banking as it is safe," he said

Venugopalan, the IT manager, said m-banking is safe, but a user needs to be careful, such as making sure the password isn’t saved on the device. “In case your phone is stolen, anyone can easily log into your account," he said.

Balakrishnan of Geojit BNP Paribas said m-banking uses SSL (secure sockets layer, a protocol that encrypts communication) and transfers files using HTTPs (another protocol for secure communication on the Internet), with at least 128-bit encryption. Higher encryption ensures better security. Flip Me, he added, “does not allow users to save passwords".

Sabharwal of ICICI Bank pointed out that banks also use two-factor authentication to provide extra security, besides alerting users to suspect transactions.

Globally, leading-edge mobile technology providers and developers are collaborating with security firms such as RSA, the security division of EMC, to build additional layers of security and access control into next-generation mobile solutions.

All the measures are expected to strengthen the m-banking ecosystem as India catches up, albeit slowly.

Zahra Khan contributed to this story.

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Published: 24 Sep 2012, 11:27 PM IST
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