M Payments (Regulation & Guidelines)

By-Rajeshwari Raju Shambhu Singh

Vikas Jain

M-Payments• It’s a payment services operated under financial

regulation and performed from or via a mobile device. • Instead of paying with cash, cheque, or credit cards, a

consumer can use a mobile phone to pay.• MPFI is the umbrella organization which is responsible

for deploying mobile payments in India.• This service is being offered by several major banks in

India.• Customers send money by SMS, using a Java

application over GPRS, a WAP service or other mobile communication technologies.

Models • Premium SMS based transactional payments

• Direct Mobile Billing

• Mobile web payments (WAP)

• Contactless NFC (Near Field Communication)

Transaction Flow(M-Payments)

Mobile number of payee

The PIN of payer

The Amount of money

MMID of payee

Regulations in India

• Banks which are licensed and supervised in India and have a physical presence in India will be permitted to offer mobile payment services.

• The services should be restricted to only to bank accounts/ credit card accounts in India which are KYC/AML compliant.

• Only Indian Rupee based services should be provided.• Banks may use the services of Business

Correspondents for extending this facility, to their customers.

• The guidelines issued by RBI on ‘Risks and Controls in C &T will equally apply to Mobile payments.

• The RBI guidelines on KYC and Anti Money Laundering (AML) as prescribed by RBI would be applicable to customers opting for mobile based banking service.

Registration of customers for M-Service

• Banks should offer mobile based banking service only to their own customers.

• Banks should have a system of registration before commencing mobile based payment service to a customer.

• There can be two level of services- Basic Level Standard Level

Advantages

• Secure• Convenience• Easy • Fast • Reliable

Technology and Security Standards

• The technology used for mobile payments must be secure and should ensure confidentiality, integrity & authenticity.

• The information Security Policy of the banks should be suitably updated and enforced to take care of the security controls required specially for mobile phone based delivery channel.

• Proper system of verification of the mobile phone number should be implemented.

• Proper level of encryption should be implemented for communicating from the mobile handset to the bank’s.

• Use strong encryption for protecting the sensitive and confidential information of bank and customers in transit.

• Separate login ID and password should be provided For WAP and Web.

• The Data Centre of the Bank and Service Providers should have proper wired and wireless data network protection mechanisms.

Some More Guidelines-

• Inter-operability

• Clearing and Settlement for inter-bank funds transfer

transactions.

• Customer Complaints and Grievance Redressal

Mechanism.

• Board level approval

Hurdles in M-Payments Adoption-

Challenges for M-Services in India

• Poor levels of literacy are a major problem in India.• Voice-based solutions.• Uncomfortable with technology.• Financial inclusion.• The mobile services have to be effective in terms of

usability, cost, efficiency, and security for transactions of all sizes.

• M-payments options should be available even on low end mobile handsets.

Consumer Protection Issues• Banks must make mandatory disclosures of risks,

responsibilities and liabilities of the customers in doing business through Mobile phone.

• There must be agreement between the banks and customers.

• Bilateral contracts between the payee and payee’s bank.• It would be the responsibility of the service providing

bank, to address the customer grievances.• The jurisdiction of legal settlement would be within India.

Thank You