Indian Customers Not Yet Ready For M-Banking

by Sohini Bagchi    Jan 06, 2014

mobile payment

Mobile banking (m-banking), which is said to transform the future of banking, is not taking off the way it is expected. A recent report from Reserve Bank of India (RBI) shows a lower-than-expected growth of m-banking in India and has warned banks and service providers to empower customers and increase the awareness levels of this tool for greater financial inclusion in the country.

[Read: India needs innovative e-payment systems for financial inclusion]

According to the RBI report, even though mobile banking channel has the potential to be one of the key tools for achieving financial inclusion, the growth and acceptance of mobile banking as a channel of accessing banking service has been below expectation. “Low levels of awareness as well as the inability of banks to integrate mobile number with the account number, handset compatibility issues, absence of collaboration and revenue-sharing models between banks and mobile network operators, are affecting the growth of this channel,” states RBI.

“Currently, each handset needs a separate program to enable mobile banking facility in it to simplify transaction. Mobile banking to most Indians is complex and too technical and needs to be made more visual and multi-lingual,” K Krishna Kumar, MD, Banking Services at State Bank of India explained at an event on Mobility. He opines that mobile payment standardization of policies as well as the revenue models for service providers and banks are the key concerns, apart from security and the risks involved in the mobile payments eco-system.

A Strong eco-system

The key phrase is a strong ‘m-banking ecosystem’. A report in ‘The Economist’ states that in Kenya, M-Pesa has become a leading money-transfer system run by Safaricom, a Kenyan mobile-phone operator that allows millions of Kenyans send cash through an SMS network. According to the report, nearly 80% of the adult population use M-Pesa for everything from paying electricity bills to education fees. The success lies in its simple text-based menu that is accessible even on a basic mobile phone. The firm, 40% by Vodafone, makes money through transaction fees when customers transfer cash at a network of more than 40,000 M-Pesa agents across the country, says the report.

There are also some examples in India, the latest one being The Central Bank of India’s launch of new mobile banking application - an EMV-compliant RuPay Debit Card last week. Rajeev Rishi, Chairman and MD said the card based on the Swadeshi Platform and is more secure with in-built security chip and would help traders to draw Rs. 40,000 a day or Rs. 1 lakh in case of international transactions.

However, experts point out that India’s overall readiness for mobile payments is still at the exploratory stage. At present, RBI allows only a bank-led model for mobile banking, with only those banks having physical presence in the country are permitted to offer this service. As on date, as many as 78 banks, including a few regional rural banks, urban cooperative banks, offer mobile banking services in the country. Although the report informed the payment and settlement system infrastructure was performed without any major disruptions, like downtime or security glitches, the number of customers have not see any significant increase and needs a definite boost.

“If India wants to better position itself for mobile payments, the focus should be on partnerships between banks, service providers and telcos, strengthening its overall environment to be more willing to mobile payments, and engaging with consumers to highlight the benefits mobile payments both the short and long-term,” says Ashok Jhunjhunwala, an industry veteran, and Professor in the Department of Electrical Engineering, IIT Madras. [To read the full exclusive interview of Ashok Jhunjhunwala with CXOtoday, click here]

He adds that the success of mobile payments will be possible only by driving low cost computing – especially the cost of tablets smartphones to reach global heights. 

[Also read: eMudhra to facilitate mobile commerce growth in India]