FINANCIAL MANAGEMENT

PROJECT ON:-

SUBMITTED BY:-

SUSHANT BHOSALE 12

HITESH KATARIA 27

NARESH PAMECHA 41

PARMINDER SINGH 51

SAGAR SAWANT 53

RITU SHARMA 55

SUBMITTED TO:-

PROF. CHITRA GOUNDER

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INDEX

1. Introduction

2. RBI Operative Guidelines for Banks

3. Mobile Banking: A Wallet for all Pockets

4. Finacle Mobile Banking Solution

5. Syndicate Bank Registration

6. Mobile Banking Services

7. Mobile Banking in India

8. Mobile Banking Implications

9.Statistics

10. Stake-Holder’s Expectation

11. Challenges for a Mobile Banking Solution

12. CONCLUSION

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INTRODUCTION

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

A mobile banking conceptual model

Mobile banking is defined as:

"Mobile Banking refers to provision and availment 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.

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Mobile Banking transactions in India – RBI Operative Guidelines for Banks

Introduction

Mobile phones as a delivery channel for extending banking services have off-late been attaining greater significance. The rapid growth in users and wider coverage of mobile phone networks have made this channel an important platform for extending banking services to customers. With the rapid growth in the number of  mobile phone subscribers in India (about  261 million as at the end of March 2008 and growing at about 8 million a month), banks have been exploring the feasibility of using mobile phones as an alternative channel of delivery of banking services.  Some banks have started offering information based services like balance enquiry, stop payment instruction of cheques, transactions enquiry, location of the nearest ATM/branch etc. Acceptance of transfer of funds instruction for credit to beneficiaries of same/or another bank in favor of pre-registered beneficiaries have also commenced in a few banks. In order to ensure a level playing field and considering that the technology is relatively new, Reserve Bank has brought out a set of operating guidelines for adoption by banks. 

For the purpose of these Guidelines, “mobile banking transactions” is undertaking banking transactions using mobile phones by bank customers that involve credit/debit to their accounts. It also covers accessing the bank accounts by customers for non-monetary transactions like balance enquiry etc.

Regulatory & Supervisory Issues

1 Only banks which are licensed and supervised in India and have a physical presence in India will be permitted to offer mobile banking services.

.2 The services shall be restricted only to customers of banks and holders of debit/credit cards issued as per the extant Reserve Bank of India guidelines. 

3 Only Indian Rupee based domestic services shall be provided. Use of mobile banking services for cross border transfers is strictly prohibited.

4 Banks may also use the services of Business Correspondent appointed in compliance with RBI guidelines, for extending this facility to their customers.

5 The guidelines issued by the Reserve Bank on ‘Risks and Controls in Computers and Telecommunications’ vide circular DBS.CO.ITC.BC. 10/ 31.09.001/ 97-98 dated 4th February 1998 will apply mutatis mutandis to mobile banking.

6 The guidelines issued by Reserve Bank on “Know Your Customer (KYC)”, “Anti  Money Laundering (AML)” and Combating the Financing of Terrorism (CFT) from time to time would be applicable to mobile based banking services also.

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7 Only banks who have implemented core banking solutions would be permitted to provide mobile banking services.

8 Banks shall file Suspected Transaction Report (STR) to Financial Intelligence Unit – India (FID-IND) for mobile banking transactions as in the case of normal banking transactions.

Registration of customers for mobile service

1 Banks shall put in place a system of document based registration with mandatory physical presence of their customers, before commencing mobile banking service.

2 On registration of the customer, the full details of the Terms and Conditions of the service offered shall be communicated to the customer.

Technology and Security Standards

1 Information Security is most critical to the business of mobile banking services and its underlying operations. Therefore, technology used for mobile banking must be secure and should ensure confidentiality, integrity, authenticity and non-repudiability. 

Inter-operability

1 Banks offering mobile banking service must ensure that customers having mobile phones of any network operator is in a position to avail of the service. Restriction, if any, to the customers of particular mobile operator(s) is permissible only during the initial stages of offering the service, up to a maximum period of six months subject to review.

 2 The long term goal of mobile banking framework in India would be to enable funds transfer from account in one bank to any other account in the same or any other bank on a real time basis irrespective of the mobile network a customer has subscribed to. This would require inter-operability between mobile banking service providers and banks and development of a host of message formats. To ensure inter-operability between banks, and between their mobile banking service providers banks shall adopt the message formats like ISO 8583, with suitable modification to address specific needs

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 Clearing and Settlement for inter-bank funds transfer transactions

1 To meet the objective of a nation-wide mobile banking framework, facilitating inter-bank settlement, a robust clearing and settlement infrastructure operating on a 24x7 basis would be necessary. Pending creation of such a national infrastructure, banks may enter into bilateral or multilateral arrangement for inter-bank settlements, with express permission from Reserve Bank of India, wherever necessary.

