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“A Bank Account With Every Mobile Connection”; Stakeholder Comments On M-Banking Guidelines

Why should mobile transactions be treated any differently from Internet transactions? There isn’t a limit to online transactions that we know about, and a physical presence isn’t needed for opening a net-banking account. In our opinion, as long as pins aren’t stored in the handsets, or transmitted without encryption, there really shouldn’t be a difference in outlook.

The mobile banking guidelines issued by the RBI a couple of days ago have been deemed, politely, to be “Conservative”, and we contacted a few stakeholders from the mobile payments space for their perspective:

Probir Roy, co-founder of Paymate suggests that the registration process be made as simple as possible, and allow consumers to register remotely. The suggested ticket size of Rs. 2500 per transaction and Rs. is too small, and doesn’t make it convenient to pay bills; one can’t even pay for a Flight ticket with the mobile this way. He suggests that the banks should be given the freedom to set the limits. He contests the point we’d raised about issues with SMS based authentication, saying that there are other means of authentication. We’re told that Interactive Voice Response Systems (IVRS) is a probably a means of authenticating SMS based payments.

Vijay Balakrishnan, CMO of Obopay India adds that there’s an issue with mobile banking being allowed only for debit and credit card holders*, who only constitute 25 percent of the total bank account holders. The risk has been mitigated by the low transaction limits, though they want those an increase in those as well. They want restrictions on microfinance using mobile payments to be reduced. “The issue of no frills accounts becoming dormant or unprofitable for banks can be addressed systemically if MFI , banks and Mobile Payments companies can come together to create a viable and sustainable model in which micro loan repayments are done through the ubiquitous mobile device.”

Sanjay Swamy, CEO of MChek outlined what the banking fraternity might be missing out on: He believes that a bank account should be activated with every single mobile connection – the opportunity lies in adding 9 million accounts every month – with every single mobile connection, offer the customer the opportunity to open a new account as well. If there are significant KYC issues, then do a separate verification for the bank, and separate for mobile. The question should be – in the next 3 years, can we get 200 million customers in the banking system? That’s the number that will have cellphones in 3 years, and if we don’t implement this, the opportunity will be lost. The reasons to do it significantly outweigh the concern – give them a transaction limit of Rs. 1000 to begin with.

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Even if you do the math on just the mobile bill payments, says Swamy, the opportunity is immense: with an expected 600 million mobile subscribers by the 2010, even at an ARPU of $5 (current ARPU is around $7), that’s still $3 Billion in just mobile bill payments per month, and much of that could go through the banking system.

Update: During the course of discussions, I also realized that it’s more likely that banks will tie up with a single payment service provider who offer services via multiple platforms, and have relationships with multiple operators, instead of each mobile operator dealing with only one payment service provider, who caters to multiple banks. I think both banks and mobile operators will resist the creation of a monopoly, with a single service provider works with all banks and all mobile operators.

Also keep in mind that these are initial guidelines, and the RBI is accepting comments. The final Policy is yet to be announced.

Related:M-Banking Guidelines For India Issued; Ridiculous Transaction Limit

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