Project Final DEEPAK

8/13/2019 Project Final DEEPAK

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Table of Contents

Executive Summary......................................................................................................................2

Introduction ...................................................................................................................... ...........3

Mobile Commerce scenario in India............................................................................................8

Understanding Mobile Commerce ............................................................................................!

"##lication of Mobile Commerce..............................................................................................$

Mobile Commerce and %an&ing................................................................................................ '

Services offered in Mobile %an&ing...........................................................................................2

Models for Mobile %an&ing %usiness ....................................................................................... 28

Mobile %an&ing (uidelines In India...................................................................................... ...32

Tec)nology and Security Standards .........................................................................................3*

%usiness and +egal Issues ..........................................................................................................38

,egulatory and Su#ervisory Issues........................................................................................... *!

Sco#e of Mobile %an&ing............................................................................................................*-

i. Mobile %an&ing as istribution C)annel................................................................. ..../2

ii. Mobile %an&ing as Source of ,evenue........................................................................./3

iii Mobile %an&ing as Image 0roduct....................................................................... ......../*

Conclusion ..................................................................................................................................//

%ibliogra#)y ............................................................................................................................... /-

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Executive Summary

Mobile Commerce has gained increasing acceptance amongst various sections of thesociety in previous years. The reasons for its growth can be traced back to technological

and demographical developments that have influenced many aspects of the socio-culturalbehavior in todays world. The need (andor wish! for mobility seems to be the drivingforce behind Mobile Commerce. The launch of "MT# technology has provided MobileCommerce with the necessary verve.

Mobile $inancial #ervices build a cornerstone of Mobile Commerce. They comprise ofMobile %ayment and Mobile &anking. Mobile &anking' the primary research obect ofthis proect consists of gauging the scope of mobile banking in )ndia and shedding lighton

a! Mobile banking and its sub-applications*

. Mobile "ccounting

2. Mobile %ro&erage

3. Mobile 1inancial Information

Mobile $inancial )nformation can be considered as an independent module and offered asa stand-alone application. +ach of the first two sub-applications is offered' in contrast'invariably in combination with information services.

b! Mobile &anking and its business models , &) guidelines for the same.

c! Mobile banking insights , consumer perspectives.

There is large-scale interest in Mobile &anking. The customer interest and the willingnessto pay however vary for individual services. )t is therefore necessary to design offerstaking cogniance of the needs and wishes of relevant target groups.

Mobile &anking presents an opportunity for banks to retain their e/isting' technology-savvy customer base by offering value-added' innovative services and to attract newcustomers from corresponding sections of the society. The time seems to be ripe to

convert the non-negligible customer interest into business-driving customer demand. 0proactive attitude on the part of the banks therefore seems to be recommendable.


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Introduction

T)e %an&ing %usiness utloo&

0sia %acifics retail banking consumer drives growth &ank deposits in the 0sia %acificregion (0ustralia' China' )ndia' 2apan' #outh 3orea' Taiwan! are recorded to be over"#411 trillion by 515 with over 655 million bankable households. 7hile the vastmaority of bank deposits in 0sia %acific is still 2apan' bank deposits in China and )ndiawill grow rapidly.

Chinas share of 0sia %acific bank deposits doubled from 18 percent of total 0sia %acificbank deposits in 555 to 9 percent of total 0sia %acific bank deposits in 515. +venmore amaing is the fact that )ndias bank deposits' albeit smaller in total than Chinasbank deposits' are proected to grow by over :55 percent during the same period. Thenumber of bankable households is also increased rapidly' from 65 million bankable

households in 555 to 619 million bankable households in 515.

0sia %acific markets will likely provide the greatest opportunities for financial servicescompanies looking for future growth. ;riven by strong consumer demographics' politicaland market reform' and economies of scale in production' 0sia %acific nations haverealied significant growth over the past five years and this trend will likely continuethrough 511 and beyond.


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0s is evident in 0sia %acific economies' specifically those of China and )ndia willcontinue to be leaders in global growth through 511. 0sia %acific e=uity markets' withthe e/ception of Chinas reforming stock markets' have realied high growth over thepast three years' reaching' in many cases' multi-year highs.

7ith such promising growth prospects' global financial institutions are focusing theirresources on 0sia %acific and investing heavily in the region. $rom buying stakes inmaor state-owned Chinese banks to developing branch networks in )ndia' foreign bankscontinue to place their bets on 0sia %acific. The 558 financial results of a maorfinancial services group are a case in point* they showModest profit growth of between 15-1< percent in +urope and >orth 0merica' but in0sia and ?atin 0merica' growth rates of


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7ith rising incomes' growing urban affluence and favorable demographics' the rapidgrowth of these financial products is not surprising. The demographics of our countrywill also be a key driver in creating a large retail customer base that banks ust cannotafford to ignore with 8:A of the )ndian population under 8 years of age. 0s thispopulation enters the Bwage earnerB category by the year 511' the propensity to use

multiple financial products will be high. ver 65A of this age group will be under :5years of age and a prime customer segment for insurance' mutual funds' credit cards etc.

0lready' many banks enoy a higher cross-sell ratio with customers in the 8-


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Major Banks In India By Asset Size

5%

7%

23%

10%

10%

45%

Axis Bank HDFC Bank Ltd. ICICI Bank Ltd.

Bank of Baroda Bank of India State Bank f India

#ource* &)

The )ndian banking industry showed great resilience in springing back to shape as alsoadusting to the impact of the reforms. $rom a high overhang of bad debts and large loandelin=uency in the early 1995s' )ndian banks turned the corner in a decades time with astronger balance sheet and surging profitability. >ot deterred by the burden of bad debtsthat emerged in the aftermath of banking sector reforms and introduction of prudentialnorms' the banking industry showed sound growth and e/pansion in the post reformperiod. Capital levels have increased' profitability has risen' productivity improved andso has several developments in enhancing the =uality of customer service. )ntegration ofbanking industry with other maor segments of finance' notably the securities markets isalso growing. )ntegration with international markets is also on the rise' where )ndianbanks are increasing their presence and operations. 0ll these augur well for the prospectsof the )ndian banking in the future.

0n important aspect of the )ndian economy at present is having a vibrant domesticfinancial system and a strong e/ternal sector. @iven the growing pace of globaliation offinance' )ndian domestic financial system in general and banking industry in particularstand to gain from opportunities arising within the country and outside.

&) announced constitution of an internal working group to e/amine the report of theEigh %owered +/pert Committee on Making Mumbai as an )nternational $inancialCenter and implement the recommendations as appropriate. Making Mumbai as aninternational financial center would be of great significance for )ndian finance andbanking in view of the enormous opportunities such a development could bring in.The stance of the monetary policy to get a hold on rapidly rising asset prices and growinginflationary tendencies in the back of high economic growth' though might appear to

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impact the business of banks' but could prove helpful in the long run since the prudentialmeasures could ensure appropriate pace of business and better risk management.