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Customer Complaints and Grievance Redressal Mechanism

1 The customer /consumer protection issues assume a special significance in view of the fact that the delivery of banking services through mobile phones is relatively new.

Transaction limit

1 A per transaction limit of Rs. 2500/- shall be imposed on all Mobile Banking transactions. Subject to an overall cap of Rs. 5000/- per day, per customer.

2 Banks may also put in place monthly transaction limit depending on the bank’s own risk perception of the customer.

Board approval

1 Approval of the Board of Directors (Local Board in case of foreign banks) for the product as also the related security policies must be obtained before launching the scheme.

Approval of Reserve Bank of India

1 Banks wishing to provide mobile banking services shall seek prior one time approval of the Reserve Bank of India, by furnishing full details of the proposal.

Technology and Security Standards

1.The security controls/guidelines mentioned in this document are only indicative. However, it must be recognised, the technology deployed is fundamental to safety and soundness of any payment system. Therefore, banks are required to follow the Security Standards appropriate to the complexity of services offered, subject to following the minimum standards set out in this document. The guidelines should be applied in a way that is appropriate to the risk associated with services provided by the bank and the system which supports these services.

2. Banks are required to put in place appropriate risk mitigation measures like transaction limit (per transaction, daily, weekly, monthly), transaction velocity limit, fraud checks, AML checks etc. depending on the bank’s own risk perception, unless otherwise mandated by the Reserve Bank.

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3. Authentication

Banks providing mobile banking services shall comply with the following security principles and practices for  the authentication of mobile banking transactions:

a) All mobile banking shall be permitted only by validation through a two factor authentication.  b) One of the factors of authentication shall be mPIN or any higher standard.c) Where mPIN is used, end to end encryption of the mPIN shall be ensured,  i.e  mPIN shall not be in clear text anywhere in the network. d) The mPIN shall be stored in a secure environment.

4. Proper level of encryption and security shall be implemented at all stages of the transaction processing. The endeavor shall be to ensure end-to-end encryption of the mobile banking transaction. Adequate safe guards would also be put in place to guard against the use of mobile banking in money laundering, frauds etc. The following guidelines with respect to network and system security shall be adhered to:

a) Implement application level encryption over network and transport layer encryption wherever possible.b) Establish proper firewalls, intruder detection systems (IDS), data file and system integrity checking, surveillance and incident response procedures and containment procedures.c) Conduct periodic risk management analysis, security vulnerability assessment of the application and network etc at least once in a year.d) Maintain proper and full documentation of security practices, guidelines, methods and procedures used in mobile banking and payment systems and keep them up to date based on the periodic risk management, analysis and vulnerability assessment carried out.e) Implement appropriate physical security measures to protect the system gateways, network equipments, servers, host computers, and other hardware/software used from unauthorized access and tampering. The Data Centre of the Bank and Service Providers should have proper wired and wireless data network protection mechanisms.

5. The dependence of banks on mobile banking service providers may place knowledge of bank systems and customers in a public domain. Mobile banking system may also make the banks dependent on small firms ( i.e mobile banking service providers) with high employee turnover. It is therefore imperative that sensitive customer data, and security and integrity of transactions are protected. It is necessary  that the mobile banking servers at the bank’s end or at the mobile banking service provider’s end, if any, should be certified by an, accredited external agency. In addition, banks should conduct regular information security audits on the mobile banking systems to ensure complete security.

6. For channels which do not contain the phone number as identity, a separate login ID and password shall be provided to ensure proper authentication.  Internet Banking login IDs and Passwords shall  not be allowed to be used for mobile banking.

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Mobile Banking: A Wallet for all Pockets

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. It was Internet Banking, which ushered in a new era in banking convenience by bringing the entire operations to the computer, and now mobile banking promises to take it to the next level.

Internet Banking helped give the customers anytime access to their banks. Customers could check out their account details, perform transactions like transferring money to other accounts, and pay their bills, sitting in the comfort of their homes and offices. However, the biggest limitation of Internet Banking is the requirement of a PC with an Internet connection, not a big obstacle if we look at the US and the European countries, but definitely a big barrier if we consider most of the developing countries of Asia like India and China.

Mobile Banking addresses this fundamental limitation of Internet Banking, as it reduces the customer requirement to just a mobile phone. Mobile usage has seen an explosive growth in most of the Asian economies like India, China and Korea. The main reason that Mobile Banking scores over Internet Banking is that it enables 'Anywhere Anytime Banking'.

