This write-up discusses some of the prevailing trends and products available for making payment by using a mobile phone. While there is a lot of similarity in the payment process, there are subtle differences in technologies used and accompanying advantages/ disadvantages. This write-up seeks to highlight some of the differences.
To say that the advent of mobile telephony in India has changed the lives of countless millions would be stating the obvious. Today, mobile phones are not just a means of communication, but they are much more. I am sure, neither Alexander Graham Bell (who invented the telephone in 1875) nor did Dr. Martin Cooper (who is credited with designing the first practical mobile phone back in 1973) ever imagined that one day in the future their invention would be used to:
- Flash1 one’s status (funky, snooty, VFM)
- Collect memories (photos)
- Stay connected (Facebook & Twitter)
- Keep updated (news, alerts)
- Entertain (music, video)
- Transact (m-commerce)
- Influence people (Obama’s election campaign)
Be that as it may, today, mobile phones are an integral part of our day-to-day environment and (at the cost of repeating myself2), their importance/ our dependence on this marvel of technology is growing by the day. Today, the phone has become the hub for all our activities, from e-mailing and browsing to paying bills and transferring money. In fact, mobile phones are fast replacing your credit/ debit/ATM cards (Plastic money) as a convenient mode of transacting. For the uninitiated, please watch the recent ads put up by Airtel, Indusind Bank. There are several active players3 and they offer the same or similar services, for a charge (of course). Here it is important to understand what is on offer, and then pare down expectations accordingly.
How does a mobile banking/wallet work?
Mobile banking (not to be confused with phone banking) allows you to conduct financial transactions on your phone just as you would at a bank branch or through Net banking. Banks are now evolving this facility as they launch innovative products (this sometimes entails installing an app on your phone). In the mobile banking segment, all telecom companies have tie-ups with different banks that allow you to avail of banking services.
- The process is pretty simple, and the steps could be something like: Register with the service provider: Open an account with the concerned bank or telecom company.
- In case of a bank — register for Net banking.
- Use a Java-based phone4.
- Activate GPRS services on your connection, so that you can access the Net5.
- Install the banks phone app.
To transfer funds, you will have to:
- Log in using the bank’s app menu and input the mobile phone number or bank account number of the beneficiary.
- Message the PIN you receive from the bank to the beneficiary who will also receive a secret number.
- The recipient will have to log in with both PINs at the ATM to withdraw the money.
- If the funds are being transferred to a bank account, it will take about four working days.
Practical applications:
IndusInd Bank’s cash-to-mobile service enables customers to transfer money to anybody, including those who do not have an Indusind Bank account. A bank customer is required to download the bank’s app on his phone, and then put in the phone number of the person to whom he wants to send the money, along with the transaction amount. The bank sends a message to the remitter and the beneficiary, along with different PINs to each. The remitter is required to message his PIN to the beneficiary, who can then use both PINs and his mobile number to withdraw cash from an IndusInd Bank ATM. The service is free, but operator charges would apply. Also, the sender will need a Java-enabled handset. Airtel Money has a different offering.
Airtel Money can be used on any mobile phone, and you can register for it by dialling *404# or at an authorised Airtel Money retailer. There are two types of accounts. The first one is an express account, wherein you can load Rs.10,000, and use it to pay utility bills or for booking rail/flight tickets on travel portals. The upgraded version is called a power account, which can be loaded with amount up to Rs.50,000. This can be done through Net banking or an Airtel Money retailer.
Charges?
There is a minimum fee for each transaction. For instance, a transfer of up to Rs.500 will cost Rs.5, while higher transactions and up to Rs.10,000 will entail a fee of Rs.10. Under mobile banking, apart from the transaction charge, one also pays Internet charges and SMS charges to the service provider.
Other considerations:
The Reserve Bank of India (RBI) has capped the transaction limit to Rs.10,000 for all essential services like ticketing, utility bill payments, etc. For non-essential transactions, the limit is set at Rs.5,000. There is also a ceiling of Rs.50,000 for loading the wallet.
While online banking has picked up pace, mobile banking is currently subdued. One reason for this is that whenever a new technology is introduced in the market, it takes time for people to familiarise themselves with it, which is why the growth is slow. Phone technology is another problem area, as there are different platforms of mobile banking for different phones. Also, let us not forget the whole business of bandwidth — all these applications need secure and good connections.
Presently, most banks have decided to take one step at a time. They are not pushing hardcore banking services, but only presenting mobile banking as an enquiry tool to entice customers to carry out transactions. For example, SMS alerts for bill payment may tempt you to pay the bill through the phone itself.
What’s in store for the future?
Notwithstanding the above, the advent of smart phones has definitely spelt good news for the mobile banking segment. Why? For starters, the younger generation today prefers to use mobiles more than PCs. Secondly, statistics7 suggest that there are approximately 13 million Internet users in the country, as against 911 million mobile phone users. Obviously, the numbers would justify future trends and investments.
This decade belongs to mobile telephone, and the use of phones (smart or otherwise) is going to be the trend of the future. Until then, bon chance.
1 On April 3, 1973 Dr. Martin
Cooper did show off to his rival Joel Engel, head of research at AT&T’s
Bell Labs by placing a call to him while walking the streets of New York City
talking on the first Motorola DynaTAC prototype.
2 Refer to this feature in the BCAJ March 2010.
3 Airtel, Oxicash, Paymate, ICICI, Citi, Indusind,
etc.
4 Not required for Airtel Money.
5 Not required for Airtel Money.
6 This is based on the
information available in public domain, there may other charges/conditions.
Readers are expected to do their own due diligence before subscribing to the
service.
7 Released by TRAI in February 2012.
