The National Payment Corporation of India (NPCI) has proposed that mobile phones can be used for non-financial banking transactions such as Account balance enquiry, replacing ATM machines, resulting in reduced costs for Banks, reports The Times of India. NPCI is already in talks with mobile operators to implement mobile banking transactions through USSD (unstructured supplementary service data) messages, which are realtime messages that flash on the subscriber’s screen after he dials a designated code. USSD is used by mobile operators to carry out mobile balance and validity requests for prepaid mobile subscribers, as well as for service activation and deactivation requests.

According to NPCI, this can reduce the load on ATMs, as around 1.5 million balance enquiry transactions are carried out daily through third party ATMs, for which banks pay Rs 5 to Rs 8 per query, although five monthly queries are offered free to customers. Mobile banking transactions (both financial and non-financial) have so far been rather low in India – and SMS based inquiries and alerts are not new.

We wonder why the NCPI is going down the USSD path, particularly since CDMA users will not be able to use USSD.

Boost Low IMPS Transactions

The total number of transactions on IMPS (Interbank Mobile Payments Service), a service from the NCPI, remained remarkably low at 9,989 in August 2011, which means that less than 7 people in 10,000 with MMIDs are transacting each month. NPCI feels that the major reason for low transactions on its IMPS mobile money transfer service is that the customers already use internet banking for transactions in urban areas.

We feel that this is also because banks are not doing enough to create awareness around the service. Also the lack of a centralized application and the need to remember multiple PINs are factors that hamper its growth.

It now intends to extend the service to basic phones through USSD, to cover users who do not have access to internet. In June, PayMate, the company which offers mobile payments solutions for Banks, merchants and other financial institutions,had announced that it will power IMPS based mobile money transfer services for three banks, namely Syndicate Bank, Lakshmi Vilas Bank and South Indian Bank, with five other banks are in pre-launch stage, to allow customers to make inter-bank transactions using a hybrid SMS-IVR mode, in addition to mobile apps and SMS, through IMPS.

NPCI also said that it is exploring the possibility of deploying an interoperable tap and pay system (similar to NFC based systems) involving payment smart cards and mobile phones.

Poor Transaction Volumes Despite 14.31M IMPS Mobile Money IDs Issued In India
– July 2011: 11.70M IMPS Mobile Money IDs
– June 2011: 11.38M IMPS Mobile Money IDs; Transactions Decline Marginally
– IMPS To Pilot Merchant Transactions; Should Not Increase Rates
– Why Are Banks Not Promoting The IMPS Money Transfer Service?