An Overview and future scope of Mobile Banking

Introduction
India's telecom mobile subscriber base crossed another milestone to top 560 million
connections by the end of 2009 with a record 19.10 million new users being added during the
month of December, according to latest figures released by the sector's watchdog. The total
number of mobile phone users in the country now stands at 525.15 million.

According to the sector's regulator, Telecom Regulatory Authority of India (TRAI), 19.1

million new mobile connections were added in December to take the country's tele-density to
an impressive 47.89%. India’s mobile phone subscriber base in larger than the number of
bank accounts or internet users.

Given the mobile tele – density of approximately 50%, banks are well-positioned bridge the
digital divide and introduce the unbanked sector to the financial mainstream. In this respect,
the Reserve Bank of India had set up the Mobile Payments Forum of India (MPFI), a
‘Working Group on Mobile Banking’ to examine different aspects of Mobile Banking (M-
banking). The Group had focused on three major areas of M-banking, i.e., (i) technology and
security issues, (ii) business issues and (iii) regulatory and supervisory issues. After
examining the detailed report of MPFI and accepting the recommendations of the group, the
RBI has finally decided to implement it in a phased manner. Accordingly, the following
guidelines are issued for implementation by banks. Banks are also advised that they may be
guided by the original report, for a detailed guidance on different issues.

What is Mobile banking?

Mobile banking (also known as M-Banking, m - banking, SMS Banking etc.) is a term used
for performing balance checks, account transactions, payments etc. via a mobile device such
as a mobile phone or Personal Digital Assistant (PDA). Mobile banking is most often
performed via SMS or the Mobile Internet but can also use special programs, called clients,
downloaded to the mobile device.

“Mobile Banking refers to provision and availability of banking- and financial services with
the help of mobile telecommunication devices. The scope of offered services may include
facilities to conduct bank and stock market transactions, to administer accounts and to access
customised information."

According to this model Mobile Banking can be said to consist of three inter-related
concepts:

 Mobile Accounting
 Mobile Brokerage
 Mobile Financial Information Services
Most services in the categories designated Accounting and Brokerage are transaction-based.
The non-transaction-based services of an informational nature are however essential for
conducting transactions - for instance, balance inquiries might be needed before committing a
money remittance. The accounting and brokerage services are therefore offered invariably in
combination with information services. Information services, on the other hand, may be
offered as an independent module.

Mobile phone banking may also be used to help in business situations.

Market Size and growth Trends

The mobile banking market has grown significantly over the past several years, particularly
in the US, where many financial institutions now offer some form of mobile services for their
customers.

According to the January 2008, e – marketer article, “More flip phones and clamshells will
become portable ATMs in coming years”.

According to a study by financial consultancy Celent, 35% of online banking households will

be using mobile banking by 2010, up from less than 1% today. Upwards of 70% of bank
centre call volume is projected to come from mobile phones. Mobile banking will eventually
allow users to make payments at the physical point of sale. "Mobile contactless payments”
will make up 10% of the contactless market by 2010.

Many believe that mobile users have just started to fully utilize the data capabilities in
their mobile phones.

In Asian countries like India, China, Bangladesh, Indonesia and Philippines, where mobile

infrastructure is comparatively better than the fixed-line infrastructure, and
in European countries, where mobile phone penetration is very high (at least 80% of
consumers use a mobile phone), mobile banking is likely to appeal even more.

India’s mobile phones will reach more than the targeted half billion people by the end of
2010 or 60 per cent of the tele-density, going by the country’s telecom ministry estimates.
According to a report, approximately 43 million urban Indians used their mobile phones to
access banking services during quarter ending August, 2009, a reach of 15% among urban
Indian mobile phone user.

Thirty-two banks have been given approval to provide mobile banking services in India. Of
this, 21 banks have already started providing these services to their customers. ICICI Bank
now has eight million customers registered for mobile banking services. It is closely followed
by HDFC Bank & State Bank of India. Mobile banking is also seen as the most promising
front end technology for broadening the access of banking in the country. Immense potential
of mobile banking in the process of financial inclusion and financial growth is now well
acknowledged. In RBI's Vision for Payment Systems in India- 2009-12, Mobile payments
settlement network is one of the major projects intended to be pursued by banks. 

This trend contributes towards the anticipated growth of mobile financial information
services, fund transfer, bill payments and presentations, account management and customer
service solutions. It is very difficult to predict adoption rates of new services and
technologies; however in this case, it is beneficial to use the adoption of online banking as a
comparative measuring risk.

Mobile Banking Services

Today, many banks offer a many mobile banking solutions for their consumers. The most
common services available today are: -

 Accounts alert, security alerts and reminders

 Account balances, updates and histories
 Customer service via mobile
 Branch or ATM location information
 Bill Pay (i.e. electric bill), deliver online payments by secure agents and mobile client
applications
 Funds transfer
  Transaction verification
 Mortgages alerts

Future services likely will include mobile commerce, mobile payments and contactless
payments using NFC (Near Field Communication), mobile coupons and location based
services.