The Reserve Bank of India, late last month, removed the Rs 50,000 per-customer-per-day transaction cap it had placed on mobile payments in India, and asked banks to choose their own transaction limits, based on their own risk perception. Mobile banking hasn’t quite taken off in India, and even though it is showing an up-trend, the growth has been fairly limited: In a recent speech, G.Padmanabhan, Executive Director, Reserve Bank of India, disclosed that during October 2011, over 22.1 lakh transactions took place, and almost Rs 161 crore was transacted; over 96 lakh bank customers have so far registered for the mobile banking service, according to the RBI. This is higher than the last dataset that we had reported: for August 2011, banks had reported 18.92 lakh mobile transactions, and Rs 124.86 crore in amount transacted.

G.Padmanabhan said that 96 lakh bank customers have so far registered for mobile banking service, but pointed out that these numbers are “not really heartening if we juxtapose them with the data on the number of bank accounts and the mobile subscriber base. They seem like a drop in the ocean! What this means is that banks have not really made a significant penetration even amongst their existing customers to extend mobile banking services.”

Padmanabhan’s views are not new to us: the RBI’s Deputy Governor Dr. K.C. Chakrabarty had said much the same in December 2009 at the India Telecom conference. However, unlike Chakrabarty, who focused on structural issues hindering the growth of mobile banking, Padmanabhan asked Banks and Mobile Operators to sort their differences out over ‘who owns the customer’ and ‘who controls the transactions’. “Has there been any worthwhile attempt to resolve them in a mature way? Or like sulking infants is each one trying to wear out the other including the regulator? Let me say that if the latter is true, it can be a painfully long and expensive process benefitting none and does not help in our efforts to achieve true financial inclusion. Therefore I would urge upon the banks and MSPs to get their acts together.”

Our Take

It’s up to the banks to push mobile banking since the customer is theirs and the control of transactions is theirs: the RBI, through its policies, enforced a bank-led model. Banks have been marketing mobile banking, but clearly, it isn’t being given enough of a push. Unless banks push mobile banking, it’s a lost cause. The only alternative to banks is prepaid cards, and unless banks get their act together, the RBI should allow prepaid card licensees to offer open wallet systems (wherein, cards are converted), not just semi-closed wallets.