According to Cellular Operators Association of India (COAI), the mobile subscribers' base in India hit 40.6 Million in August 2004, and it will be almost 80 Million in 2008, i.e., nearly double. We all expect 2009 set to be a big year for Mobile Banking. After a slow start at the turn of the millennium, it would seem this time around, that the devices, the networks, and the users have finally started using "Mobile Banking". The majority of the Indian banks, whether nationalized bank or privatized, are already involved in offering mobile services to their customers. Several banks have even tied-up with mobile phone operators and service providers to carry out transactions on mobile phones. While some banks allow simple account -related queries on mobile phones, some have gone a step further and stored the debit and credit cards on mobile phones as well to enable various transactions.

Four banks - SBI, HDFC, ICICI and Corporation Bank - have partnered with India's largest operator - Bharti Airtel - to offer m-banking. RCOM has tied up with ICICI Bank, HDFC Bank, Axis Bank and IDBI Bank. Bharti Airtel has launched its mobile banking and plans to rope in about 100 major banks in India by end 2008.

But despite the addition of around seven million mobile users every month, bank officials feel it is too early to gauge the success of mobile banking in India. "Mobile banking is still in its nascent stage, and we will have to wait and watch if it really changes the way

we bank," officials from various banks echo.

Mobile banking has been at the threshold of a revolution for some time. While many operators, as well as banks, had introduced mobile banking applications, it never became popular due to security concerns. The number of people using mobile banking services has jumped from under 10,000 to 120,000 in two years. While the trend is growing, lack of awareness of services, apart from perceived security issues,

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are inhibiting faster take-off.

There is yet another reason why the service will not spread like wild fire - the credit environment. RBI has been tightening the banks, which have been offering unsecured and secured loans with minimal or no customer verification. With RBI tightening liquidity, personal loan defaults have reached 9% and banks will be very wary of giving you a credit card on the mobile.

Though RBI has specified norms for the banks to provide secure technology and ensure 'confidentiality, integrity, authenticity and non-reputability', security remains a major concern as well as a hurdle. However, with a few precautions and safety measures, users can have a safer m-banking experience. The m-PIN, which is issued by the bank, should be memorized and the PIN-mailer destroyed immediately. Change your m-PIN regularly and do not share it with anyone. The PIN is valid only for the corresponding phone number, which means users cannot access their accounts using other hand-sets. Thus, in case of a loss/theft of mobile phone, inform the mobile phone operator as well as the bank to block the banking application. Similarly, you should also inform the bank, if you change your hand-set or SIM card.

Reserve Bank of India has 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.,1. technology and security issues, 2. business issues, and 3. regulatory and supervisory issues.

One way to classify these services depending on the originator of a service session is the 'Push / Pull' your last five transactions statement is a Pull-based offering.

The other way to categorize the mobile banking services, gives us two kind of services- 'Transaction-Based' and 'Enquiry -Based'. So a request for your bank statement is an enquiry-based service and a request for your fund's transfer to some other account is a transaction-based service.

The new generation of mobile phones offers the speedy GPRS, EDGE or 3G data transmission standards and has large, high-definition colour displays. Prices are coming down and services and features are now considerably easier to handle on the mobile. Mobile Banking, in particular, has finally become a fast, user-friendly and affordable service. India's leading telecom companies started their services for Mobile Banking, basically they use these services as a marketing tool to advertise there services on this basis. Here are few giants of telecom industries in India who are offering Mobile Banking in various states.

IDBI's CTO, Neeraj Bhai, echoes the sentiment, "Over 12% of our Internet Banking users use our Mobile Banking services as well."

While ICICI Bank offers its services on GPRS and secure SMS, Barclays Bank's Hello Money isBased on Unstructured Supplementary Service Data (USSD) platform, which is independent of GPRS.nature. 'Push' is when the bank sends out information based upon an agreed set of rules;for example, your bank sends out an alert when your account balance goes below a threshold level. 'Pull' is when the customer explicitly requests a service or information from the bank, so a request for

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UK-based Barclays is one of the largest corporate money managers in the world. The bank launched its consumer banking services in India last year. And recently, the bank made its mobile banking service available on GSM hand-sets, on Airtel, Vodafone, and Idea networks in forty cities. Customers can choose between Hindi and English. Further, Barclays aims to include more languages and extend it to CDMA hand-sets as well.

ICICI Bank has tied-up with Airtel and m-Chek to load a virtual credit card on a mobile phone to carry on complete banking transactions as well as for making payments. "We conducted a pilot in Delhi and received close to a thousand responses. Mobile phones can be safer as compared to physical cards as they are pin-protected, thereby minimizing the risk of misuse," said Mr. Sachin Khandelwal, General Manager, Head-Cards Product Group, ICICI Bank.

