The National Payment Corporation of India, on November 22nd 2010, launched Interbank Mobile Payment Service (IMPS) in India, with seven Banks enabling transfer of funds using mobile phones. The participating banks include some of the largest banks in India: State Bank of India, ICICI Bank, Union Bank of India, Bank of India, Yes Bank, Axis Bank and HDFC Bank. The IMPS service will operate as back-end for the banks allowing them to offer a real-time money transfer facility to customers.
Interbank money transfer via mobile phones holds much promise – of being the system that will push up usage of mobile payments in India, and bring draw more Indians into the banking system. So far, Mobile payments have failed to take off in India: according to a speech given by RBI Deputy Governor Shyamala Gopinath, despite 40 banks being allowed to do mobile banking, India’s mobile banking customer base was 0.887 million at the end of September 30th 2010, albeit, up from 0.616 million at the end of August 2010. India reported 0.49 million transactions of value Rs. 44 crores for September 2010, which works out to an average of Rs. 897.95 per transaction. Gopinath didn’t mention the median transaction size, but frankly, the lower the average and the median transaction size, the better: for us, it would serve as an indication that mobile payments are being used for everyday payments. So far, it doesn’t appear to be the case. The customer base is still very small.
Details of Interbank Mobile Payments, from NCPI’s website:
- Need A Bank Account: Both the sender and receiver needs to have a bank account, with any of the seven banks that are participating in IMPS. The sender needs to enroll for Mobile Banking Service with the bank.
- Mobile Money ID: The recipient needs to register his mobile number with the bank where the account is maintained, and have a valid Mobile Money ID (MMID). The Mobile Money Identifier (MMID) is a seven digit random number issued by the bank upon registration, and a customer can have more than one account linked to the mobile number – each account will have a separate MMID.
- Cost: Till 31st March 2011, NPCI will be providing the service to the member banks free of charges, after which there will be a switching fee of Rs. 0.25 per transaction. The banks may levy a fee over and above this, which is probably going to determine whether it’s worth it for customers to use the mobile payments service or not.
- Real Time? According to IMPS, the funds should be transferred within 15-30 seconds.
- Medium: It’s up to banks to choose their medium – SMS, USSD, mobile application etc, as long as they stick to RBI’s mobile banking guidelines
- How to transfer:
Step 1: Remitter sends instruction from his/her mobile through his/her bank provided application or SMS. The remitter can only use a registered mobile number for remitting.
Step 2: Remitting bank validates the details of the remitter and debits his/ her account. This transaction is sent by the remitting bank to NPCI.
Step 3: Transaction is passed by NPCI to the beneficiary bank. Beneficiary Bank validates the details of the beneficiary customer, credits the account, sends confirmation NPCI about transaction status and sends a sms to the beneficiary customer informing him of the credit.
Step 4: NPCI sends the transaction status to remitting bank which in turn informs the status of the transaction to the Remitter.
Step 5: Remitting bank send a sms confirmation of the transaction to the remitting customer.
Note that if either the MMID, the registered mobile number or MPIN is incorrect, the transaction will be declined. If the transaction is not completed, the reversal of the remitters funds will happen immediately, or in case of reconciliation delays, the next working day.
- Transaction limits: same as that for mobile payments – a daily cap of Rs. 50,000 per customer per day for fund transfer and purchase of goods and services for encrypted transactions, and Rs. 1000 for transactions without end-to-end encryption.
Until the launch of IMPS, Banks were using the NEFT service, wherein transactions are processed and settled in batches, and only during working hours of the RTGS system. What’s particularly interesting is that IMPS rides on the existing Interbank ATM transaction switching infrastructure and the message format, which has 51 member banks. Perhaps we should expect more banks to adopt IMPS?
Inter-Mobile Operator Payments Next?
In her speech, Gopinath also said that while India has adopted a bank-led model for mobile payments, there is need for mobile operators and banks to partner, rather than compete. Because India, unlike in Kenya and Philippines, has a number of mobile service providers (MSPs) and a huge base of mobile subscribers, “To have an efficient mobile based payment and remittance system would require inter-MSP payment services…Facilitating this would require the setting up of a clearing and settlement arrangement for such non-bank operators,” she said. Gopinath believes that the IMPS system is a an important pre requisite for the product to scale up (to allow Inter Mobile Operator Payments), given that Bharti Airtel has already received a prepaid cards license, and another telecom operator (Vodafone, is our guess), has an application pending.
Frankly, the number of numbers to remember is a big issue. For banking transactions, now you’ll need to remember an MMID, MPIN, apart from an IPIN for Internet banking, and a PIN number for ATM transactions. If technology is meant to make the medium of accessing services irrelevant, and the services themselves ubiquitious across platforms, then why can’t there be a ubiquitous PIN as well?