Nokia has started shipping mobile phones in India that are preloaded with the Obopay mobile banking applications, starting with the X1-01, a dual-SIM (subscriber identity module) phone manufactured from its Indian facility, reports PC World. The primary interface for mobile banking, the report suggests, will be SMS. Remember that Nokia has partnerships with Union Bank of India and Yes Bank; as a ‘Banking Correspondent‘, registered Nokia stores will act facilitate service registration, money transfer and cash withdrawal. Nokia has a massive retail network across India. By embedding the Obopay application on its handsets, is probably hoping that this will help increase sign-ups and usage of mobile banking, by being the default payments application.

Nokia has a majority share of the Indian handset market with hundreds of millions of handsets, but it will take a few years for consumers to replace their handset with an Obopay embedded one; meanwhile, Indian handset companies like Micromax, Lava, Karbonn, Lemon etc are eating into the lower end of the market, even as Android (Samsung, LG, HTC) and Apple have taken over the top end. The replacement cycle will, in all likelihood, not be kind to Nokia, and hence, to Obopay. Another factor to keep in mind is that Nokia’s interface hasn’t always been application friendly, though its approach is likely to change with newer handsets.

Mobile Banking Struggles To Grow

Mobile banking growth in India has been slow, and both Union Bank of India and Yes Bank have a fairly small share of even that small amount. Do try our interactive visualization on Mobile Banking Transactions at MediaNama Charts

A Critical Stage For Obopay

Obopay, which Nokia has investments in, is struggling in India. Obopay investor Elephant Capital had been disappointed with the companys performance last year, and had stated in its assessment last month, as a part of an interim results report (pdf) for the six month period ended February 28th 2011 that:

“Obopay’s performance last year was disappointing, and the Board is conscious that the coming period will be a critical one for this investment“…”The roll out of the Obopay service has lagged the Investment Manager’s expectations, but under the new CEO Deepak Chandnani, Obopay has developed more efficient working relationships with key strategic partners, including Nokia in India. As a result, the Nokia Money service has been expanded to New Delhi and the National Capital Region and is in the process of expanding to other major metropolitan centres in this quarter. In the US, the Investment Manager understands that Obopay is exploring new relationships with new strategic partners, which may accelerate the roll out of the service there. Whilst welcome, such initiatives are early stage, and funding requirements, and related valuation implications remain unclear. The Investment Manager remains cautious on the performance of this investment.”

Elephant Capital had invested GBP 1.2 million across two funding rounds in July 2007 and April 2008, and holds 1.2% (on a fully diluted basis). Nokia had taken a strategic stake in Obopay, investing $70 million (alongside some smaller partners) in funding rounds closing in February 2009, April 2009 and January 2010.

*

Earlier this year Google had partnered with Citi, Master card, First Data and mobile service provider Sprint, to offer users a payment product that resides in their mobile phones in form of a mobile app. It works with NFC technology, through which users can make payments by simply tapping their mobile phones on a terminal. Currently, it works with MasterCard PayPass terminals and supports Citi Mastercard and Google Prepaid Card.

Also read our coverage of the Interbank Mobile Payments Service.