Mobile banking on the rise, state-run banks leads the pack
August 26, 2009
Consumers are increasingly using their cell phones for financial transactions, and users in India alone would spend about Rs165.2 billion by June 2010 from Rs57.8 billion in June 2008. The growth is primarily being driven by SMS, mobile Internet, and mobile application forms of payment.
In India, banks, mainly the state-run lenders, have seen an increase in the number of customers opting for mobile banking services in the last two months due to a steep rise in small-value transactions. Many banks see this as a positive sign which could lead to higher customer base.
"Both customers and bank branches have realised the immense potential of this service, especially when it comes to small value transactions. We have seen more number of customers availing this service in the July-August period," the official told PTI.
Country's largest lender, State Bank of India (SBI), has added more than 20,000 customers in mobile banking in the last two months and expects the number to rise further in the future, another senior SBI official said.
The number of clients registered for mobile banking with SBI has surged from 10,000 in May this year to 33,000 as on date.
Bankers attributed the rising popularity of mobile banking service to an increase in the number of small-value fund transfers. At present, customers are allowed to transfer funds up to Rs5,000 and can make purchases worth up to Rs10,000 through mobile banking.
Another state-owned lender, Union Bank of India (UBI), has also witnessed a six-fold increase in the number of mobile banking customers in the last two months. .
The bank's mobile banking customer-base rose to 11,508 in August from 1,700 two months ago, a major portion of the new customers being youngsters, Union Bank deputy general manager for transaction banking department, Pravin K Bansal said.
"We have introduced many additional features to our mobile banking offering. Many have found this service very useful, especially for account-to-account fund transfers. There is a lot of potential for mobile banking in the future," Bansal added. Union Bank has targeted to increase its mobile banking customer-base to 50,000 by the end of this fiscal, he said.
IDBI Bank, another state-run lender, also has received a good response for its mobile banking service. The bank has around 40,000 customers registered for the service and is confident of adding substantially more in the months ahead.
"Still this number 40,000 is low. We have given targets to our branches to migrate a certain percentage of their business to innovative models like mobile banking eventually," IDBI Bank's personal banking head CS Jain said.
In the private sector, despite a large number of people registering for mobile banking, the number of customers who actively use the service is understood to be very low. This is despite the fact that GSM mobile subscriber base in India have grown to 325.7 million by end- July, excluding subscribers from Reliance Communications.
"Mobile banking is still new and it may take some more time for the customers to build up confidence in the new form of banking," a senior official with a private sector bank said.
Avenues, the payment gateway services provider, feel banks should encourage more debit based transactions to make mobile banking popular. Vivek Nayak, chief executive, Avenues, said, “If the banks can find a way to use debit instead of current credit and prepaid transactions then the mobile banking sector will become more popular.”
“Mobile banking today is used mainly for micro-payments but there would be a new market opening up considering the number of people having an access to mobile phone than to internet,” Nayak added.
However, there are some people who feel that most of the mobile subscribers in India are not yet ready for m-commerce. MN Srinivasu, co-founder and director, BillDesk pointed out that as long as the average customer uses a prepaid mobile connection with a balance of less than Rs100 on a handset that is not web-enabled, mobile commerce (m-commerce) is certainly not a sector on the verge of a major explosion.
Mobile banking or m-commerce uses the same infrastructure like the ATM solution. But it is extremely easy and inexpensive to implement. It reduces the cost of operation for bankers in comparison to the use of ATMs.
In past two years, mobile banking users have increased three times if we compare the use of either debit card or credit card. However, there still are questions about the security involved in such transactions. For mobile banking you either have to use short message service (SMS) or use an application downloaded on your mobile.
When you send a SMS or application data, there is no guarantee or assurance that it will be transmitted through an encrypted method and the data will reach the desired connection without any leakages.
“There are still processes which can be hacked into but mobile providers are working towards avoiding such unprecedented events,” Nayak from Avenues said.
Echoing the same, Ajay Adiseshann, founder and managing director, PayMate India said, “We are payment card information data security standard (PSCDSI) compliant and are very serious about security and safety. Having said that the fact remains that nothing is full proof, still mobile payments are relatively safer that existing technologies.”
India’s software experts therefore, need to identify more pressing issues that may be solved using a mobile phone and also work towards developing secure user-friendly transaction interfaces.
PayMate, the mobile payment company have about one million customers, expects the high penetration of mobile phones to be a definitive indication of the growth potential of mobile commerce or m-commerce in India.
Using a mobile for do routine tasks has several benefits - most importantly, it offers a user 24x7, anywhere-anytime access. Users may be ignorant of security issues, but will still rush to make the most of the opportunity to flaunt their handsets in public!
Further, as mobile Internet speeds increases, the potential of mobile commerce is bound to increase. It's no wonder then that companies like ngpay, Paymate or mCheck that already have or are creating solutions for seamless payments through mobile phones. – Yogesh Sapkale with inputs from Aditya Kshirsagar[email protected]