mobile banking
TRANSCRIPT
Mobile Banking
EXECUTIVE SUMMARY
The last time that technology had a major impact in helping banks service their customers was
with the introduction of the Internet banking. Internet Banking helped to give the customer's
anytime access to their banks. Customer's could check out their account details, get their bank
mobile phone banking is the domain of a lucky few with constantly changing customer
preferences and a greater emphasis placed on mobility, it could soon become a mainstream
ability. Mobile-phone owners currently have access to mobile banking but choose not to utilise
it. This is predicated to change by 2014, when 45 percent of users will actually use it. Advancing
technologies will enable mobile banking to become a convenient and quick way for consumers to
check their balance as well as pay for goods.
"Mobile banking is quickly moving from infancy to commonplace, which will help separate the
winners from losers in banks' ability to attract and keep technology-loving consumers,"
"Consumers are hungry for the 'always-on' and 'real time' ability to monitor and manage their
money, and mobile banking serves that need better than any other." One of the factors driving
the mobile banking surge is the increased usage of smart-phones, such as the iPhone, as well as
the race between phone companies to develop the basic thin-client capabilities dubbed "wrapper
applications" designed to integrate financial services into mobile online sites.
It will also work in tandem with online banking, with mobile banking being used as a "remote
control" and ''online'' as a detailed form of control panel for more complex transactions.By 2014,
the percentage of people using mobile banking will equate to approximately 99 million US adults
conducting mobile banking transactions at least once per year. 52 percent of these customers are
reckoned to be using smart-phones.
"Mobile banking is quickly becoming an essential consumer capability," said Mark
Schwanhausser, Financial Services Channels Analyst speaking to Cellular News.
Mobile banking is a credible channel, but usage in developed markets will remain low
IT spending on mobile banking is continuing, but it is not the highest priority channel
Mobile banking’s greatest opportunity involves serving the needs of the unbanked
retail banks and technology vendors must be prepared to play the long game
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I N D E X
SL NO CONTENT PAGE NO
1 PREFACE 4
2 ACKNOWLEDGEMENT 5
3 INTRODUCTION 6
4 OBJECTIVE OF THE STUDY 8
5 METHODOLOGY OF THE STUDY 9
6 LIMITATIONS 9
7 INTRODUCTION TO MOBILE BANKING. 10
8 A MOBILE BANKING CONCEPTUAL MODEL. 15
9 CONSIDERATION WHEN IMPLEMENTING MOBILE
BANKING
15
10 FEATURES OF MOBILE BANKING 16
11 TRENDS IN MOBILE BANKING 17
12 MOBILE BANKING BUSINESS MODEL 19
13 MOBILE BANKING SERVICES. 20
14 UTILITY OF MOBILE BANKING FROM BANK’S
PERSPECTIVE.
25
15 MOBILE BANKING DISTRIBUTION CHANNEL 27
16 TECHNOLOGIES ENABLING MOBILE BANKING. 29
17 ADVANTAGES AND DISADVANTAGES OF MOBILE
BANKING.
34
18. MARKETING FOR MOBILE BANKING 35
19. CHALLENGES FOR MOBILE BANKING 36
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20 FEATURES OF MOBILE COMMERCE 38
21 EMPLOYMENT OF MOBILE TECHNOLOGIES IN BANKING
SECTOR
40
22 MOBILE BANKING IN BANGLADESH 42
23 MOBILE BANKING IN THE WORLD 42
24 THE FUTURE OF MOBILE BANKING 44
25 RECOMMENDATION 46
26 CONCLUSION 47
27 REFERENCE 48
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P R E F A C E
First of all I would like to be grateful to the Almighty Allah, the merciful and the munificent
who helped me to complete this term paper.
Over the last few years, the mobile and wireless market has been one of the fastest growing
markets in the world and it is still growing at a rapid pace. This opens up huge markets for
financial institutions interested in offering value added services. With mobile technology, bank
scan offer a wide range of services to their customers such as doing funds transfer while
traveling, receiving online updates of stock price or even performing stock trading while being
stuck in traffic. Mobile devices, especially smart-phones, are the most promising way to reach
the masses and to create “stickiness” among current customers, due to their ability to provide
services anytime, anywhere, with high rate of penetration and potential to grow.
In this term paper I tried to explain the basic concepts, services offered, market survey and
technology which enables Mobile Banking.
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ACKNOWLEDGEMENT
I want to take the opportunity to express my gratitude to all those people who have been
instrumental in making this term paper successful.
I would like to express my gratitude to all those who gave me the possibility to complete this
term paper. I would like to thank my honorable chairman Prof. Dr. Shelina Akhter, Department
of Management Studies, University of Chittagong.
I am deeply indebted to my honorable teacher, Mrs. Sharmeen Ahmed, Associate Professor,
Department of Management Studies, University of Chittagong, who gave me the permission,
opportunity and immense support by stimulating suggestions and encouragement that helped me
in all the time of research for and writing of this term paper.
INTRODUCTION
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The kind of banking and financial service that gives a real-time mobile access to customer on the
move is called mobile banking the services being offered through mobile phone. Mobile banking
to the banking activity that is carried out on mobile (cell) phones that is banking is enabled even
while a person is on the move. In modern times, information exchange takes place at great speed.
The dependence of people on computing devices such as computers, cellular phone, pager,
facsimile machine, e-mail and internet is growing at galloping rate. Such growth has made the
real time exchange of information a reality. At the same time it has also thrown challenges to
modern enterprises. Which prompt them to act in a proactive manner so as to stay competitive in
the business world. The constant innovation happening in the realm of electronic banking and
financial services has contributed to a new development called ‘mobile banking’ this may be
attributed to the forth coming demand from the mobile workforce. The increasingly growing
number of mobile workforce has really given a cutting edge to the progress of the electronic
banking. The mobile banking refers to the facility allowed by certain banks in India whereby the
mobile phone holder can undertake certain banking transaction through their mobile phones.
This value added services has very little human interface and private banks have started offering
this service. The customer is required to type a text message on the mobile phone which travel
through the server of the cell phone service provider to bank’s internet service; information is
retrieved and routed back the same way in 15-30 second. To avail the service, the client has to
fill up form at any of bank’s branches and bank informs the cellular service provider to activate
the module instantly. The information which includes checking of account balance, request for a
Cheque book, stop payment instruction, changing primary operation account, request for current
periods’ account statement to the mailed and access summaries of last three transactions
performed on the account.
