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RBI Reiterates Stand On Not Allowing Mobile Wallets To Offer Cash-Withdrawals

The RBI has reiterated that it won’t allow telecom operators offering mobile wallets to offer cash-out facility, unless they sign up customers under a Banking Correspondent tie-up, reports PTI (via DailyBhaskar). Speaking at the FICCI-IBA banking summit, HR Khan, Deputy Governor of the Reserve Bank of India, said that mobile operators can’t bypass banking, and can’t be permitted to offer cash cash-out, unless they act as banking correspondents (BCs), in which case they can use BC points for it. He also said that cross-border remittances can not be allowed via mobile banking because of security concerns and anti-money laundering rules and Know your customer guidelines.

What this essentially means is that telcos and payment companies offering mobile wallets would not be able to offer customers cash withdrawals unless they tie-up with a Bank and verify customers’ KYC documents, and will only be able to load cash in the wallet, utilizing it for merchant payments. While we do agree that offering cash out will allow telcos to get a backdoor entry in banking, we feel that the possibility could have been explored at least in regions where there’s a large unbanked/underbanked population.

Mobile Wallets

Presently, Airtel offers a semi-closed mobile wallet service which allows Airtel customers to pay utility bills, recharge their phones, shop at merchant outlets and make online transactions using their mobile phones. It also allows users to make instant money transfers between one Airtel money wallet to another and to bank accounts across the country. Airtel claims that Airtel money is India’s first mobile based service to offer such instant money transfers.

Airtel also has a Banking Correspondent tie-up with Axis Bankand offers a low-frills account called Airtel Money Super Account powered by Axis Bank, which supports cash withdrawals in all the regions (namely Mumbai, Delhi, East UP and Bihar) where it’s been launched.

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Other players in the prepaid wallet segment include My Mobile Payments, which had launched a semi-closed m-wallet in November 2011, Loop Mobile which partnered with ZipCash to offer a mobile payments service, and Nokia Money, which had shut down earlier this year, but has been acquired by mobile financial services firm FINO.

Other important points from Khan’s presentation:

Less than 1 percent of existing bank customers are covered under mobile banking.

– There were 3.34 million mobile banking transactions in June 2012 worth Rs 3067 million.

– There was a 143% year on year growth in volume and 211% YoY growth in value of transactions.

– MNOs, banks and NPCI need to put in collaborative efforts to make the system grow, growth in volumes to benefits all the stakeholders

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– IDRBT (Institute for Development and Research in Banking Technology) has launched Mobile Banking Security Lab, to explore and provide solutions for safety, security, reliability and inter-operability in mobile banking for both on low end and high-end mobile phones. The lab will offer a common technical centre for all banks and financial institutions, a testing platform for testing security applications in mobile banking, and for providing education services on security related matters.

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