Despite lots of security issues related to mobile banking and lack of awareness on part of consumers, the technology has taken off on slow pace, still it will be a big hit in coming years. Due to large number of advantages, and these advantages have over-powered all the disadvantages of the technology. All these advantages create a WIN-WIN-WIN situation for the technology: -

End-users benefit from greater control of their personal finances, as well as time saved by not having to access account details via other channels (Internet, phone, ATM, among others).

Bankers are of the opinion that mobile banking gives the banks an opportunity to expand their customer base without incurring additional infrastructure costs. It would also help in financial inclusion as it would provide a large number of unbanked people access to banking services.

Banks would save a huge amount of money on card issuance and merchant acquiring with zero point of sale cost. Mobile banking could be used to make remittances from person to person, banking purposes and to make payments for purchases or services provided.

Mobile operators benefit from increased customer stickiness, data usage and, potentially, customer experimentation with other forms of mobile content.

Given this win-win-win situation, we expect uptake of mobile banking services to be robust among mobile subscribers, users and the banks.

Over the next five years, mobile banking deployments will develop significantly - from "online banking" applications to one with richer interfaces and multiple mobile payment capabilities. The successful evolution of mobile banking and payments will be on the basis of the ability of financial institutions and mobile operators to balance ease of use with security.

I certainly am looking forward to the convenience of banking on my mobile. But, now that banks will have our mobile numbers (it was optional to give it to banks earlier), could it mean more unwanted calls and SMS from banks?

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FINACLE Mobile Banking SolutionFinacle mobile banking solution empowers retail and corporate banking customers with access to banking services through SMS and GPRS/WAP-enabled handsets, leveraging a single platform. It offers both mobile commerce (m-commerce) and mobile payments within the DNA of mobile banking, with built-in support for merchant-initiated payments and reversals, in addition to customer-initiated payments and reversals. Leveraging recent technological advances in the mobility space, the mobile banking solution empowers banks with the means to innovate by easily deploying new services, with improved time to market. The end user experience thus created is richer, secure and truly convenient.

Finacle mobile banking solution functions in tandem with disparate host systems, core banking solutions, payment networks and third-party applications. The solution is interfaced with Infosys MConnect, the indigenously developed middleware, which orchestrates mobile transactions between users’ devices and the Finacle universal banking solution. Infosys MConnect handles the multiplicity of form factors and access mechanisms on multiple devices to provide a context-adaptable view to the transaction server. This presents banks with a powerful channel to service customer segments ranging from the mass affluent to the under-banked or unbanked, surmounting the challenge posed by the diversity of mobile devices. 

The solution supports synchronization of customers’ own data on their mobiles without re-downloading the application for downloadable client-based mobility. It empowers banks to capitalize on their existing Internet transaction and support capabilities to extend it to the mobile world, in practically real time. This ushers in the advantages of reduced integration by leveraging common interface messages, maintenance and deployment costs.

Key ModulesThe mobility banking offering from Finacle is a logical extension of its proven Internet banking solution. All of Finacle’s online capabilities can be translated to the mobile channel, with reduced lead times, ensuring rapid time-to-market for banks.

Customer On-boardingFinacle enables the bank’s existing customers to be directed to use the mobile channel for banking and payment transactions through the following modes:

Phone banking leveraging the bank’s telebanking call center Mobile banking facility requested by sending SMS request in prescribed format Registering for mobile banking through the bank’s Internet banking site

The various flavors of mobile banking are: Browser-based mobile banking Downloadable-client based mobile banking Manual SMS banking

Finacle offers various functionalities for consumer and corporate banking leveraging GPRS or WAP-based transmission. An indicative list of features is:

Account management and requests Local payments, bill payments and transfers Transaction approvals for corporate customers Merchant payments and reversals for POS, telephonic or internet-based purchase transactions

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Support for administrative tasks like secure mails to relationship manager, approvals, password change, data synchronization and self-audit

Mobile Commerce Finacle offers commerce capabilities on its mobility and Internet platforms. Merchants and consumers can leverage Finacle mobile banking solution to perform business transactions at points of sale, with support for mobile and/or Internet banking. The solution offers out-of-the-box support for both merchant and customer initiated payments and reversals. Finacle mobile banking solution can service both retail and corporate consumers including the SME customer segment of banks.