The number of people using mobile banking services has increased. While the trend is growing,
lack of awareness of services, apart from perceived security issues are inhibiting faster takeoff. “-
Dataquest. It was clear at the start itself that this would be a battle focused not on technology,
but on the mindset of the target audience. Over two years after the launch of mobile banking
services in the country, that bridge has been reached and many are beginning to walk those
cautious steps across it. Yes, the usage of mobile banking services is increasing, and fast against
dataquest’s estimated user base of under 10,000 for mobile banking services in 2000, there are
over 120,000 today who SMS from their banking. Even our survey despite targeting a respondent
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profile that would bring in more positive answers than negative (see methodology), threw up
very low usage numbers. Also, e-commerce as a medium of purchasing and transacting has not
really caught on, and the basket of mobile banking offerings is, in itself, very limited. The good
news the technology backbone is in place, and getting better. There’s CDMA, there’s GSM.
Forget their battles on the mobile telephony front from the consumer’s point of view; he never
had it so good.
The recent price cuts are also likely to help, “say banking experts, adding that this will lead to
“increasing willingness to move on to mobile, and therefore, to the value-added services that
most operators offer today”
The Internet is revolutionizing the way the financial industry conducts business, empowering
organization with new business model and new ways to interact with customers. The ability to
perform banking transactions online banks and brokers who offer personalized services through
their web portals. This increased competition is driving traditional financial institutions to find
new ways to add value to their product and services, gain competitive advantage and increase
customer loyalty while also attracting new, high-value client.
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OBJECTIVE OF THE STUDY
Mobile and wireless technology, combined with the wide variety of portable devices available
today, enable new revenue opportunities for financial services organizations. This provides a
new channel that can be used to refresh and expand the customer base, attract prime customers
and enhance loyalty. With mobile and wireless technology, banks can offer a wide possibility of
services to their customers, from the freedom of paying bills while stuck in traffic, to receiving
notification of a change in stock price while having lunch, the challenge, then is how to turn
these possibilities into a reality for the customers.
METHODS OF THE STUDY
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Following methods have been used to accomplish this proposed solution:
Basic principles of existing banking system (Bangladesh)
Study the major drawbacks of existing system by interviewing the current employees of
different banks. Interviews are mostly taken through emails and in some cases through
telephone and Internet chat.
Study the existing IT infrastructure of Bangladesh in context of Bank by interviewing the
developer of different banking software vendors
Study the Online Banking system from different resources that are available in different
websites, books and online journals
Some of the what-if analysis has been used to measure performance of the proposed
solution.
Design proposed solution.
LIMITATIONS
Mobile Banking is a very much new concept in our country. Only two banks and three mobile
phone operators are trying to implement this. The process is still in a tender age. That’s why a
real impact of mobile banking Bangladesh can’t be picked up by this study. As there are only
two banks implementing it, most of the time I had to rely on web based data for the study.
INTRODUCTION TO MOBILE BANKING
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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 Bangladesh, 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, Bangladesh, China and Korea. The main reason that Mobile
Banking scores over Internet Banking is that it enables 'Anywhere Anytime Banking'.
The last time that technology had a major impact in helping banks service their customers was
with the introduction of the Internet banking. Internet Banking helped to give the customer's
anytime access to their banks. Customer's could check out their account details, get their bank
statements, perform transactions like transferring money to other accounts and pay their bills
sitting in the comfort of their homes and offices.
In fact Korea boasts about a 70% mobile penetration rate and with its tech-savvy populace has
seen one of the most aggressive rollouts of mobile banking services.
Still, the main reason that Mobile Banking scores over Internet Banking is that it enables
‘Anywhere Banking'. Customers now don't need access to a computer terminal to access their
banks, they can now do so on the go – when they are waiting for their bus to work, when they are
traveling or when they are waiting for their orders to come through in a restaurant.
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The scale at which Mobile banking has the potential to grow can be gauged by looking at the
pace users are getting mobile in these big Asian economies. According to the Cellular Operators'
Association of India (COAI) the mobile subscriber base in India hit 40.6 million in the August
2004. In September 2004 it added about 1.85 million more. The explosion as most analysts say,
is yet to come as India has about one of the biggest untapped markets. China, which already
witnessed the mobile boom, is expected to have about 300 million mobile users by the end of
2004. South Korea is targeted to reach about 42 million mobile users by the end of 2005. All
three of these countries have seen gradual roll-out of mobile banking services, the most
aggressive being Korea which is now witnessing the roll-out of some of the most advanced
services like using mobile phones to pay bills in shops and restaurants.
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, 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.
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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.,
(i) Technology and security issues,
(ii) Business issues, and
(iii) Regulatory and supervisory issues.
Each stake-holder group has the following expectations: -
a) To meet the following expectations of 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
Person to person transfers
b) To meet the following expectations of Merchant: -
Faster transaction time
Low or zero cost in using the system
Integration with existing payment systems
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High security
Being able to customize the service
Real time status of the mobile payment service
Minimum settlement and payment time
c) To meet the following expectations of 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) To meet the following expectations of Mobile Device Manufacturers: -
Large market adoption with embedded mobile payment application
Low time to market
Increase in Average Revenue Per User (ARPU)
e) To meet the following expectations of 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
f) To meet the following expectations of Software & Technology Providers:
Large markets
g) To meet the following expectations of Government: -
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Revenue through taxation of m-payments
Standards
Enthusiasm for mobile banking services
66% of respondents in the survey considered that mobile banking provides an excellent
opportunity to enhance existing customer service.
International factors
European and Asia-Pacific regions are considerably ahead of the US in terms of mobile banking
provision – only 10% of US banking organizations taking part in the study currently offer mobile
banking against 57% in Europe.
Expected growth
With 34% of banks (globally) currently offering mobile services to customers, an additional 32%
of respondents plan to offer mobile services in the next 12-24 months.
