Mobile Banking


Today most of the large banks offer basic mobile banking solutions for their consumers. The most common services are:

* Account Alerts, security alerts and reminders
* Account balances, updates and history
* customer service via mobile
* branch ATM location information
* transfer verification
* mortgage alerts

Future expectations are mobile commerce, mobile payments, contactless payments, mobile coupons.

The different platforms used for mobile banking operations include Short Messaging Service, mobile Web and Mobile client applications.

*No common standards has yet been developed for banking transactions.

The banks normally choose SMS to start with and then may decide to progress with mobile web and mobile client applications.

SMS is ubiquitous and easy to use but has limited support for rish media.

Mobile web provides a richer experience but is limited when it comes to availability on the handsets. Not many people have handsets which are web enabled.

Mobile client applications provide best user experience and the most security but require users to download an application. This again is limited.

After having talked about the general facts, let me come to my area of interest, use of mobile phones for financial inclusion.

Mobile telephones have been imagined as devices to complete banking transactions directly. M-Pesa in Kenya, G-Cash and SMART Money in the Philippines and Suvidha/BEAM in India are some examples of banking innovation. It is easy to see the appeal as many of the unbanked are poor, and mobile technology offers the possibility of both filling financial gaps and improving the economic lives of the customers.

The core of businesses like M-Pesa rests with facilitating financial transactions via mobile telephones. In the most common application, microfinance customers can pay loan installments via telephone by entering a code that transfers funds from a personal account to the bank’s account. Transactions can also flow between customers directly, as long as the two parties are in the M-Pesa network. These transactions are facilitated by mobile phone agents in commercial areas.

Taken from: http://www.isb.edu/isbinsight/Insight_Sep07/Beyond%20Microfi%20nance,%20Towards.html

The Asian Banker, a financial industry research group, estimates that a typical financial transaction in the Philippines would cost 80% less if carried out on a mobile phone instead of in a bank. Potential savings to clients, represented primarily by the convenience of m-banking, are also big. With the ability to make payments and transfers literally in the palms of their hands, clients no longer have to travel to the bank and wait in line when they get there to take care of financial needs.

Challenges for mobile banking:

  • Banking would entail using mobile devices to facilitate lending and deposit-taking.  Not impossible, but the models aren’t there yet.  One promise is that m-banking will generate troves of digitized repayment data that can then be mined to implement (or refine) credit scoring models, fundamentally changing the lending equation.  Changing the lending equation would come about by eliminating some of the face-to-face social aspects of financial transactions, and the great unknown is whether cutting back on social elements – dropping weekly group meetings say, or simply weakening the personal relationships between customers and loan officers – would undermine repayment rates.
  • the geography of mobile phone coverage and bank branch coverage today is largely overlapping—as are the populations served.
  • Trust. The poor aren’t lining up to use their cell phones for banking because they value face-to-face interaction when making business transactions.

Taken from: http://poverty-action.org/node/1634

Need to put some material on M-Pesa, G-Cash, SMART Money and Suvidha/BEAM.

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One Comment

  1. The last point regarding “Trust” is the most challenging one, even for Urban customer and equally applicable in the case of Netbanking.

    Corporate internet banking is more popular with “View” option only, no transactions at all. However, it is bound to change, according to some rough estimate, around 75% banking transactions in India is being done right now out of Bank branches (i.e. ATM and Netbanking).

    Reply

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