AlertsThis module empowers customers to subscribe and receive alerts on multiple channels such as e-mail, SMS, voice, fax and Internet. It enables the customer to subscribe to alerts and choose a delivery channel. The module also allows the customer to set preferences for alerts and configure ‘do not disturb’ timings. The module supports the following:

Personalized alerts Alerts from multiple back-end systems Batch or real-time alerts Alerts digest

Mobile Banking Software Suppliers - India

Attotel Technologies - Chennai, India

BK Systems - Chennai, Tamil Nadu, India

Group Technologies and Exports - Nagpur, Maharashtra, India

Banknetindia - Mumbai, India

Indiabizclub - Pune, Maharashtra, India

Nucleus   Software Exports Ltd. - New Delhi, India

Feedbackconsulting - Sion (E), Mumbai, India

ec21 - India

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Syndicate Ban k Registration

Collect SMS Banking application from your home branch, fill in and submit the same to them. After that, register for SMS Enquiry through same Mobile Phone by sending SMS Registration message

as given below. Customer ID can be obtained from the Branch for the purpose of using SMS Enquiry facility. Please note

down same. Details of Mobile numbers (With country code) from which SMS enquiry facility is accessed should be

invariably mentioned very clearly in the application.

Facilities available in SMS Enquiry.

Following facilities available under SMS Enquiry.

Registration for SMS Banking Balance Enquiry in CASA Change of primary account Term Deposit details enquiry Issued Cheque status Cheque stop request View of last 5 transactions De-register for SMS Banking

1. Please note down your account numbers in full (14 digits) of your operative account numbers and term deposit numbers. If these particulars are not available with you, please get the same from the Branch.

2. Remember your customer ID for sending SMS Enquiries since all your requests are serviced based on customer ID only.

3. If the Mobile Number is recorded in the branch against the Customer ID, the customer can straight away register for this service by sending registration message through SMS.

4. Know the usage of Keywords. Please refer keywords summary below.

5. All the SMS need to be sent to short code ‘56767’ only.

6. SMS should be sent from the same mobile number registered with the Bank.

Syndicate Bank Procedure for registration through mobile phone.

Please follow the sequence mentioned below in order to register for the service.Your mobile number should have been registered by the Bank for the facility against your application (meaning, you should

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have submitted application form in your home branch).

1. Mobile number Registration to be done as a one time measure using the same mobile number furnished to the Bank. The following message is to be sent to 56767 for registration.

SREG <Customer ID> or sreg <Customer ID>

e.g. : SREG 123456 or sreg 123456

System will mark the earliest opened and live operative account as your primary account. In order to register for a specific account, type the following message.

SREG <Customer ID> <14 digit A/c No.> or sreg <Customer ID> <14 digit A/c No.>

e.g.: SREG 123456 04002020013220 or sreg 123456 04002020013220

System will mark the account number mentioned by you in your SMS message as your primary operative account.

2. System will register you for SMS Banking service and sends a welcoming message for mobile banking service of the bank.

3. In case you are trying to send message from a different mobile number that is not registered with Bank, you would be receiving appropriate error message from the system.

STEPS FOR SENDIND THE CASH THROUGH MOBILE BANKING

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MOBILE BANKING SERVICES

Mobile banking can offer services such as the following:

Account Information

1. Mini-statements and checking of account history 2. Alerts on account activity or passing of set thresholds 3. Monitoring of term deposits 4. Access to loan statements 5. Access to card statements 6. Mutual funds / equity statements 7. Insurance policy management 8. Pension plan management 9. Status on cheque, stop payment on cheque 10. Ordering check books 11. Balance checking in the account 12. Recent transactions 13. Due date of payment (functionality for stop, change and deleting of payments) 14. PIN provision, Change of PIN and reminder over the Internet 15. Blocking of (lost, stolen) cards

Payments, Deposits, Withdrawals, and Transfers

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1. Domestic and international fund transfers 2. Micro-payment handling 3. Mobile recharging 4. Commercial payment processing 5. Bill payment processing 6. Peer to Peer payments 7. Withdrawal at banking agent 8. Deposit at banking agent

A specific sequence of SMS messages will enable the system to verify if the client has sufficient funds in his or her wallet and authorize a deposit or withdrawal transaction at the agent. When depositing money, the merchant receives cash and the system credits the client's bank account or mobile wallet. In the same way the client can also withdraw money at the merchant: through exchanging sms to provide authorization, the merchant hands the client cash and debits the merchant's account.

Investments

1. Portfolio management services 2. Real-time stock quotes 3. Personalized alerts and notifications on security prices 4. mobile banking

Support

1. Status of requests for credit, including mortgage approval, and insurance coverage 2. Check (cheque) book and card requests 3. Exchange of data messages and email, including complaint submission and tracking 4. ATM Location

Content Services

1. General information such as weather updates, news 2. Loyalty-related offers 3. Location-based services

Based on a survey conducted by Forrester, mobile banking will be attractive mainly to the younger, more "tech-savvy" customer segment. A third of mobile phone users say that they may consider performing some kind of financial transaction through their mobile phone. But most of the users are interested in performing basic transactions such as querying for account balance and making bill payment.