53% of US banks expect to be offering mobile services in the next 12-24 months, giving
potential parity to mobile service provision across the globe by 2010 (see Figure 1)
The suggestion of considerable momentum for mobile banking over the next two years should be
received warmly by mobile providers and bankers alike. The ratio of mobile banking users, i.e.
customers adopting mobile services remains modest, but is predicted to grow over the next two
years with 58% of banks currently offering mobile banking expecting that at least 1 in 10
customers will be using mobile banking by 2010. However this growth will not come without
modification of existing processes.
Our challenges are all based on standardization measures with regard to browsers, security
demands and operator tariff systems.
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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 customized
information."
According to this model Mobile Banking can be said to consist of three inter-related concepts:
Mobile Accounting
Mobile Brokerage
Mobile Financial Information Services
Most services in the categories designated Accounting and Brokerage are transaction-based. The
non-transaction-based services of an informational nature are however essential for conducting
transactions - for instance, balance inquiries might be needed before committing a money
remittance. The accounting and brokerage services are therefore offered invariably in
combination with information services. Information services, on the other hand, may be offered
as an independent module. Mobile phone banking may also be used to help in business
situations.
CONSIDERATION WHEN IMPLEMENTING MOBILE BANKING
The creation of mobile services is more efficient and effective when financial institution enters in
alliance with mobile operators. The appropriate choice for each player depends on their
combined customer base and the share of market each one brings to the alliance.
The choices are then if one bank should establish alliance with one or many mobile operator. The
theories on the evolution of these types of alliances show that the most usual beginning is from
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one to one. However, the dominant strategy will converge in the long term to a many to many
alliance model.
For large bank the most convenient strategy is to begin with a closed system; an alliance with
one telecommunication company and initially closed to user outside the combined customer
base. This will allow the alliance to lock in big customers before other players begin to enter the
market. At least one or two condition is needed to maintain the closed system working: a critical
mass of customers, or strategic adventure in the operating area.
Banks with not so large customer base or that do not want to risk being the first movers in a
closed system, would prefer to implement open system alliance and try to capture a larger market
share.
The decision about the most appropriate alliance to chose will depend on the particular of the
bank implementing the mobile services and the availability of appropriate partners for
telecommunication operation.
In the same way when choosing wireless platform the critical consideration are the connectivity
with the back –end system and the market several solutions in a short period of time. There are
currently in the market several solution based upon different technology and budget
requirements.
FEARURES OF MOBILE BANKING
Mobile Customers: - those who use ‘mobile telephony’ use mobile banking service.
Mobile telephony is used through mobile phones.
M – Commerce: - mobile banking is a part of m – Commerce whereby business and
trade takes place through mobile on-line. Those mobile users who became on line internet
users do M – Commerce.
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Technology based: - Mobile banking are based on technology of development. Mobile
banking makes use of internet for transmission, transaction & delivery of banking
services. The network provider the required software support.
Services: - Mobile banking offers the entire internet-based banking services such as on-
line account opening, account verification, funds transfer etc.
Eligibility: - At present, mobile banking is extended only to individual customer having
account with any branch of a particular bank that offers internet banking facility. Further,
it is also required that the customer is registered as on internet banking customer.
Application: - In order to avail the facility of mobile banking, an application duly filled
is to be submitted to the bank. The application is invariably made available in the official
website of the bank.
TRENDS IN MOBILE BANKING
The advent of the Internet has revolutionized the way the financial services industry conducts
business, empowering organizations with new business models and new ways to offer 24x7
accessibility to their customers.
The ability to offer financial transactions online has also created new players in the financial
services industry, such as online banks, online brokers and wealth managers who offer
personalized services, although such players still account for a tiny percentage of the industry.
Over the last few years, the mobile and wireless market has been one of the fastest growing
markets in the world and it is still growing at a rapid pace. According to the GSM Association
and Ovum, the number of mobile subscribers exceeded 2 billion in September 2005, and now
exceeds 2.5 billion (of which more than 2 billion are GSM).
According to a study by financial consultancy Celent, 35% of online banking households will
be using mobile banking by 2010, up from less than 1% today. Upwards of 70% of bank center
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call volume is projected to come from mobile phones. Mobile banking will eventually allow
users to make payments at the physical point of sale. "Mobile contactless payments” will make
up 10% of the contactless market by 2010.
Many believe that mobile users have just started to fully utilize the data capabilities in their
mobile phones. In Asian countries like India, China, Bangladesh, Indonesia and Philippines,
where mobile infrastructure is comparatively better than the fixed-line infrastructure, and in
European countries, where mobile phone penetration is very high (at least 80% of consumers
use a mobile phone), mobile banking is likely to appeal even more.
This opens up huge markets for financial institutions interested in offering value added services.
With mobile technology, banks can offer a wide range of services to their customers such as
doing funds transfer while travelling, receiving online updates of stock price or even performing
stock trading while being stuck in traffic. According to the German mobile operator Mobilcom,
mobile banking will be the "killer application" for the next generation of mobile technology.
Mobile devices, especially smartphones, are the most promising way to reach the masses and to
create “stickiness” among current customers, due to their ability to provide services anytime,
anywhere, high rate of penetration and potential to grow. According to Gartner, shipment of
smartphones is growing fast, and should top 20 million units (of over 800 million sold) in 2006
alone.
In the last 4 years, banks across the globe have invested billions of dollars to build sophisticated
internet banking capabilities. As the trend is shifting to mobile banking, there is a challenge for
CIOs and CTOs of these banks to decide on how to leverage their investment in internet banking
and offer mobile banking, in the shortest possible time.
The proliferation of the 3G (third generation of wireless) and widespread implementation
expected for 2003–2007 will generate the development of more sophisticated services such as
multimedia and links to m-commerce services.
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MOBILE BANKING BUSINESS MODEL
A wide spectrum of Mobile/branchless banking models is evolving. However, no matter what
business model, if mobile banking is being used to attract low-income populations in often rural
locations, the business model will depend on banking agents, i.e., retail or postal outlets that
process financial transactions on behalf telcos or banks. The banking agent is an important part
of the mobile banking business model since customer care, service quality, and cash
management will depend on them. Many telcos will work through their local airtime resellers.
However, banks in Colombia, Brazil, Peru, and other markets use pharmacies, bakeries, etc.