0t the same time there are challenges that may appear daunting. &anks in 0sia'particularly in China have phenomenal sie as compared to )ndian banks. ?iberaliation

is leading to creation of global banks through growth and consolidation. )n thisbackground' an important and most urgent challenge for )ndian banks is to create a siethat would be effective in dealing with the global competition. )ndian banking also needslarger amounts of capital to sustain their growth in the future for which they need to stepup performance and efficiency that would attract investors. 0nother e=ually importantchallenge would be harnessing the benefits of technology. Though progress is made'technology solutions integrating the banking operations to derive synergies andefficiencies in %ublic #ector &anks need to move at a much faster pace. #imilarly' %ublic#ector &anks need to step up the use of infrastructure related to eal Time @ross#ettlement and +lectronic $und Transfer #ystems that could benefit their customers.There is much scope to further increase the share of non-interest income' which will raise

profitability and productivity.

>otwithstanding the challenges' the )ndian banking industry can look forward to apromising period ahead. Eigh economic growth offers banks a host of opportunities innew businesses and also in e/panding the e/isting ones. @rowing international operationsof )ndian business will provide )ndian banks with global opportunities in banking. isingincome levels of people will give scope to design and develop a wide range of personalfinancial products and fee based services. $ocus on infrastructure development andcertain key sectors like rural economy' health and education offer e/citing businessopportunities for the e/tensive branch network of %ublic #ector &anks located in the ruraland semi-urban areas.

7hile opportunities could be numerous' responding to them positively and realiing themto a desired e/tent would be a great challenge. 7ith right strategies in harnessingtechnology and human resources developing market segments' design of new generationproducts and services' focus on efficient customer service and pursuing global aspirationscan take )ndian banks to the ne/t generation banking

Mobile Commerce Scenario In India

Mobile payments may not be the most happening thing in the )ndian market today' butthe situation is certainly ripe for the m-phenomenon. )ndia currently has 155 millionmobile subscribers' :8 million credit or debit card holders and over


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users. These figures are what prompted Coruscant Tec' a mobile solutions company' tolaunch a spin-off company' %ayMate.

M-commerce is still at a nascent stage in )ndia. Mobile %ayments is available on websitesfor shopping' ob portals' matrimonialG also for purchase of tickets' flowers' dining' hotel

bookings' bill payments for various services etc.

M-commerce is making its presence felt in )ndia mostly through shopping' utility billpayments' travel and entertainment. Eowever' it is almost always in conunction withonline payment. $or instance' &ill 2unction offers both online and mobile payment' asdoes airline 0ir ;eccan and more recently' %H Cinemas. 0ccording to 0rvind ao'C+ and co-founder' nMobile' a mobile solutions company' ITelecom operators'merchants and service providers are beginning to see the need for m-commerce services'by starting to work towards fulfilling their respective roles in the overall chain. Eowever'it will take another four to si/ years before we see substantial m-commerce usage like in#outh +ast 0sian countries.J )n fact' 2apan - with the highest number of mobile phone

users in the world - is witnessing a trend where electronic and mobile payments arereplacing real cash transactions. :< per cent of 2apans internet users make paymentsthrough their mobile phones (eMarketer!.

Telecom operator 0irtel launched its mobile wallet facility' mCh=' in #eptember 558' incollaboration with )C)C) &ank and Hisa. Eowever' a year later' the idea of a mobilewallet still hasnt caught on' and 0irtel does not have significant numbers to showotherwise. 0 company spokes person says' IThe pilot proect covers Mumbai and >ew;elhi and >C across 155 retailers. Eowever' we feel that the markets need to mature alittle more before we e/tend the same service across other cities.K

"ndoubtedly' mobile users would have their fair share of apprehensions about conductingfinancial transactions over the mobile spectrum. Eowever' people always have theirdoubts about using a new technology. This was the case about a decade ago when onlinepayment was still new concept. Cutting to the present' there are about 8.5 million onlinebanking users in )ndia today (#ource. )0M0)!. #imilarly' users can be e/pected todevelop greater faith in their mobile phones in the coming years. Currently' serviceproviders are taking efforts to ensure ma/imum security in this realm. 0diseshann says'IThe use of %ay Mate does not re=uire the user to enter any confidential information likecredit card number as the payments are linked directly to the bank account. +achcustomer is given a %)> which is used for conducting transactions.J

;espite security issues' time-starved consumers are bound to turn to a method of paymentthat comes with the least hassles. Convenience will be the driving factor for m-commerce. This is the reason why services like m-ticketing' prepaid easy recharge andm-coupons. )t is only a matter of time before consumers realie that transacting throughthis medium is ust as secure as it is with any other medium. )n fact' it allows e/trasecurity processes to be implanted in mobile phones.

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#lowly but surely' more and more applications are being provided by telecom operatorsto their bou=uet of services. The mobile phone is well on its way to becoming the singledevice connecting people to the economy. )t wont be long before we will be able toorder and pay for your 2umbo 3ing Hada%av through your mobile. Till then' its back tothe =ueue.

UnderstandingMobileCommerce

)n the following we characterie the concept of Mobile Commerce and distinguish it fromthe concept of Mobile &usiness. 7e further e/amine it in the more common conte/ts of+lectronic Commerce and +lectronic &usiness and present an overview establishing aholistic perspective of Mobile Commerce.

The Conceptual Background and Perspective

&efore defining the mobile aspects of commerce (Mobile Commerce! and distinguishingthem from the mobile aspects of business (Mobile &usiness!' it is imperative to establishworking definitions of the terms IcommerceJ and IbusinessJ' as they seem to havetranscended their dictionary meanings and ac=uired new significance since the advent ofthe )nternet economy. )n this section we further differentiate between the termsIelectronicJ and ImobileJ' so as to clarify the respective concepts by showing theirsimilarities and highlighting their differences.

Difference between Business and Commerce

The term IbusinessJ' in this study' refers to all activities undertaken by a firm in order toproduce and sell goods and services. These activities are' thus' not e/clusively ofIcommercialJ nature but also include other processes such as procurement' production'customer relationship management (CM! and human resources management (EM!.

The /ford dictionary L55 describes IcommerceJ as Ifinancial transactionsJ andIbusinessJ among others as Isellingpurchasing of goodsJ. The term IcommerceJ' in thiswork' refers to selling and purchasing of goods and services in both business- andconsumer segments and to activities directly related with such transactions. +/amples ofsuch activities are marketing measures and after-sales services. The related activities areincluded so as to take into account that not each and every transfer of ownership or rightsto use a good or service must trigger a monetary transaction.

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The term IcommerceJ is' hence' seen as an integral subset of the broader termIbusinessJ. )n accordance with this approach Mobile Commerce is regarded as anintegral subset of Mobile &usiness L&use' 55' p. 9G ">CT0;' 55:' p. 8.+lectronic Commerce is correspondingly seen as an integral subset of +lectronic&usiness.

Difference between Electronic and Mobile spects

To understand the difference between +lectronic- and Mobile Commerce or between+lectronic- and Mobile &usiness it is essential to understand the similarities anddifferences between the terms IelectronicJ and ImobileJ. The adective IelectronicJ' usedwithin the specific conte/ts of I+lectronic &usinessJ or I+lectronic CommerceJ' signifiesan Ianytime accessJ to business processes managed by computer-mediated networks.$urthermore' the access to such networks is' in this case' stationary. The services are'

therefore' not available independent of the geographic location.

The adective ImobileJ' used within the specific conte/ts of IMobile CommerceJ orIMobile &usinessJ' signifies an Ianytime and anywhere accessJ to business processesmanaged by computer-mediated networks. The access takes place using mobilecommunication networks' making the availment of these services independent of thegeographic location of the user.