Mobile Banking in India

 India is marching towards m-commerce - a world where you can make all payments by keying in instructions on your mobile phone. In India, however, there is a limitation on the availability of functions

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that can be deployed by banking customers.   Most m-banking transactions today are ‘information-based’ -- customers engage in m-banking services like balance enquiry, last three transactions, "alerts" for strange activities in bank accounts etc. Some banks like IDBI Bank are also offering bill-payment services to customers through m-banking.   However, actual cash transactions like fund-transfer, payment of bills at a restaurant among others have not yet been introduced in India. There are many reasons for this.   Firstly, as m-banking is currently SMS-based, the transaction delivery time is not guaranteed since it is dependent on factors like SMSC (short message service centre) congestion and network strength in the area where the customer is located. Secondly, there is an issue of repudiation as till date there are no clear guidelines on wireless payments.   In the very near future, one can see m-banking leaping into a new phase. With the advent of Java-enabled mobile devices, the shape of m-banking services is in for a change.  One would also be ensured the same amount of security and comfort as one would be when using internet banking. 

  M-banking Implications

 Micropayments In the more affluent economies, a good infrastructure for a cashless environment is already prevalent and most people have bank accounts and access to both debit and credit facilities. These factors are incentives in the developing countries to move the population at large away from cash with introductions of low cost solutions such as micro-payments to further efficiency gains.

 Smart Money The service was launched in December 2000 in co-operation with First E-Bank, which has since been acquired by Banco de Oro, and MasterCard, one of the world’s leading payment services providers. According to SMART, SMART Money was the world’s first re-loadable electronic cash wallet, linked together by their cellular network. Once cash has been transferred to the SMART Money account, it can be used in thousands of shops and restaurants. The cash value can also be used to load airtime, pay utility bills, or transfer money from one SMART Money card to another. 

  G-Cash  The service was launched in October 2004, with an initial set of three anchor services; international and domestic remittance, P2P (phone-to-phone or person-to-person) transfers and payments for retail purchases. With G-Cash, all of GLOBE’s subscribers are m-Commerce-enabled. As users do not need to have a card or bank account to be part of the service, G-Cash is able to provide M-Commerce capability to a previously underserved segment of the market, including those who currently do not do banking. Unlike SMART’s approach whereby it operates the service jointly with BDO, GLOBE on its own maintains records of all transactions and arranges settlement between the retailers and the G-Cash customers. G-

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Cash provides services through close to 4,900 retail outlets nationwide and more than 500 G-Cash partners.

  Mobile Remittance  Migrant remittances, which are personal flows from migrants to their friends and families, have become a major source of external development finance, and in the process, play an effective role in reducing poverty.  Capitalizing on the benefits of such a system, remittance services can become cheaper and more convenient, thus improving financial access of migrants, their beneficiaries and the financial intermediaries in the origin countries.

 Microfinance through Mobile Technology Currently, a major constraint to microfinance is the high cost of operating in remote areas. Many institutions are now working toward low-cost delivery options such as Internet banking and cashless transactions to help the rural poor. The mobile devices that could be a more efficient tool for such transactions. For people in such rural areas, using computers is often a problem due to faulty Internet connections and frequent power failures. Hence, providing microcredits through a mobile platform (SMS-based) could be the best way to reach out to the poor.

STATISTICS

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Market Report: Mobile Banking in India used by 40 Million Urban Indians

Mobile banking in India is set to explode -  approximately 43 million urban Indians used their mobile phones to access banking services during quarter ending August, 2009, a reach of 15% among urban.

Most Popular Banking Service on MobileIn countries like Korea, two SIM Card is used in mobile phones. One for the telephonic purpose and the other for banking. Bank account data is encrypted on a smart-card chip. About 3.3 million transactions were reported by Bank of Korea in 2004

Checking account balances is the most popular banking service used by urban Indians with almost 40 million users followed by checking last three transactions, 28 million and status of cheques with 21 million users.

Usage Unique Users (In millions)

Used mobile banking 43.70

Checking account balance 39.97

View last three transactions 28.15

Status of cheques 21.06

Payment reminders 20.92

Request a cheque book 19.11

Mobile banking is popular among the Rs.1 to 5 lakhs per year income group with almost 60% of mobile banking users falling in the income bracket, an indicator of adoption of this service by younger generation.

A. Cell phone teledensity is still very low in India at around 6%, In comparison, China’s cell phone density is at around 35%, while some of the European and Asia-Pacific countries have 100% teledensity or more in mobile telephony.

B. In the past two years, the number of people using mobiles has increased three times

C. Indian cellular services market is projected to reach $24 billion by the end of 2009, a CAGR of 35.6%, Gartner said. Indian cellular services market had recorded the highest growth in Asia Pacific and Japan region in 2004 with a CAGR of 67%.