These models differ primarily on the question that who will establish the relationship (account
opening, deposit taking, lending etc.) to the end customer, the Bank or the
Non-Bank/Telecommunication Company (Telco). Another difference lies in the nature of agency
agreement between bank and the Non-Bank. Models of branchless banking can be classified into
three broad categories - Bank Focused, Bank-Led and Nonbank-Led.
Bank-focused model
The bank-focused model emerges when a traditional bank uses non-traditional low-cost delivery
channels to provide banking services to its existing customers. Examples range from use of
automatic teller machines (ATMs) to internet banking or mobile phone banking to provide
certain limited banking services to banks’ customers. This model is additive in nature and may
be seen as a modest extension of conventional branch-based banking.
Bank-led model
The bank-led model offers a distinct alternative to conventional branch-based banking in that
customer conducts financial transactions at a whole range of retail agents (or through mobile
phone) instead of at bank branches or through bank employees. This model promises the
potential to substantially increase the financial services outreach by using a different delivery
channel (retailers/ mobile phones), a different trade partner (telco / chain store) having
experience and target market distinct from traditional banks, and may be significantly cheaper
than the bank-based alternatives. The bank-led model may be implemented by either using
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correspondent arrangements or by creating a JV between Bank and Telco/non-bank. In this
model customer account relationship rests with the bank
Non-bank-led model
The non-bank-led model is where a bank has a limited role in the day-to-day account
management. Typically its role in this model is limited to safe-keeping of funds. Account
management functions are conducted by a non-bank (e.g. telco) who has direct contact with
individual customers.
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
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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
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
Especially for clients in remote locations, it will be important to help them deposit and withdraw
funds at banking agents, i.e., retail and postal outlets that turn cash into electronic funds and vice
versa. The feasibility of such banking agents depends on local regulation which enables retail
outlets to take deposits or not.
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
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exchanging SMS to provide authorization, the merchant hands the client cash and debits the
client's account.
Investments
1. Portfolio management services
2. Real-time stock quotes
3. Personalized alerts and notifications on security prices
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.
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One way to classify this service depending on the originator of a service session is the push/pull
nature. ‘Push’ is when the bank sends out information based upon an agreed set of rules, for
example your banks send out an alert when your account balance goes below a thousand level.”
pull” when the customer explicitly request a service or information from the bank so a request
for your last five transaction statement is a pull based offering.
The other way to categorize the mobile banking services by the nature of the service, gives us
two kind of services:- Transaction based on 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 services transaction based services are also differentiated from enquiry based
services in the sence that they require additional security across the channel from the mobile
phone to the banks date servers.
Based upon the above classifications are arrive at the following services listed below:-
Push Based Pull based
Transaction Based
Fund Transfer
Bill Payment
Other Financial
Services like share
trading
Enquiry Based
Credit / Debit Alerts
Minimum Balance
Alerts
Bill payment alerts
Account Balance
enquiry
Account statement
enquiry
Cheque Status enquiry
Cheque book request
Recent transaction
history
Table:- Classification of Services
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DEVICES
Mobile phone and palm pilot are the most important wireless devices. Even though, there is
solution for both type of devices and some banks use both mechanisms to deliver their service,
mobile phone has more potentially due to its rate of penetration especially countries.
The following table presents the technology and advantages and disadvantages of both:
Device Technology Advantages/Disadvantages
Mobile phone
SMS
Mobile phone is a more effective way
to reach the “unbanked masses”,
specially in emerging markets.
Screen and keyboard will limit
functionality.
SMS is a low-cost mechanism for non-
voice communication. Especially
important in countries
Where communication is still expensive.
Pricing is per message send it.
Texts are not much user-friendly.
It is a more friendly due to its web
enabled capacity.
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WAP It will be expensive for the
customer(pricing per minute).
Table:- Technology
UTILITY OF MOBILE BANKING FROM BANKS’ PERSPECTIVE
At this stage it would be relevant to understand the usefulness of Mobile Banking from the
banks’ perspective. It is therefore imperative to understand the business environment in which
banks operate and to identify customer groups that the banks may seek to target via Mobile
Banking.
Intensified Competition in the Banking Sector:
Bank products are of immaterial nature sold increasingly with the help of computer networks
spanning across the globe The global networks provide the customer with world-wide services,
for instance the use of credit cards while abroad. The creation of an EU-wide single domestic
market has led to intensification of competition in the EU in all business fields including in the
banking sector.
The ongoing Globalization has further intensified the competition. Technical developments
coupled with the process of Globalization, have made it possible for banks to offer their services
in far-flung areas without investing money to build branches and hire additional staff.
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Mobile Banking
This opportunity, of course, is a two-way street: On the one hand, a bank gets access to new
markets.
On the other hand it is faced with increased competition on its home turf. To master this
combination of opportunities and challenges banks need – apart from business consolidation and
cooperation – organic growth. It is therefore necessary to retain the existing customer base while
simultaneously acquiring new, economically prosperous customers. Seen in conjunction with the
price-sensitivity of customers and the resultant low relevance of the brand-name banks are
compelled to introduce innovative services that potentially attract prospective customers while
retaining others. Even though the brand-name remains a critical factor on account of the need for
trust in banking business, the Globalization and the technological developments, however, have
reduced entry barriers so that the number of available reputed brands has increased significantly;
thereby intensifying the competition.
Adapting to Requirements of Core Target Groups:
Banks, today, are increasingly confronted with technology-savvy customers who are often on the
move. As Wolfgang Klein, Private Customers Director at Postbank, a leading German bank,
puts it: “Today’s customers want to organise banking transactions while on the move,
irrespective of opening hours”.Banks are responding to this development by introducing mobile
services. Core target groups of Mobile Banking are often divided in three categories:
a) The Youngsters: The segment of 14-18 years old youth has acquired an important role in the
growth of mobile telecommunications and related services. This group is technology-savvy
and willing to experiment with innovative products and services. The youngsters, often on the
move, demand ubiquitous, anytime service. Though the youngsters as a group are hardly
relevant for banks from a financial perspective, they represent the prospective clientele of
tomorrow and need to be cultivated in the middle to long-term marketing strategy of the
banks.
b) The Young Adults: Also this segment is thought to be technology- and innovation friendly.