Computer-mediated networks are Ielectronically linked devices that communicateinteractively over network channelsJ LMesenbourg' 1999' p.


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with the full form I+lectronic &usinessJ. ther forms are however left unaltered if citedfrom a reference. The prevailing view in the academic literature regarding +lectronic&usiness is reflected in the following definition*I+-&usiness is the integration of systems' processes' organiations' value chains andentire markets using )nternet-based and related technologies and concepts.J L#tanoevska-

#labeva' 55CT0;!+lectronic &usiness processes include Customer 0c=uisition and etention' +lectronicCommerce' rder $ulfillment and Tracking' )nbound and utbound ?ogistics' )nventoryControl' $inance-' &udget- and 0ccount Management' EM' %roduct #ervice and#upport' esearch and ;evelopment as well as 3nowledge Management L">CT0;'55:' p. 6.Electronic Commerce

+lectronic Commerce is often referred to as I+-CommerceJ or IeCommerceJ. This bookworks with the full form I+lectronic CommerceJ. ther forms are however left unalteredif cited from a reference. +lectronic Commerce has found much more attention in theliterature than +lectronic &usiness' owing to its pro/imity to the consumer. There aremany definitions of +lectronic Commerce in circulation' with each one emphasiingsome different aspects of +lectronic Commerce.

0 very simple definition is delivered by 3alakota and obinson* I+-Commerce is simplythe buying and selling of products and services over the 7eb.J L3alakotaobinson'55' p. D

The prevailing definitions may be divided in two primary categories*

The first category works with a narrow' restrictive definition' re=uiring the wholetransaction to take place in electronic form and having a monetary character. $ore/ample' the @erman $ederal #tatistical ffice reportedly uses the following definitionfor +lectronic Commerce* ITransactions are regarded as +lectronic Commerce' when theoffer for sale as well as the purchase or the actual availment of a product or service iscarried out electronically' with the help of a computer-mediated network' againstmonetary payment.JL$ischer' 55


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This definition seems to be too restrictive as it does not recognie the fact that ust someparts of a transaction might also be carried out electronically without having to processall the steps of a value-chain in that form. $urther' the emphasis on the monetarycharacter ignores the commercial nature of marketing measures (transactions carried out

with the intent to sell a product or service! and after-sales services (transactions carriedout in continuation of a preceding monetary transaction!' both important features ofcommercial transactions.

The second category works with a broader definition of +lectronic Commerce' as can beseen in the definition used by the "# &ureau of the Census* I+lectronic commerce (e-commerce! is any transaction completed over a computer-mediated network that involvesthe transfer of ownership or rights to use goods or services. LN Completed transactionsmay have a ero price (e.g.' a free software download!.J LMesenbourg' 551' p. :

0lso according to the rganiation for +conomic Co-operation and ;evelopment

(+C;! it is the method used to place or receive an order' not the mode of payment orthe channel of the delivery that determines whether a transaction is considered as an+lectronic Commerce transaction L+C;' 55' p. 61.

The primary criteria for +lectronic Commerce' thus' are the (at least partially! electronicform of a transaction and the transfer of ownership or rights to use a good or servicewhether against monetary payment or otherwise.

This discussion shows that +lectronic Commerce &eings as an integral subset of+lectronic &usiness' since all the aspects of +lectronic Commerce also take place in+lectronic &usiness but +lectronic &usiness has a larger scope than +lectronicCommerce.

Defining Mobile Business and Mobile Commerce

)n the following we describe the earlier mentioned mobile aspects of the )nternet-economy' namely Mobile &usiness and Mobile Commerce.

Mobile %usiness

Mobile &usiness is often referred to as IM-&usinessJ or Im&usinessJ. )n this study wework with the full form IMobile &usinessJ. ther forms are however left unaltered if

cited from a reference.

Mobile &usiness is often described as an e/tension of the traditional +lectronic &usinessto wireless devices LMagic' 555' p.


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The ">CT0; defines Mobile &usiness in the following terms*IMobile &usiness involves business-related communication among individuals andcompanies where financial transactions do not necessarily occur.J L">CT0;' 55' p.D9

Thus' we can regard Mobile &usiness as an e/tension of +lectronic &usiness that alsoprovides for some new' uni=ue features' such as location based conte/t-sensitive servicesaccessible via Mobile )nternet and hitherto unknown in +lectronic &usiness. Mobile&usiness shares' but is not limited to' some common features with +lectronic &usinessthat also provides a vast range of services not possible with Mobile &usiness' as can beseen in figure 1.

The graphic illustrates the following facts*

1. +lectronic &usiness and Mobile &usiness offer many similar services in bothcommercial and non-commercial areas. espective e/amples are salepurchase of goodsand services on the one hand and CM on the other.

. +lectronic &usiness offers additional services' not feasible with Mobile &usiness' e.g.coordination of esearch , ;evelopment activities.


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6. +lectronic Commerce and Mobile Commerce offer many similar services' e.g. bookingan entrance ticket for a football match.

F. +lectronic Commerce offers additional services' not feasible with Mobile Commerce'e.g. selling of high-=uality' non-standardied products re=uires an intensive presentation

not feasible on mobile devices.

D. Mobile Commerce' too' offers uni=ue conte/t-sensitive' location-based services' notfeasible with +lectronic Commerce' e.g. search for the nearest 0TM specific to adynamic location.

This discussion establishes a Mobile Commerce perspective and distinguishes it fromother related terms. The concept of Mobile Commerce is now further characteried.

The !eatures of Mobile Commerce

Mobile Commerce is characteried by some uni=ue features that e=uip it with certainadvantages against conventional forms of commercial transactions' including +lectronicCommerce

. Ubiuity4 "bi=uity means that the user can avail of services and carry outtransactions largely independent of his current geographic location (IanywhereJfeatures!. This feature can be useful in many situations' e.g. to cross-check prices whilestanding in a supermarket.

2. Immediacy4 Closely related to the feature of ubi=uity is the possibility of real-time

availment of services (IanytimeJ feature!. This feature is particularly attractive forservices that are time-critical and demand a fast reaction' e.g. stock market informationfor a broker. 0dditionally' the consumer can buy goods and services' as and when hefeels the need. The immediacy of transaction helps to capture consumers at the momentof intention so that sales are not lost in the discrepancy between the point of intention andthat of the actual purchase.

3. +ocali5ation4 %ositioning technologies' such as the @lobal %ositioning #ystem (@%#!'allow companies to offer goods and services to the user specific to his current location.?ocation based services can be' thus' of fared to meet consumers needs and wishes forlocalied content and services.

*. Instant connectivity4 +ver since the introduction of the @eneral %acket adio #ervice(@%#!1 mobile devices are constantly IonlineJ' i.e. in touch with the network(Ialways-onJ feature!. This feature brings convenience to the user' as time-consumingdial-up or boot processes are not necessary.