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D. India is all set to be among the top four countries in mobile phone subscriber numbers by the end of year 2008, according to industry analysts

E. As on August 31, 2008, There were 62.57 million mobile subscribers in India, according to data provided by the TRAI. Fixed Phone users already lag behind by 47.44 million

Awareness of technology formats Singapore Australia India China TaiwanDon't know 14% 31% 18% 5% 7%Java ready 7% 8% 18% 9% 2%WAP 66% 79% 88% 91% 93%MMS 85% 82% 79% 88% 84%

CLIENT BASE

Transaction through branches :- 9.5*/month

Transaction through Mobile-23*/month

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Transaction through Internet :- 26*/month

(*Figures are in millions) Source :- Lokmat dated 24th July,2008.Mumbai Edition

COST ADVANTAGE

Through Branch Rs. 35-40 / Transaction ATM Transaction Rs. 15-30 / Transaction Internet Transaction Rs. 10-15 / Transaction Mobile Transaction Rs. 2-5 / Transaction

Stake-Holder’s Expectation The stake-holders are as follows: -

A. ConsumersB. MerchantsC. Mobile Network OperatorsD. Mobile Device ManufacturerE. Financial Institution & BanksF. Software & Technology ProvidersG. Government

Each stake-holder group has the following expectations: -A. Consumer : -

Personalized service

Minimal learning curve

Trust, privacy and security

Ubiquitous - anywhere, anytime and any currency

Low or zero cost of usage

Interoperability between different network operators, banks and devices

Anonymity of payments like cash

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Person to person transfers

B. Merchant : -

Faster transaction time

Low or zero cost in using the system

Integration with existing payment systems

High security

Being able to customize the service

Real time status of the mobile payment service

Minimum settlement and payment time

C. Telecom Network Providers : -

Generating new income by increase in traffic

Increased Average Revenue Per User (ARPU) and reduced churn (increased loyalty)

Become an attractive partner to content providers

D. Mobile Device Manufacturers : -

Large market adoption with embedded mobile payment application

Low time to market

Increase in Average Revenue Per User (ARPU)

E. Banks : -

Network operator independent solutions

Payment applications designed by the bank

Exceptional branding opportunities for banks

Better volumes in banking - more card payments and less cash transactions

Customer loyalty

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F. Software & Technology Providers :

Large markets

G. Government : -

Revenue through taxation of m-payments

Standards

There are lots of evidences that not only big cities are using mobile banking, but even thousands of people from rural areas across 12 states are also likely to get their social security pension and wages paid under the National Rural Employment Guarantee Act (NREGA) Scheme with the help of mobiles over the coming few months. Bharti Airtel, too, is in the process of tying-up with two leading banks to extend its mobile remittance services to rural areas, according to its President (Mobile Services), Sanjay Kapoor.

Airtel has already partnered with the Indian Farmers' Fertilizers Cooperative Limited (IFFCO) to set up IFFCO Kisan Sanchar Limited in Rajasthan. Under this initiative, thecooperative department will provide mobile hand-sets to farmers at marginal price through its out-lets in the rural areas. These hand-sets would be loaded with green SIM cards, which will flash daily updates on agricultural practices and weather forecasts free of cost.

Challenges for a Mobile Banking Solution

Key challenges in developing a sophisticated mobile banking application are :

Handset operability

There are a large number of different mobile phone devices and it is a big challenge for banks to offer mobile banking solution on any type of device. Some of these devices support J2ME and others support SIM Application Toolkit, a WAP browser, or only SMS.

Initial interoperability issues however have been localized, with countries like India using portals like R-World to enable the limitations of low end java based phones, while focus on areas such as South Africa have defaulted to the USSD as a basis of communication achievable with any phone.

The desire for interoperability is largely dependent on the banks themselves, where installed applications(Java based or native) provide better security, are easier to use and allow development of more complex capabilities similar to those of internet banking while SMS can provide the basics but becomes difficult to operate with more complex transactions.

There is a myth that there is a challenge of interoperability between mobile banking applications due to perceived lack of common technology standards for mobile banking. In practice it is too early in the service lifecycle for interoperability to be addressed within an individual country, as

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very few countries have more than one mobile banking service provider. In practice, banking interfaces are well defined and money movements between banks follow the IS0-8583 standard. As mobile banking matures, money movements between service providers will naturally adopt the same standards as in the banking world.

Security

Security of financial transactions, being executed from some remote location and transmission of financial information over the air, are the most complicated challenges that need to be addressed jointly by mobile application developers, wireless network service providers and the banks' IT departments.

The following aspects need to be addressed to offer a secure infrastructure for financial transaction over wireless network :

1. Physical part of the hand-held device. If the bank is offering smart-card based security, the physical security of the device is more important.