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Mobile Banking
Though this group too is financially not very strong, many members of this group are known
to be involved in stock market activities. Further, this group can be expected to enter in short
to medium-run a professional carrier so that it needs to be cultivated in order to retain
customers of this age-group even after they enter professional lives.
c) The Business People: This group of customers, generally in the age-group of 26-50 years, is
thought to be the most important one for Mobile Banking. Members of this group are generally
well educated and economically well-off. They need to be professionally often on the move and
carry mobile devices to ensure accessibility. For this reason they are ideal candidates to use
services offered via mobile devices. From the banks’ perspective this group
is particularly attractive on account of its relative economic prosperity and the need for
financial services, e.g. home loans for young families.
In order to fulfill the requirements of these customer groups banks tend to look at Mobile
Banking as a promising option. However, these services also have their own utility for the banks.
MOBILE BANKING AS DISTRIBUTION CHANNEL
Mobile Banking enhances the number of existing channels of distribution that a bank employs to
offer its services. The efficiency of a distribution channel can be measured by its fulfillment of
three major objectives, which are closely related to each other.
Increasing Sales Volume
One of the primary tasks of a distribution channel is to increase the volume of demand for
products at profitable prices .This objective is arrived by increasing operational efficiency so that
those losses are minimized that are caused by delays in catering to customer orders. Further, a
favorable reputation of the firm’s logistical capacities may help generate additional orders.
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Mobile Banking
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 a 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).
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Mobile Banking
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.
TECHNOLOGIES ENABLING MOBILE BANKING
Technically speaking most of these services can be deployed using more than one channel.
Presently, Mobile Banking is being deployed using mobile applications developed on one of the
following four channels.
1. IVR (Interactive Voice Response)
2. SMS (Short Messaging Service)
3. WAP (Wireless Access Protocol)
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Mobile Banking
4. Standalone Mobile Application Clients
1. IVR (Interactive Voice Response)
IVR or Interactive Voice Response service operates through pre-specified numbers that banks
advertise to their customers. Customer's make a call at the IVR number and are usually greeted
by a stored electronic message followed by a menu of different options. Customers can choose
options by pressing the corresponding number in their keypads, and are then read out the
corresponding information, mostly using a text to speech program.
Mobile banking based on IVR has some major limitations that they can be used only for Enquiry
based services. Also, IVR is more expensive as compared to other channels as it involves making
a voice call which is generally more expensive than sending an SMS or making data transfer (as
in WAP or Standalone clients).
One way to enable IVR is by deploying a PBX system that can host IVR dial plans. Banks
looking to go the low cost way should consider evaluating Asterisk, which is an open source
Linux PBX system
Asterisk, due to its open source nature has caught on in a big way and is being sold as an PBX
solutions by quite a few companies commercially. However there has been considerable noise on
multiple Asterisk related forums over the stability of Asterisk based systems. Companies
planning to use Asterisk for their IVR solutions should certainly do a rigorous evaluation of its
capabilities before committing their long term future on it.
2. SMS (Short Messaging Service)
SMS uses the popular text-messaging standard to enable mobile application based banking. The
way this works is that the customer requests for information by sending an SMS containing a
service command to a pre-specified number. The bank responds with a reply SMS containing the
specific information.
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Mobile Banking
For example, customers of the HDFC Bank in India can get their account balance details by
sending the keyword ‘HDFCBAL' and receive their balance information again by SMS. Most of
the services rolled out by major banks using SMS have been limited to the Enquiry based ones.
However there have been few instances where even transaction-based services have been made
available to customer using SMS. For instance, customers of the Bank of Punjab can make fund
transfer by sending the SMS ‘ TRN(A/c No)(PIN No)(Amount)'.
One of the major reasons that transaction based services have not taken of on SMS is because of
concerns about security and because SMS doesn't enable the banks to deliver a custom user
interface to make it convenient for customers to access more complex services such as
transactions.
The main advantage of deploying mobile applications over SMS is that almost all mobile
phones, including the low end, cheaper one's, which are most popular in countries like India and
China are SMS enabled.
An SMS based service is hosted on a SMS gateway that further connects to the Mobile service
providers SMS Centre. There are a couple of hosted IP based SMS gateways available in the
market and also some open source ones like Kannel .
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Mobile Banking
3. WAP (Wireless Access Protocol)
WAP uses a concept similar to that used in Internet banking. Banks maintain WAP sites which
customer's access using a WAP compatible browser on their mobile phones. WAP sites offer the
familiar form based interface and can also implement security quite effectively.
Bank of America offers a WAP based service channel to its customers in Hong Kong. The banks
customers can now have an anytime, anywhere access to a secure reliable service that allows
them to access all enquiry and transaction based services and also more complex transaction like
trade in securities through their phone
A WAP based service requires hosting a WAP gateway. Mobile Application users access the
bank's site through the WAP gateway to carry out transactions, much like internet users access a
web portal for accessing the banks services.
The following figure demonstrates the framework for enabling mobile applications over WAP.
The actually forms that go into a mobile application are stored on a WAP server, and served on
demand. The WAP Gateway forms an access point to the internet from the mobile network.
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Mobile Banking
4. STANDALONE MOBILE APPLICATION CLIENTS
Standalone mobile applications are the ones that hold out the most promise as they are most
suitable to implement complex banking transactions like trading in securities. They can be easily
customized according to the user interface complexity supported by the mobile. In addition,
mobile applications enable the implementation of a very secure and reliable channel of
communication.
One requirement of mobile applications clients is that they require to be downloaded on the
client device before they can be used, which further requires the mobile device to support one of
the many development environments like J2ME or Qualcomm's BREW. J2ME is fast becoming
an industry standard to deploy mobile applications and requires the mobile phone to support
Java.
The major disadvantage of mobile application clients is that the applications needs to be
customized to each mobile phone on which it might finally run. J2ME ties together the API for
mobile phones which have the similar functionality in what it calls 'profiles'. However, the rapid
proliferation of mobile phones which support different functionality has resulted in a huge
number of profiles, which are further significantly driving up development costs. This scale of
this problem can be gauged by the fact that companies implementing mobile application clients
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Mobile Banking
might need to spend as much as 50% of their development time and resources on just
customizing their applications to meet the needs of different mobile profiles.