/. 0ro6active functionality4Mobile Commerce opens' by the virtue of its ability to beimmediate' local and personal' new avenues for push marketing such as content- and

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product offers. #ervices like Ipt-in advertisingJ can be offered' so that a user maychoose the products' services and companies which he wants to be kept informed about.The #hort Message #ervice (#M#!1: can be used to send brief te/t messages toconsumers informing them of relevant local offerings that best suit their needs. Thisfeature ensures that the IrightJ (relevant! information can be provided to the user at the

IrightJ place' at the IrightJ time. n the other hand' the user does not have to fearmissing some potentially crucial information or getting it too late.

-. Sim#le aut)entication #rocedure4Mobile telecommunication devices function withan electronic chip called #ubscriber )dentity Module (#)M!.18 The #)M is registered withthe network operator and the owner is thus unambiguously identifiable.

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"##licationfMobileCommerce

Mobile %an&ing* This application makes it possible to complete bank related

transactions' e.g. checking account status' transferring money and selling stocks' viamobile devices' independent of the current user location.Mobile Entertainment4n the one hand' this application contains services that providethe user digital data with entertainment value on mobile devices' e.g. ring-tones' musicand videos. n the other hand it opens an array of interactive services' e.g. betting'gaming' dating and chatting.

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Mobile Information Services* This term refers to mobile services that providesubscribers with content of informational character.+/amples of such services are news updates of any nature (finance' politics' sport etc.!'travel information' access to search engines and Mobile ffice (e-mails' appointmentsetc.!.

Mobile Mar&eting* This term refers to services based on mobile communicationtechnologies that provide firms with new' innovative instruments' e.g. to increase sale'win and retain customers' improve after-sales services' build and sustain a positive andmodern imagebrand and carry market research.Mobile devices serve thereby as simple and relatively ine/pensive channels ofinteraction.

Mobile S)o##ing4This application bundles services that allow for mobile processing oftransactions involving purchase of goods of daily use. The user can purchase (mostlystandardised! products by choosing them from a catalogue accessible from a mobile

device. The products need not be of a digital nature.

Mobile Tic&eting40ll services that must be paid for' before a lawful utiliation can takeplace' are suitable for Mobile Ticketing' e.g. traveling in public transport' entry to acultural event or cinema. This application ensures that the user can purchase a right toutilisationentry (ticket! via a mobile device' replacing the conventional paper ticket. Theticket is sent in digital form to the mobile device.

Telematics Services4Telematics is an artificial term referring to innovative technologiesthat link telecommunication technologies with informatics (information technologies!.The transport segment has been the primary area of this application' which is also knownas )ntelligent Transport #ystem ()T#!. The main services are navigation systems' remotediagnosis as well as access to other mobile applications such as Mobile +ntertainment'Mobile Contentffice' Mobile &anking and Mobile #hopping.

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MobileCommerce7 %an&ing

$inance-related services that are offered by employing mobile telecommunicationtechnologies are generally referred to as Mobile $inancial #ervices. The offered servicescan be divided into two categories*

Mobile 0ayment 7 Mobile %an&ing

The purpose of this chapter is to serve as a literature review on Mobile &anking. )tdescribes' in detail' various services pertaining to Mobile &anking and e/plains thetechnical issues specific to this particular application. +ven as Mobile &anking is definedand its services e/plained' we identify issues that potentially possess critical relevance forthe future of Mobile &anking and which cannot be answered in a purely theoretic

framework.

The financial services business comprises of*

1. e#osit business* the acceptance of funds from others as deposits or of otherrepayable funds from the public unless the claim to repayment is securitied in the formof bearer or order debt certificates' irrespective of whether or not interest is paidG

.+ending business4 the granting of money loans and acceptance of creditsG


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11. the incurrence of the obligation to ac=uire claims in respect of loansprior to their maturity.

Scope of Financial Services

)n addition to banks there are some other institutions that provide a limited range ofsimilar services. )nstead of offering classic banking services such as deposit- or girobusiness they specialie in services relating primarily to stock markets.

The scope of financial services'

. Investment bro&ing4 the brokering of business involving the purchase and sell offinancial instruments or their documentationG

2. Contract bro&ing4the purchase and sell of financial instruments in the name of and

for the account of othersG

3. 0ortfolio management4 the administration of individual portfolios of financialinstruments for others on a discretionary basisG

*. n6account trading4the purchase and sell of financial instruments on an own-account basis for othersG

/. Money transmission services4the e/ecution of payment ordersG

-. 1oreign currency dealing4dealing in foreign notes and coinsG

$. Credit cards business4the issuance or administration of credit cards and travelerschouse unless the card issuer also provides the service underlying the paymenttransaction.

"ervices #ffered in Mobile Banking

Mobile &anking' as defined above' includes a wide range of services. Theseservices may be categoried as following

. Mobile "ccounting

2. Mobile %ro&erage

3. Mobile 1inancial Information

These sub-applications of Mobile &anking are discussed below in detail.

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. Mobile "ccounting

Mobile 0ccounting can be defined as transaction-based banking services that revolvearound a standard bank account and are conducted andor availed by mobile devices. >ot

all Mobile 0ccounting services are however necessarily transaction based Mobile0ccounting represents basically that part of Mobile &anking which deals with utiliingaccount-specific banking services of non informational nature via mobiletelecommunication devices.

Mobile 0ccounting services may be divided in two categories to differentiate betweenservices that are essential to operate an account and services that are essential toadminister an account. 0dditionally' services are re=uired that inform a customer oftransactions and other activities involving his or her account. )t is for this reason thatMobile 0ccounting is offered P almost invariably P in combination with services fromthe field of Mobile $inancial )nformation.

Account Operation in Mobile Accounting

The term 0ccount peration' as used in this study' refers to activities that involvemonetary transactions. #uch transactions may involve an e/ternal account' e.g. whenpaying bills' or an internal (sub-! account' e.g. when transferring money from ownsavings account to own securities account held with the same bank. Mobile services thatare used to operate an account are*

1.Money remittances4 Mobile devices may be used to instruct the bank to remit moneyin order to conduct one-time transactions' such as paying bills or transferring funds. Thisservice can also include the facility to cancel an ordered remittance.

. Issue standing orders for bill #ayments4The house bank may be entrusted withstanding orders for payment of regularly recurring bills' e.g. payment of monthly rent ortelephone bill.

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re=uires informational services in order to facilitate brokerage activities. $or this reason'Mobile &rokerage is invariably offered in combination with services related to Mobile$inancial )nformation.

ccount #peration in Mobile Brokerage

perating a securities account is primarily concerned with selling and purchasing of

financial instruments. Mobile &rokerage allows placing and cancellation of orders to sellas well as purchase securities and other financial instruments Mobile &rokeragefacilitates full-scale orders with all necessary details such as price limits and the desiredstock e/change centre. This section however raises interesting =uestions about theusefulness of and demand for the offered services.

ccount dministration in Mobile brokerage

The following mobile services can be utilied to administer a securities account.

1."ccess administration40s with Mobile 0ccounting mobile devices may be used to

administer the access to an account' e.g. to change the individual %)> or to re=uest newT0>s.

."dminister order boo&4rders to sell or purchase stocks' which are not yet carriedout' can be modified via mobile devices that are allowed to access the customer orderbook. 0dditionally' new standing orders may be placed to sellpurchase a particular stockon reaching a predefined threshold value.