2. Security of any thick-client application running on the device. In case the device is stolen, the hacker should require at least an ID/Password to access the application.

3. Authentication of the device with service provider before initiating a transaction. This would ensure that unauthorized devices are not connected to perform financial transactions.

4. User ID / Password authentication of bank’s customer. 5. Encryption of the data being transmitted over the air.

Scalability & Reliability

Another challenge for the CIOs and CTOs of the banks is to scale-up the mobile banking infrastructure to handle exponential growth of the customer base. With mobile banking, the customer may be sitting in any part of the world (true anytime, anywhere banking) and hence banks need to ensure that the systems are up and running in a true 24 x 7 fashion. As customers will find mobile banking more and more useful, their expectations from the solution will increase. Banks unable to meet the performance and reliability expectations may lose customer confidence. There are systems such as Mobile Transaction Platform which allow quick and secure mobile enabling of various banking services. Recently in India there has been a phenomenal growth in the use of Mobile Banking applications, with leading banks adopting Mobile Transaction Platform and the Central Bank publishing guidelines for mobile banking operations.

Application distribution

Due to the nature of the connectivity between bank and its customers, it would be impractical to expect customers to regularly visit banks or connect to a web site for regular upgrade of their mobile banking application. It will be expected that the mobile application itself check the upgrades and updates and download necessary patches (so called "Over The Air" updates). However, there could be many issues to implement this approach such as upgrade / synchronization of other dependent components.

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Personalization

It would be expected from the mobile application to support personalization such as :

1. Preferred Language 2. Date / Time format 3. Amount format 4. Default transactions 5. Standard Beneficiary list 6. Alerts

CONCLUSION

Mobile banking is gaining traction in India on a number of levels, though the speed at which eachregion adopts mobile banking clearly differs. India has a greater enthusiasm for mobile banking servicesthan Taiwan, for example. However, mobile penetration rates in India are considerably smaller than in itsFar Eastern neighbours, with only one fifth of Indians possessing mobile devices against 103% mobilepenetration in Taiwan. The contradiction of less devices but greater mobile service use can be answered to some extent by the fact that India has three times the number of mobile internet users (31.3 million) than fixed line internet users (9 million) (source: Trai 2007). In short, Indian mobile device use is fundamentally different, mirroring the region’s sentiment towards mobile banking.

As a market in its infancy, it is interesting to watch how mobile banking develops and which financialinstitutions become the trailblazers in offering consumers another tool with which to monitor and managetheir finances. For the financial institution, the value in offering mobile services is two-fold – revenue

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generation and cost reduction.Revenue generation, not surprisingly, is often presented as the more ‘vibrant’ area for businesses to focus on,especially in the media and entertainment fields where premium pay mobile content creates exciting new revenue opportunities. However, the survey shows that there are monetisation opportunities for the financial sector as people are prepared, in some cases, to pay for premium personal finance and security services using a mobile.

Cost reduction provides an additional business proposition for mobile banking services. Creating data services to lighten the burden on customer service infrastructure, whilst also adding value to the customer experience is more likely to strengthen a business case for banks to ‘go mobile’. In short, banks need a 360-degree view of mobile service deployment and its benefits to customer and operational expenditure alike.The impetus now is for mobile and banking sectors to encourage mobile banking services and to highlight the benefits of mobile banking to an audience who are likely to be open to using another tool to support their enthusiasm for personal financial services in a more immediate manner than the Internet can afford.

Though diversity within India is an important consideration, this helps to answer some of the more fundamental questions that financial institutions grapple with when formulating mobile strategy. For example, there is considerable interest in mobile banking services across these huge populations and, in some areas, encouraging levels of service awareness to adoption ratios. Awareness is key if banking is to realise the opportunities presented by mobile services. Most of the Indian mobile user base is a largely untapped market in terms of mobile banking and there appears to be evident potential to expand existing efforts in helping consumers link to their banks via mobile data.

In response to the findings, Sybase 365 has developed five key considerations for evolving mobile services and adoption in the banking sector.

• Increase awareness of mobile banking services amongst customer base• Develop more sophisticated mobile data services beyond balance and payment updates• Establish the enthusiasm for mobile banking services with different aspects of the customer demographic• Evaluate operational savings of text ‘push’ services to replace aspects of customer service proposition • Use flexibility of mobile data projects to validate wider strategy mobile services expansion

Mobile banking is not necessarily a panacea for all customer needs. Like any technology format it is a tool that can enhance existing services. Customers are keen to be kept abreast of any changes to the nano-economy and it appears that existing mobile provisioning could capitalise on this opportunity and better capture the imagination of mobile users. Innovation and cost management are critical tenets for commercial success in the financial sector and mobile banking services are capable of delivering against both of these objectives ifappropriately executed.

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