Out of J2ME and BREW, J2ME seems to have an edge right now as Nokia has made the
development tools open to developers which has further fostered a huge online community
focused in developing applications based on J2ME. Nokia has gone an additional mile by
providing an open online market place for developers where they can sell their applications to
major cellular operators around the world. BREW on the other hand has seen limited popularity
among the developer community, mostly because of the proprietary nature of its business and
because of the steep prices it charges for its development tools.
Quite a few mobile software product companies have rolled out solutions, which enable J2ME
mobile applications based banking. One such product is Wireless I-banco . The mobile user
downloads and installs the wireless I-banco application on their J2ME pone. The J2ME client
connects to the wireless I-banco server through the service providers GSM network to enable
users to access information about their accounts and perform transactions. One of the other big
advantages of using a mobile application client is that it can implement a very secure channel
with end-to-end encryption.
However countries like Bangladesh face a serious obstacle in the proliferation of such clients as
few users have mobiles, which support J2ME or BREW. However, one of the biggest CDMA
players in the telecom industry, Reliance Infocomm has about 7.01 million users all of which
have handsets, which support J2ME. Reliance has unveiled one of the most ambitious data
services deployment program in the country. On the other hand a country like South Korea with
its tech-savvy population has a widespread adoption of the higher-end mobiles, which support
application development.
ADVANTAGES OF MOBILE BANKING
The biggest advantage that mobile banking offers to banks is that it drastically cuts down the
costs of providing service to the customers. For example an average teller or phone transaction
costs about $2.36 each, whereas an electronic transaction costs only about $0.10 each.
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Mobile Banking
Additionally, this new channel gives the bank ability to cross-sell up-sell their other complex
banking products and services such as vehicle loans, credit cards etc.
For service providers, Mobile banking offers the next surest way to achieve growth. Countries
like Korea where mobile penetration is nearing saturation, mobile banking is helping service
providers increase revenues from the now static subscriber base. Also service providers are
increasingly using the complexity of their supported mobile banking services to attract new
customers and retain old ones.
user experience of browsing the internet from a mobile device is familiar and offers a rich
UI experience.
allows end user to access corporate association.
secure connection can be established on most of the mobile browsers.
DISADVANTAGES OF MOBILE BANKING
Many non-standards variables including handsets, browsers and operating system.
Inconsistent user experience due to varying connection speed and different handset.
User needs to have a data plan, which may be a barrier to adoption among price sensitive
demographics.
No “offline” (out of the coverage) capability.
MARKETING FOR MOBILE BANKING
Mobile banking is poised to become the big killer mobile application arena. However, Banks
going mobile the first time need to tread the path cautiously. The biggest decision that Banks
need to make is the channel that they will support their services on.
Mobile banking through an SMS based service would require the lowest amount of effort, in
terms of cost and time, but will not be able to support the full breath of transaction-based
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Mobile Banking
services. However, in markets like India where a bulk of the mobile population users' phones can
only support SMS based services, this might be the only option left.
On the other hand a market heavily segmented by the type and complexity of mobile phone
usage might be good place to roll of WAP based mobile applications. A WAP based service can
let go of the need to customize usability to the profile of each mobile phone, the trade-off being
that it cannot take advantage of the full breadth of features that a mobile phone might offer.
Mobile application standalone clients bring along the burden of supporting multiple mobile
device profiles. According to the Gartner Group, a leading wireless computing consulting
organization, mobile banking services will have to support a minimum of 50 different device
profiles in the near future. However, currently the best user experience, depending on the
capabilities of a mobile phone, is possible only by using a Standalone client.
Mobile banking has the potential to do to the mobile phone what E-mail did to the Internet.
Mobile Application based banking is poised to be a big m-commerce feature, and if South
Korea's foray into mass mobile banking is any indication, mobile banking could well be the
driving factor to increase sales of high-end mobile phones. Nevertheless, Bank's need to take a
hard and deep look into the mobile usage patterns among their target customers and enable their
mobile services on a technology with reaches out to the majority of their customers.
CHALLENGES FOR MOBILE BANKING
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 WAP browser or only SMS.
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Mobile Banking
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
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.
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Mobile Banking
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.
6. Encryption of the data that will be stored in device for later / off-line analysis by the
customer.
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).
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Mobile Banking
However, there could be many issues to implement this approach such as upgrade /
synchronization of other dependent components.
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
FEATURES OF MOBILE COMMERCE
Mobile Commerce is characterized by some unique features that equip it with certain advantages
against conventional forms of commercial transactions, including Electronic Commerce:
i) Ubiquity: Ubiquity means that the user can avail of services and carry out transactions
largely independent of his current geographic location (the “anywhere” feature).
ii) Immediacy: Closely related to the feature of ubiquity is the possibility of real-time
availment of services (the “anytime” feature). This feature is particularly attractive for
services that are time-critical and demand a fast reaction, e.g. stock market information.
iii) Localisation: Positioning technologies, such as the Global Positioning System (GPS),
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Mobile Banking
allow companies to offer goods and services to the user specific to his current location.
LBS can thus cater to consumers’ needs and wishes for localised content and services.
iv) Instant connectivity: Ever since the introduction of the General Packet Radio Service
(GPRS) mobile devices are constantly “online”, i.e. in touch with the network (the
“always-on” feature). This feature brings convenience to the user, as time-consuming dialup
or boot processes are not necessary.
v) Pro-active functionality: Mobile Commerce opens, by the virtue of its ability to be
immediate, local and personal, new avenues for business. The user may choose the
products, and services, which he wants to be kept informed about. The Short Message
Service (SMS) can be used to send brief text messages to customers ensuring that the
“right” (relevant) information is provided to the user at the “right” place, at the “right”
time.
vi) Simple authentication procedure: Mobile devices function with an electronic chip called
Subscriber Identity Module (SIM). The SIM is registered with the network operator and
the owner is thus unambiguously identifiable. The clear identification of the user in
combination with an individual Personal Identification Number (PIN) makes any furthertime-
consuming, complicated and potentially inefficient authentication process redundant.