Mobile !inancial $nformation

Mobile $inancial )nformation refers to non-transaction based banking- and financial

services of informational nature. This sub-application may be divided into two categories*

1. 0ccount information

. Market information

)nformation services are an integral part of Mobile 0ccounting and Mobile &rokerage butcan also be offered as an independent module' i.e. Mobile $inancial )nformation can be


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offered without providing Mobile 0ccounting or Mobile &rokerage but vice versa is notfeasible. Mobile $inancial )nformation services are generally provided by creditinstitutions and financial services institutions. Eowever' there are other enterprises toothat do not belong to either of this category but still provide market information viamobile devices.

Mobile $inancial )nformation services include subsets from both banking and financialservices and are meant to provide the customer with anytime' anywhere access toinformation. The information may either concern the bank and securities accounts of thecustomer or it may be regarding market developments with relevance for that individualcustomer. The information is customied on the basis of preferences given by thecustomer and sent with a fre=uency decided by him. The information should be provided'ideally' on both' pull and push basis.

ccount $nformation in Mobile !inancial $nformation

The term 0ccount )nformation' as used here' refers to information that is specific to acustomer and his bank' even though it does not necessarily involve a monetarytransaction. Mobile services that belong to this category are*

1.%alance inuiries4Mobile devices may be employed to check the current financialstatus of own bank or securities accounts.


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.+ist of latest transactions4Mobile devices may be used to re=uest a list of latesttransactions performed on an account. This service works with a standard' pre-specifiednumber of latest transactions that are reported' as and when demanded. Most of the banksprovide a list of up to five latest transactions.


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could be carried out. This ensures that urgent information can be provided to thecustomer while on the move.

1. 0roduct information and offers4 The bank can provide information about itsproducts and new offers to a customer on the move. 0 customer can IpullJ the

information that he wishes to access. n the other hand the bank can IpushJ theinformationoffers that the customer has identified as interesting and is willing to receive.

Market )nformation in Mobile financial services

The term Market )nformation P as opposed to 0ccount )nformation P refers toinformation with a macro-scope. This information is not directly related to the customeraccount. )t is generated either e/ternally' e.g. e/change rates or central banks interestrates' or internally by the individual bank' e.g. bank-specific interest rates.

The individual bank-customer does not play a direct role in this process. The informationmay be later sorted out to cater to the individual needs and preferences of a particularcustomer' if so desired by him'6< and subse=uently delivered on a mobile device of hischoice' e.g. a mobile phone or a %;0.

)nformation in this category generally concerns*1. $oreign e/change rates. )nterest rates


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Models 1or Mobile %an&ing %usiness

0 wide spectrum of Mobilebranchless banking models is evolving. These models differprimarily on the =uestion that who will establish the relationship (account opening'deposit taking' lending etc.! to the end customer' the &ank or the >on-&ankTelecommunication Company (Telco!. 0nother difference lies in the nature ofagency agreement between bank and the >on-&ank. Models of branchless banking can beclassified into three broad categories - &ank $ocused' &ank-?ed and >onbank-?ed

T)e ban&6focused Model

The bank-focused model emerges when a traditional bank uses non-traditional low-costdelivery channels to provide banking services to its e/isting customers. +/amples rangefrom use ofautomatic teller machines (0TMs! to internet banking or mobile phonebanking to provide certain limited banking services to banks customers. This model isadditive in nature and may be seen as a modest e/tension of conventional branch-basedbanking

T)e ban&6led model

The bank-led model offers a distinct alternative to conventional branch-based banking inthat customer conducts financial transactions at a whole range of retail agents (or throughmobile phone! instead of at bank branches or through bank employees. This model

6
http://en.wikipedia.org/wiki/Automatic_teller_machinehttp://en.wikipedia.org/wiki/Automatic_teller_machine


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promises the potential to substantially increase the financial services outreach by using adifferent delivery channel (retailers mobile phones!' a different trade partner (telco chain store! having e/perience and target market distinct from traditional banks' and maybe significantly cheaper than the bank-based alternatives. The bank-led model may beimplemented by either using correspondent arrangements or by creating a 2H between

&ank and Telconon-bank. )n this model customer account relationship rests with thebank

T)e non6ban&6led model

The non-bank-led model is where a bank does not come into the picture (e/cept possiblyas a safe-keeper of surplus funds! and the non-bank (e.g. telco! performs all the functionsis where a bank does not come into the picture (e/cept possibly as a safe-keeper ofsurplus funds! and the non-bank (e.g. telco! performs all the functions

,is&s "ttac)ed To %usiness Models

0gents elated isks arise from substantial outsourcing of customer contact to retailagents. $rom a typical banking regulators perspective' entrusting retail customer contactto the types of retail agents used in both the bank-led and nonbank-led models wouldseem riskier than these same functions in the hands of bank tellers in a conventional bankbranch. These retail agents may operate in hard-to reach or dangerous areas , they lackphysical security systems and specially trained personnel. The lack of e/pert training mayseem a particular problem if retail agents functions range beyond the cash-incash-outtransactions of typical bank tellers to include a role in credit decisions.&anking regulation typically recognies multiple categories of risk that bank regulatorsand supervisors seek to mitigate. $ive of these risk categoriesQcredit risk' operationalrisk' legal risk' li=uidity risk' and reputation riskQtake on special importance whencustomers use retail agents rather than bank branches to access banking services. The useof retail agents also potentially raises special concerns regarding consumer protection andcompliance with rules for combating money laundering and financing of terrorism.

+-Money isks relates to acceptance of repayable funds from retail customers by >on-&ank entities that are not subected to prudential regulation and supervision. isk is thatan unlicensed' unsupervised >on-&ank will collect repayable funds from the public ine/change for e-money and will either steal these funds or will use them imprudently'resulting in insolvency and the inability to honor customers claims

F


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(i! The pioneer phase when a few early entrants launch and test out their products andstart to find successG

(ii! The breakout phase when the success of the pioneers is noticed' leading to rapid entryof new firms and e/pansion of the marketG

(iii! 0 consolidation phase when a shakeout of firms occurs due to increased competitionore/ternal factors such as regulation' although the number of customers continues to growbut at a diminishing rateG

(iv! 0 final maturity phase when the number of firms in the industry and its norms andrules have been settled' and the market grows at a steady' natural rate

D


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9


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Mobile %an&ing (uidelines in India

)ndia has about 5F MM (#eptember 55F T0) ;ata! mobile phone subscribers' anumber that is larger than the number of bank accounts or )nternet users. @iven themobile tele-density of about 5A and development of secure mobile technology

solutions' banks are well-positioned bridge the digital divide and introduce the unbankedsector to the financial mainstream

Oou may be aware that eserve &ank of )ndia had set up the Mobile %ayments $orum f)ndia (M%$)!' a R7orking @roup on Mobile &anking to e/amine different aspects ofMobile &anking (M-banking!. The @roup had focused on three maor areas of M-banking' i.e.' (i! technology and security issues' (ii! business issues and (iii! regulatoryand supervisory issues. 0 copy of the @roups report is enclosed. &) has accepted therecommendations of the @roup to be implemented in a phased manner. 0ccordingly' thefollowing guidelines are issued for implementation by banks. &anks are also advised thatthey may be guided by the original report' for a detailed guidance on different issues.