EMPLOYMENT OF MOBILE TECHNOLOGIES IN THE BANKING
SECTOR
A cornerstone of Mobile Commerce is built by Mobile Banking, the availment of bank-related
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Mobile Banking
financial services via mobile devices. It comprises of services in the field of accounting,
brokerage and financial information. Mobile Banking is increasingly being employed by many
banks around the world to generate additional revenues, reduce costs or to increase customer
satisfaction, often with very promising results. For instance, the utilization of transaction-based
MFS of Finland-based Nordea bank grew by 30% in 2004.The number of France’s Société
Générale customers using mobile services crossed the mark of one million in year 2004,
registering an impressive growth of nearly 200% vis-à-vis 2003. These facts point toward a
positive shift in the customer perception of Mobile Banking. On the other hand, technological
developments like Universal Mobile Telecommunications System (UMTS) have provided a new
platform for realistic mobile applications.
Unlike in the past, when banks offering mobile services suffered a severe setback due to lack of
customer interest and unripe technologies, the time seems to be now ripe for (re-)launching
mobile services. Mobile Banking is usually defined as carrying out banking business with the
help of mobile devices such as mobile phones or PDAs [8; 11]. The offered services may include
transaction facilities as well as other related services that cater primarily to informational needs
revolving around financial activities. Considering these factors we can define Mobile Banking as
following:
“Mobile Banking refers to provision and availment of bank-related 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 customized
information.”
Mobile Banking, as defined above, includes a wide range of services. These services may be
categorized as following:
Mobile Accounting
Mobile Accounting is sometimes characterized as transaction-based banking services that
revolve around a bank account and are availed using mobile devices .Not all Mobile Accounting
services are however necessarily transaction-based. A more precise definition of Mobile
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Mobile Banking
Accounting would therefore characterize it as “availment of account-specific banking services of
non-informational nature”. Mobile Accounting services may be divided in two categories to
differentiate between services that are essential to operate an account and services that are
essential to administer an account.
Mobile Brokerage
Brokerage, in the context of banking- and financial services, refers to intermediary services
related to the bourse, e.g. selling and purchasing of stocks. Mobile Brokerage can be thus defined
as transactionbased, mobile financial services of non-informational nature that revolve around a
securities account. Mobile Brokerage, too, may be divided in two categories to differentiate
between services that are essential to operate a securities account and services that are essential
to administer that account.
Mobile Financial Information
Mobile Financial Information refers to non-transaction based banking- and financial services of
informational nature . Mobile Financial Information services include subsets from both banking
and financial services and are meant to provide the customer with anytime, anywhere access to
information .The information may either concern the bank and securities accounts of the
customer or it may be regarding market developments with relevance for that individual
customer. The information may be customized on the basis of preferences given by the customer
and sent with a frequency decided by him. The information should be provided, ideally, on both,
pull and push basis. Information services are an integral part of Mobile Accounting and Mobile
Brokerage but they may also be offered as a stand-alone, independent module, i.e. Mobile
Financial Information can be offered without offering Mobile Accounting or Mobile Brokerage
but vice versa is not feasible.
MOBILE BANKING IN BANGLADESH
Bangladesh has just entered in the era of mobile banking. The idea is very much new here. Only
two banks started mobile banking here. Dutch Bangla Bank Ltd tied up with mobile phone
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Mobile Banking
operator ‘ Banglalink’ and ‘ Citycell’ and BRAC Bank tied up with mobile phone operator ‘
Robi’ to give this services to customers. Only Dhaka city is under coverage of mobile banking
facility now. Soon the network will expand to the whole country. With Dutch Bangla Bank a
customer can make five transactions a day with a maximum of taka five thousand per
transaction. One percent commission will be charged for each deposit amount and two percent
commission will be charged for each withdraw amount.
MOBILE BANKING IN THE WORLD
Mobile banking is used in many parts of the world with little or no infrastructure, especially
remote and rural areas. This aspect of mobile commerce is also popular in countries where most
of their population is unbanked. In most of these places, banks can only be found in big cities,
and customers have to travel hundreds of miles to the nearest bank.
In Iran, banks such as Parsian, Tejarat, Mellat, Saderat, Sepah, Edbi, and Bankmelli offer the
service. Banco Industrial provides the service in Guatemala. Citizens of Mexico can access
mobile banking with Omnilife, Bancomer and MPower Venture. Kenya's Safaricom (part of
the Vodafone Group) has the M-Pesa Service, which is mainly used to transfer limited amounts
of money, but increasingly used to pay utility bills as well. In 2009, Zain launched their own
mobile money transfer business, known as ZAP, in Kenya and other African countries. In
Somalia, the many telecom companies provide mobile banking, the most prominent being
Hormuud Telecom and its ZAAD service.
Telenor Pakistan has also launched a mobile banking solution, in coordination with Taameer
Bank, under the label Easy Paisa, which was begun in Q4 2009. Eko India Financial Services,
the business correspondent of State Bank of India (SBI) and ICICI Bank, provides bank
accounts, deposit, withdrawal and remittance services, micro-insurance, and micro-finance
facilities to its customers (nearly 80% of whom are migrants or the unbanked section of the
population) through mobile banking.
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Mobile Banking
In a year of 2010, mobile banking users soared over 100 percent in Kenya, China, Brazil and
USA with 200 percent, 150 percent, 110 percent and 100 percent respectively
According to the "2011 China Mobile Banking Industry User Survey" recently issued in
Beijing by Chinese mobile internet portal 3G.cn, as of February 2011, mobile banking reached a
penetration rate of 52.2% among Chinese mobile internet users, compared to 36.8% in July 2010.
The report also shows that the industry is making inroads amongst the middle-age demographic,
and users' personal monthly income level continues to rise.
The Industrial and Commercial Bank of China's mobile banking services led the industry with a
penetration rate of 35.1%, followed by China Construction Bank with 35% in second place,
while other banks trailed far behind.
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Mobile Banking
According to the survey, security was named a key concern by more than 60% of mobile
banking users.
Micropayments remained the strongest application of mobile banking services, with over 70% of
users' largest payments remaining under RMB 1,000, while nearly half made payments no larger
than RMB 500. More than 10% of users reported making payments in excess of RMB 10,000.