Eowever to start with ' we must understand who the various stakeholders are and whatthere e/pectation are*

#takeholders are as follows *

1. Consumers. Merchantsetwork operators:. Mobile device manufacturers8. $inancial institutions and banks

6. #oftware and technology providersF. @overnment

+ach stakeholder group has the following e/pectations*

a! To meet the following Consumer e/pectations*%ersonalied serviceMinimal learning curveTrust' privacy and security"bi=uitous P anywhere' anytime and any currency

?ow or ero cost of usage)nteroperability between different network operators' banks and devices0nonymity of payments like cash%erson to person transfers


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b! To meet the following Merchant e/pectations*$aster transaction time?ow or ero cost in using the system)ntegration with e/isting payment systemsEigh security

&eing able to customie the serviceeal time status of the mobile payment serviceMinimum settlement and %ayment time

c! To meet the following Telecom >etwork %roviders e/pectations*@enerating new income by increase in traffic)ncreased 0verage evenue %er "ser (0%"! and reduced churn (increasedloyalty!&ecome an attractive partner to content providers

d! To meet the following Mobile ;evice Manufacturers e/pectations*

?arge market adoption with embedded mobile payment application?ow time to market)ncrease in 0verage evenue %er "ser (0%"!

e! To meet the following &anks e/pectations*>etwork operator independent solutions%ayment applications designed by the bank+/ceptional branding opportunities for banks&etter volumes in banking P more card payments and less cash transactionsCustomer loyalty

f! To meet the following #oftware and Technology %roviders e/pectations*?arge markets

g!To meet the following @overnment e/pectationsevenue through ta/ation of m-payments#tandard

Technolog% and "ecurit% "tandards

SSMaor inputs to be provided by the Technology #ub CommitteeSSecommendation on Technology #tandards by egulatory #ub Committee

The technology used must be secure and at the same time convenient to deploy and costeffective. The following technology basis provides a summary of the available models.&anks must deploy only secure channels that provide a non-repudiable platform totransact.


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"nless fool proof security is used in compiling and deploying the mobile bankingapplications' the %)> number should not be allowed to be stored in the mobile bankingapplication on the phone. 0s' generally the application installed on the phone would bedeveloped in 2ava' it may be possible to decompile it e/tract the m%)>. 0lternatively' theapplication should be so compiled that it should not be feasible to e/tract the %)> on

decompilation.

0ll accounts' credit or debit cards allowed to be transacted through the mobile phonesshould have the mobile phone number linked to the account' credit or debit card. Thismobile number should be used as the second factor authentication for mobiletransactions.

;uring the transaction' the %)> should not travel in plain te/t. ;oing this' there is risk ofthe %)> being snooped out of the phone from sent items and also it being e/posed at the#M#C level. 0lso' it may be able to snoop out the %)> during transmission' although'this is very difficult in cellular communications.

%roper level of encryption should be implemented for communicating from the mobilehandset to the mobile payments service providers server. )t has been assumed that propersecurity checks would be made by the banks to ascertain the security levels of the serviceproviders. This may include %C) ;## certification in addition to banks own audits.

%roper system of verification of the phone number should be implemented' whereverpossible. This is so as to guard against spoofing of the phone numbers as mobile phoneswould be used as the second factor authentication.)t is also recommended that )nternet &anking login ids and passwords may not be allowedto be used through the mobile phones. 0s fraudsters get more sophisticated' the chancesof phishing attacks on mobile phones would become more probable. 0llowing )nternetbanking login id and password usage on the mobile phone may compromise their usageon the )nternet banking channel. This restriction may be communicated to the customersthrough an industry wide effort so as to ensure that )nternet banking passwords are notcompromised through mobile phones.

The payment authorisation message from the users mobile phone should be securelyencrypted and checked for tampering by the service provider or the bank. )t should not bepossible for any interceptor to change the contents of the message.

%rovided the above security recommendations are reviewed' the mobile payment servicecould use any of the preferred mode of communication vi.' #M#' )H#' 70%@%#'"##; and >$C.

There are couple of security issues in some of these modes of communications' whichare listed below*

#M# is the simplest form of communication' but is vulnerable to tampering. 0s long asthere is a second level of check on the details of the transaction so as to guard against


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data tampering and the m%)> does not travel in plain te/t' this mode of communicationcan be used.

)H# is also a simple mode of communication and therefore does not have any inbuiltsecurity measures. The system should be capable of encrypting the

;TM$ tone entries' if re=uired to be stored or transmitted.

"##; communication uses its inbuilt encryption technology to talk between the cellphone and the operators server. Eowever' the decryption of the information happens atthe cell phone operators server. Hulnerability of data may e/ists at this point. Thisinformation should be re-encrypted and transmitted to the service provider.

0ny of the following modes of user interface may be used' provided the above listedsecurity measures are taken into consideration*

#M#

Menu driven applicationMenu driven "##; application70%@%# website

$ormats need to be specified for e/change of information between banks. n thedebitcredit card front' the e/iting )# D8D< message format may be used forcommunication between bank switches. Eowever' for account number based mobiletransfers' a message format may need to be froen.

&anks should designate a network and database administrator with clearly defined rolesas indicated in the technology @roups report

&anks should have a security policy duly approved by the &oard of ;irectors. Thereshould be a segregation of duty of #ecurity fficer @roup dealing e/clusively withinformation systems security and )nformation Technology ;ivision which actuallyimplements the computer systems. $urther' )nformation #ystems 0uditor will audit theinformation systems.

&anks should introduce logical access controls to data' systems' application software'utilities' telecommunication lines' libraries' system software' etc. ?ogical access controltechni=ues may include user-ids' passwords' smart cards or other biometric technologies

0t the minimum' banks should use the pro/y server type of firewall so that there is nodirect connection between the )nternet and the banks system. )t facilitates a high level ofcontrol and in-depth monitoring using logging and auditing tools. $or sensitive systems' astateful inspection firewall is recommended which thoroughly inspects all packets ofinformation' and past and present transactions are compared. These generally include areal time security alert.


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0ll the systems supporting dial up services through modem on the same ?0> as theapplication server should be isolated to prevent intrusions into the network as this maybypass the pro/y server.

The information security officer and the information system auditor should undertake

periodic penetration tests of the system' which should include*

0ttempting to guess passwords using password-cracking tools. #earch for back door trapsin the programs. 0ttempt to overload the system using ;;o# (;istributed ;enial of#ervice! , ;o# (;enial of #ervice! attacks.Check if commonly known holes in the software' especially the browser and the e-mailsoftware e/ist.

The penetration testing may also be carried out by engaging outside e/perts (often calledR+thical Eackers!

%hysical access controls should be strictly enforced. %hysical security should cover all theinformation systems and sites where they are housed' both against internal and e/ternalthreats.

&anks should have proper infrastructure and schedules for backing up data. The backed-up data should be periodically tested to ensure recovery without loss of transactions in atime frame as given out in the banks security policy. &usiness continuity should beensured by setting up disaster recovery sites. These facilities should also be testedperiodically

Business & 'egal $ssues

SSMaor inputs to be provided by the &usiness #ub Committee

The following kinds of business applications are envisaged under the purview of thiscircular. &anks may permit the following transactions to its e/isting customers. They willencompass three key areas*

Mobile banking (basic saving account P balance en=uiry' bill payment' credit card

payment' ;raft issuance' ;eposit booking' #top payment re=uest' funds transfer toanother bank account including


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&anks may additionally facilitate transactions for their customers customers (+.g. &ill%ayments for their corporate clients and other transactions that facilitate transactionalconvenience and also the inclusion of the financially e/cluded into the bankingmainstream. Thus banks may also permit following transactions for non-customersnon-account holders.

i. #mall value person-to-person remittances (not e/ceeding s 18'555! including the useof bank branches' 0TMs and other


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failure etc. needs to be assessed and banks providing Mobile banking should considerinsuring themselves against such risks' as is the case with )nternet &anking.