THE FUTURE OF MOBILE BANKING
The growth of mobile banking technology is increasingly hard to ignore. Analyst firm Javelin
Strategy & Research reports that nearly 50 percent of all mobile users in the United States will
be using mobile banking within four years and that nearly 50 percent of iPhone and other
smartphone users already use mobile financial services today.
With 2010 being the year in which mobile banking broke into the mainstream, 2011 will be the
year in which financial institutions will look to capitalize on the full potential of the mobile
channel -- moving from basic user functionality to full mobile finance; or, "Your bank in your
pocket."
Where We Are Now
The majority of banks currently are in transition between their introductory mobile solutions and
a second generation of offerings with greater capabilities. The introductory mobile offerings
most banks deploy closely mirror users' online experiences. While this is a fraction of the full
potential of the mobile channel, it is an essential stepping-stone to move users from the branch
and online banking to their own handsets for financial interaction.
While the mobile channel still is far from being definitively proven, consumers demand it. Banks
are moving from one-way alerts and simple notifications to proactive content in the form of real-
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Mobile Banking
time, "actionable alerts." These are personalized, two-way alerts that enable customers to quickly
and easily take action directly on their mobile devices in response to previously set alert
thresholds or financial events as defined by the consumer.
For instance, if a customer's account balance falls below a predefined threshold, an actionable
alert is sent to the customer, who can then instantly transfer funds by responding to the alert.
Many financial industry analysts, including Javelin, believe that the delivery of real-time, two-
way, transaction-driven alerts is one of the keys for financial institutions to provide value to their
customers and to drive adoption and usage of mobile banking.
Where We're Going
As mobile banking gives firms the ability to fully engage in conversations with customers
through their mobile devices, coordination of a "business workflow" across different banking
systems is required. In order to accomplish this, mobile banking providers must establish open
ways to access these different sources of information. This "connectivity" is crucial to delivering
fully mobile banking.
By opening up the mobile channel to multiple back-end and third-party systems or networks such
as VisaNet, mobile payments hubs such as CashEdge or PayPal, remote check-deposit capture
technologies such as those offered by Mitek, or contextual marketing systems capable of
determining when to present offers, banks can capitalize on the full capabilities of the mobile
phone as a consolidation point of all other existing bank channels -- e-mail, online, customer
service, and mobile-specific SMS or push notification alerts.
In order to provide authoritative value to customers and produce strong adoption (and with it,
definitive ROI), third-generation mobile banking solutions must empower institutions to use the
mobile channel as an extension of and integrative point for existing technologies. This will
instantly resolve consumer issues and complete tasks faster and more economically -- making
alerts fully actionable.
Many financial institutions and mobile vendors today, however, still are tied to basic core
functionality, either because they developed a non-scalable, non-adaptable elementary mobile
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Mobile Banking
solution, or because they signed binding contracts with core financial technology providers in
order to rush a baseline mobile solution to market. The smart mobile banking solutions of
tomorrow must anticipate the future expectations of consumers and recognize the potential that
the mobile channel represents -- a technology set to increase customer loyalty and satisfaction
via conversation creation.
RECOMMENDATION
Some guidelines and consideration banks need to follow implementing wireless banking are:
Application servers should be easy to install, configure and add new services.
Client application must be easy to install, customized, and add new handheld devices.
Integration with other servers and back end services must be easy to implement.
The advantages of using standard protocol are attainable mainly through open system.
For smaller financial institution, like credit unions, the outsourcing of the wireless services can
solve most of the impediments they would face. Besides the lack of resources and expertise,
other reasons for outsourcing are:
Financial institution will not divert from it core business.
Improve the time to implement the services.
Cost and budget can be predicated with more accuracy.
Wireless services will use the latest in technology.
CONCLUSION
Mobile Banking, as has been demonstrated, has gained non-negligible relevance for banks today.
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Mobile Banking
Developments in the banking sector, e.g. increased competition on account of technological
developments coupled with the process of globalization have produced new challenges for
banks. Mobile Banking presents an opportunity for banks to retain their existing, technology-
savvy customer base by offering value-added, innovative services. It might even help attracting
new customers. Further, Mobile Banking presents a chance to generate additional revenues.
Its main contribution, however, can be expected to take place in the strategic field as it is all set
to become an instrument of differentiation. Many banks recognize this threat and are already
taking preventive measures by introducing mobile services. The foremost significance of Mobile
Banking would therefore be of a defensive nature. Instead of providing a positive differentiation,
Mobile Banking would be employed to thwart negative differentiation vis-à-vis rivals. Mobile
Banking seems to possess the potential to become one of the widely spread and accepted
application in the field of Mobile Commerce, particularly in the backdrop of its high acceptance
across commercially important sections of the society. We may expect to see Mobile Banking go
into the footsteps of Online Banking, i.e. to become a standard service offered by every bank
worth its name.
REFERENCE
1. www.banking2020.com/2011/.../social-media-statistics-by-the-numbers-june- 2011
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Mobile Banking
2. www.barclays.co.uk › Personal Banking › Mobile Banking Services
3. www.bankofamerica.com/onlinebanking/index.cfm?...mobile_banking
4. https://www.cibc.com/ca/legal/mobile-banking-security.html
5. www.creditnet.com/.../mobile-banking-growing-in-popularity-19930032.php
6. www.icicibank.com › Insta Banking
7. www.infogile.com/pdf/Mobile_Banking.pdf
8. www.mobilecommercedaily.com
9. mobithinking.com/mobile-marketing-tools/latest-mobile-stats
10. http://www.marbridgeconsulting.com/marbridgedaily/2011-03-30/article/44783/
chinas_mobile_banking_penetration_reaches_52
11. www.slideshare.net/.../mobile-payment-value-chain-and-business-models.
12. www.statebankofindia.com/
13. technology.cgap.org/.../new-business-models-in-mobile-banking
14. Tiwari, Rajnish; Buse, Stephan and Herstatt, Cornelius (2006): Mobile Banking as
Business Strategy: Impact of Mobile Technologies on Customer Behaviour and its
Implications for Banks, in: Technology Management for the Global Future - Proceedings
of PICMET '06.
15. Vaidya (2011): “Emerging Trends on Functional Utilization of Mobile Banking in
Developed Markets in Next 3-4 Years
16. en.wikipedia.org/wiki/Mobile_banking.
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