&anks may determine their own pricing for the use of these services.&anks should get the scheme for facilitating Mobile banking approved by their respective

boards ?MC before offering it to their customers. The ?MC approval mustdocument the e/tent of perational and $raud risk assumed by the bank and the banksprocesses , policies designed to mitigate such risk.

()C Process

&anks are permitted to rely on $inancial )ntermediaries as recommended by the rela/ed3OC guidelines issued vide &) circular ;&;.>.0M?.&C.D 1:.51.551558-56dated 0ugust


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The products should be restricted to account holders only and should not be offered inother urisdictions. The services should only include local currency products. The Rin-outscenario where customers in cross border urisdictions are offered banking services by)ndian banks (or branches of foreign banks in )ndia! and the Rout-in scenario where)ndian residents are offered banking services by banks operating in cross-border

urisdictions are generally not permitted and this approach will apply to )nternet bankingalso. The e/isting e/ceptions for limited purposes under $+M0 i.e. where resident)ndians have been permitted to continue to maintain their accounts with overseas banksetc.' will' however' be permitted.

verseas branches of )ndian banks will be permitted to offer )nternet banking services totheir overseas customers subect to their satisfying' in addition to the host supervisor' thehome supervisor.

@iven the regulatory approach as above' banks are advised to follow the followinginstructions*

0ll banks' who propose to offer transactional services on the Mobile services shouldobtain prior approval from &). &anks application for such permission should indicateits business plan' analysis of cost and benefit' operational arrangements like technologyadopted' business partners' third party service providers and systems and controlprocedures the bank proposes to adopt for managing risks.

The bank should also submit security policy covering recommendations made in thiscircular and a certificate from an independent auditor that the minimum re=uirementsprescribed have been met. 0fter the initial approval the banks will be obliged to inform&) any material changes in the services products offered by them.

The guidelines issued by &) on Risks and Controls in Computers andTelecommunications vide circular ;.C.)TC.&C. 15


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effected using credit cards' payments arising out of cross border e-commerce transactionsand all intra-bank payments (i.e.' transactions involving only one bank! should bee/cluded for settlement through an inter-bank payment gateway.

)nter-bank payment gateways must have capabilities for both net and gross settlement.

0ll settlement should be intra-day and as far as possible' in real time.&ilateral contracts between the payee and payees bank' the participating banks andservice provider and the banks themselves will form the legal basis for such transactions.The rights and obligations of each party must be clearly defined and should be valid in acourt of law.

&anks must make mandatory disclosures of risks' responsibilities and liabilities of thecustomers in doing business through Mobile' through a disclosure template. The banksshould also provide their latest published financial results over the net.

*egulator% *oles and *esponsibilities of "takeholders

,ole of %an&s

0ny money e/change i.e. %ayments' %%' remittance' etc P should be e/ecuted through&anking instruments , )nfrastructure. This is to ensure compliance with all financialcontrols and regulation. %ayments can be made by the following#avings &ank 0ccount;ebit Card Credit Card 0ccount %re-paid Cards Hirtual Cards(Credit , ;ebit Cards!

&anks role should be of providing normal transactional services to customers using the

full range of services including Cash' #avings account' Credit Card' ;ebit Card and%repaid Cards services.

Transactions should be maintained within the banking network and all the stakeholders intransaction processing and should be subect to e=ual level of scrutiny and regulation asare other bank accounts.

Transaction settlement should ride on the e/isting infrastructure for efficient settlementand payment systems.

)ntra &ank - Transactions involving &ank 0c to &ank 0c funds Transfer should be real

time or near real time transactions

)nter &ank - Transactions involving &ank 0c to &ank 0c funds Transfer should ride onthe >$# or other e/isting switches available for inter-&ank transactions.

)ntra &ank P Transactions involving Card 0c ( including Credit , ;ebit Cards! toMerchant recipient account should ride on the e/isting settlement , payment systemsavailable with &anks.


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)nter &ank P Transactions involving Card 0c ( including Credit , ;ebit Cards! toMerchant recipient account should ride on either on )ndia #witch ' H)#0' MasterCard orany other available switching infrastructure.The bank should take responsibility for audit' fraud management' account security etc.

under its normal banking license. &anks should ensure that the service operates entirelywithin the &) framework.

&anks should be responsible for ensuring the identity of the sender and the receiver offunds. &anks can design the process of verification of sender and receiver as per thee/isting guidelines. )n case where the e/isting process of 3OC compliance cannot bemet' new methods of verification such as mobile based %)> verification and transactionlimit fi/ation can be considered)n case of m-wallet propositions the pooled funds should be held with a bank so thatsystemic risk of defaults is minimied.

&anks may end up playing a limited role in %% and cash to cash payments other thansettler of funds via the pooled account. This should be permissible subect to transactionlimits etc.

,ole of Telco

Telcos should provide the 3OC and customer history for &anks to offer the services tothe customer and full responsibility for fraud management at their outlet as per T0)guidelines.

)n order to ensure Mobile %ayments reaches the critical customer mass' 3OC documentsre=uired to offer financial products should be made similar to Telcos 3OC guidelines.

;istribution network of Telcos should be used to provide the services of Mobile%ayments to ma/imum possible locations across the country.

+/ternal low-cost hosting at Telco should be e/plored P &anks will not have to reinventthe technology platform , billing systems for such an offering.

%olicies enabling audit and governance of such a model to be framed.#etting up of infrastructure for undertaking ;omestic Money emittances along with&anks. ;omestic Money emittances using both Telcos dealer network and &anks$inancial infrastructure should piloted along with controls on transaction limit andfre=uency. %ilot should test the feasibility running such a model for domestic moneyremittances.

:5


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,ole of T)ird #arty #ayment #rocessors

+/ternal low-cost hosting at Third party payment processors should be encouraged tohave a truly cross-bank ' cross-carrier payment system .%olicies enabling audit and governance of such a model to be framed including acentralied settlement mechanism

Third party processors should have the responsibility of $raud management and shouldhave systems and process in place to check and control frauds.

*egulator% !ramework suggested for Mobile Pa%ments

%ayment 0ccount to be used for Mobile %ayments e.g. Credit card account' #avings &ank0ccount' virtual account' %re-paid account should be similar e/isting Credit card ' ;ebitCard bank account issuance framework.

7hile we can use innovative mechanisms to enable payments through mobile phones'following should be taken into considerations

&)s @uidelines and policies on 3OC&)s @uidelines and policies on 0M?

$inancial settlement between the various entities should be undertaken as per the e/isting@uidelines and processes.

The messaging system between 0pplication and &ank needs to be regulated andstandardied to ensure standard transaction processes and settlement systems.

@uidelines need to be evolved to ensure complete interoperability of between all thestakeholders of mobile payments. This will lead to the growth of ecosystem and willbenefit all the stakeholders.

@uidelines need to be evolved for allowing domestic money remittances by Cash )n andCash ut at Telco utlets including usage of Telcos 3OC and adherence of 0M?guidelines.

Telcos role should include providing platform to initiate transactions and carry themessages to the banks systems

*egulator% policies and standards

#ervice providers' Telcos should have the independence to develop and launchcustomied applications targeted towards their customer base however messaging system

:1


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between application and &anks needs to be regulated. This will lead to standardiation ofthe transaction processes and settlement systems. These should include

)nstruction formats for all mobile initiated payments' remittances and banking

)nstruction formats for all mobile initiated payments' remittances and banking

#ecurity standards for instructions' interfaces' data storage and transactions

Technology standards and guidelines for various modes of data transfer like #M#' @%#etc.

0nti Money ?aundering control for Telcos especially for proposed services like depositsbeing accepted and held by Telcos for $unds Transfer and remittances. 7hile Telcosprovide an opportunity to reach out to the unbanked and underbanked population of thecountry' proper regulatory control should be established to ensure conformation to 3OC

and 0M? guidelines. The Telcos offering these services should follow bank-approvedprocesses that fulfill the regulatory re=uirements while performing such transactions. The&ank may appoint payout agents such as the %ost ffice' other $)s' selective merchantsetc#ign up for service* +/isting or new customer* &ank controlled through regulated 3OC

Transaction* %)> based transactions in terms of domestic transfers.

0nti Money ?aundering* monitoring carried out by the &ank

Transactions monitoring controlled at the banking end

0gent appointment responsibility with the bank

:


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Sco#e f Mobile %an&ing

Capgemini Analysis Of Activeness Of Retail Banking Products & Services

The world bank report on retail banking sported a research by Cap @emini of variousbanks which were asked to rate the most active retail banking services and it was foundthat 0TM' nline &anking , ;irect debit were most active of them all indicating thee/citing trend of customers willingness to use new age banking services.

:


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!at Consumes "!ink#

0tom Technologies' a leading company specialiing in mobile commerce in )ndia carriedout a research on consumer patterns vis-U-vis payments , willingness towards use ofmobile phones involving over F85 respondents.

#ome f the #tatistics 0re 0s $ollows*

1* %referred Mode f %ayment

PREFERED MODE OF PAYMENT

35!

2!4

200

15!

24

0

50

100

150

200

250

300

350

400

"as# de$it "ard on%ine

transa"tion

"redit "ard &re&aid "ards

People(N!"ers#

::


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* Consumers "se of )nternet , Mobile &anking #ervices

INTERNET $ MOBI%E BAN&IN' (SERS

!!1

200

0

100

200

300

400

500

!00

700

Internet Bankin' (o$ie Bankin'

People(N!"ers#


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PREFEREN)E OF MA&IN' ATM TRANSA)TION T*RO('* MOBI%E

!5

305

0

100

200

300

400

500

!00

700

00

es o

People(N!"ers#

Some Ma;or 1indings f ,esearc) ,e#ort


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h! 0 huge number of respondents who seem to be fascinated with I %ayments by MobileJare in the age group of 1D-


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This group of customers' generally in the age group of 8P


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0s e/ample' )>@ %ostbank of >etherlands launched an innovative scheme in the year551 to boost its sales volume. +very new customer who deposited V:85 in a savingsaccount was provided with a mobile telephone worth V185 and capable of accessingMobile &anking services of the )>@ %ostbank. 7ithin si/ weeks more than 855'555 newcustomers and over V8 millions in deposits could be ac=uired. More importantly' 9FA

of these new customers became regular users of Mobile &anking

Reducing costs of distribution

)n times of increased competition' a distribution channel must organie businessprocesses efficiently so as to reduce distribution costs. The pressure to optimie businessprocesses and reduce costs can be coped by rationaliing organiational structures andincreasing productivity. Mobile

&anking can contribute to achieve this goal by following means

1. The manual collection' processing' transmission and archiving of data by bankemployees in branch offices is substituted' as in the )nternet based banking' by automatedprocesses.

. 0s against )nternet &anking' Mobile &anking makes it possible to offer ubi=uitous'semi-personal consulting services in real time. These services can be centralied toe/ploit economies of scale and scope as well as regional cost differences.


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Mobile Banking as Source of Revenue

0part from functioning as an additional distribution channel Mobile &anking can also

serve as a source of revenue. Mobile services can be offered on a premium basis. Theprice' in this case' should be reasonable enough so that customers are willing to pay thembut at the same time they should be P from a financial point of view P higher than thecosts incurred by the bank. 0dditional revenues can be generated in two ways*

1. ffering innovative' premium services to e/isting customersG

. 0ttracting new customers by offering innovative services. >ew customers contribute torevenue generation not only by utiliing mobile services but also by using otherconventional distribution channels.

Mobile Banking as 'mage Product

$inally' Mobile &anking can be also used as an image product to gain strategicadvantages. The bank may hope to win or retain a positive image amongst technology-savvy sections of the society and strengthen the brand reputation of being innovative andvisionary L@eorgi%inkl' 558' p. 65.The image of being a technology leader can help the bank win customers who are lookingfor modern products and services and at the same time help it retain its own e/isting baseof technology-savvy customers' some of whom otherwise might have switched to otherbanks while looking for such a product. $urther' the bank can profit from an early-moveradvantage by actively shaping technological standards that are based on ones ownstrengths. >egative fallout of following already-set standards may be thus avoided. Thisis' of course' fraught with a substantial risk of incurring financial and image losses if thepropagated technology fails to establish. These are the benefits that banks might e/pectby offering Mobile &anking services. )n the following we describe relevant issues thatneed to be clarified andor verified in later sections of this study.

85


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8. 0de=uate provision should be made for the issuance of e-money by appropriatelycapitalied and supervised entities which are not necessarily banks

)f mobile banking is to realie the potential of massively e/tending access to safe'convenient and affordable financial services to those who today lack it' then a suitableenvironment is re=uired. )n its absence' mobile banking may simply amount to addinganother convenient channel for already banked customers.

$or millions P perhaps billions P of lower-income people around the world' a mobilephone represents more than ust a tool for communication. )t can also become a means ofe/tending financial services to people without bank accounts' setting off a IvirtuouscircleJ of benefits to individuals' families' communities and nations. nly activecollaboration between financial and telecom regulators' financial institutions' mobileoperators and handset manufacturers will make this possible.

8


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%I%+I(,"0:=

0tom Technologies esearch on M-Commerce (55F!

$inMark $orum' 0pril' available viahttp*www.finmarktrust.org.aforums%resentationspresentations.htm

Eamburg "niversity ' eport n Mobile &anking (55:-58!

3ruger' @ I+/tending the payments franchise to the mobile phoneJ' presentation (558!

3rueger' M IThe $uture of M-%aymentsQ&usiness ptions and %olicy )ssuesJ (551!'?yman' T' @ )vatury and # #taschen IThe "se of 0gents in &ranchless ;istribution for

the %oorJ' C@0% ccasional %aper' (556!

Millard' # , H. #aporta ICentral &ank and payment systems* %ast' present' futureJ'(558!

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