Mobile Banking: Exploring the Untapped Potential

Description
The Documentation about analyses Urban and rural India as two distinct markets requiring different products, service offerings, networks, and technology.

Mobile Banking:
Exploring the Untapped Potential

Mobile Banking: Untapped Potential 2010
Executive Summary
Mobile banking, a symbiosis of technology and financial services, is the hottest area of development in the banking sector. ATM and Internet banking have been around in India for a while. While both modes have had some success, penetration and use levels have been moderate. Reasons: ? ? While ATMs offer convenience, they pose a perceived security threat in India given instances of mugging around them. Senior citizens and women appear reluctant to use ATMs if they have a choice to go to a branch and withdraw money in safety. Internet banking, on the other hand, relies on PC and Internet penetration. Estimates suggest that there are approx 40 million Internet users that are expected to rise to 100 million soon – despite this growth; penetration and use levels remain low, especially in non-metro areas.

Mobile phones as a delivery channel for extending banking services have off-late been attaining greater significance. The rapid growth in users and wider coverage of mobile phone networks have made this channel an important platform for extending banking services to customers. With the rapid growth in the number of mobile phone subscribers in India (about 261 million as at the end of March 2008 and growing at about 8 million a month), banks have been exploring the feasibility of using mobile phones as an alternative channel of delivery of banking services. Some banks have started offering information based services like balance enquiry, stop payment instruction of cheques, transactions enquiry, and location of the nearest ATM/branch etc. Acceptance of transfer of funds instruction for credit to beneficiaries of same/or another bank in favour of preregistered beneficiaries have also commenced in a few banks. But the usage of mobile banking in India is low. Mobile banking has the potential to bring a whole host of people that have no/little access to land lines/internet connections onto the electronic platform – an innovative way to generate financial inclusion. To do so successfully will require customer training, technology stabilization and managing carefully the ‘know your customer’ issues. The report analyses: ? Urban and rural India as two distinct markets requiring different products, service offerings, networks, and technology. o Currently the best user experience, depending on the capabilities of a mobile phone, is possible only by using a standalone client. ? Highlights possible opportunities and limitations of mobile banking in India. The challenges are: o Handset compatibility o Security o Scalability & reliability o Application Distribution o Personalization ? Primary market research conducted among the college students to find out the awareness & inclination towards mobile banking. It also helped to know their experiences & challenges faced while using mobile banking. Major Findings: o All respondents require confidentiality in password followed by 31% saying account number as well and also 24% tilting also in favour of account balance. o Most of the students are using Mobile Phones that are compatible to upload software’s which is one of the most important feature for initiating Mobile Banking. o On the whole, the respondents are almost sure that they prefer online banking over mobile banking. Therefore, Mobile banking is yet to make a significant impact on hostel students for their day-to-day banking operations. The level of impact is only 28/100 students who have bank account, use mobile banking facility.

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Mobile Banking: Untapped Potential 2010
? Providing suggestions & recommendations for overcoming the market constraints: Rural Expansion: The penetration of telecom & media industry into far-flung areas of India, presents a great opportunity. This segment can be targeted at a very low cost with decent returns. ? Mobile banking: Instead of setting up branches to cover rural India, we can reach the doorsteps of their customer using wirelessly online handhelds. The mobile workforce can act as mini-branches equipped to conduct financial transactions and update the central servers at the company's headquarters, all in a jiffy.

Tier I & Tier II cities: In order to promote Mobile Banking the Banks should take more initiatives: ? Advertising through all sources, in order to improve the awareness levels about the feature among the students as well as the working population. The banks can have collaboration with Mobile service providers for the purpose of promoting the feature. Usage of Pre-paid cards in order to overcome the disadvantage of overspending & security posed by credit cards & debit cards. Moreover the cards should be recharged through mobiles. This kind of instrument will be a big first mover advantage for any bank.

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Various norms issued by RBI for mobile banking to ensure secured & reliable banking. PEST analysis of mobile banking, to understand the macro factors affecting the spread of mobile banking. Economic Cost of handsets Social A required behavioural change Technology One comprehensive application for all mobile handsets Security concerns

Political Only banks can offer mobile transaction services Business Correspondent regulation Regulations on Security Daily Transaction Limit Goal of Financial Inclusion

Mobile penetration in rural Illiteracy India

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Gives examples of the experiences of foreign countries where mobile banking has already proven successful, which will help Indian service providers develop similar strategies.

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Mobile Banking: Untapped Potential 2010
Table of Contents
Executive Summary................................................................................................................................. 2 Introduction to Mobile Banking .............................................................................................................. 6 What is mobile banking?......................................................................................................................... 7 Mobile banking business models ............................................................................................................ 7 Bank-focused model ........................................................................................................................... 7 Bank-led model ................................................................................................................................... 7 Non-bank-led model ........................................................................................................................... 7 Mobile Banking Services ......................................................................................................................... 8 Technologies enabling Mobile Banking .................................................................................................. 9 IVR – Interactive Voice Response........................................................................................................ 9 SMS – Short Messaging Service ........................................................................................................ 10 WAP – Wireless Access Protocol....................................................................................................... 10 Standalone Mobile Application Clients ............................................................................................. 11 Reason for genesis of mobile banking .................................................................................................. 12 Product Benefits................................................................................................................................ 12 Customer Benefits............................................................................................................................. 12 Merchant Benefits ............................................................................................................................ 12 Banks ................................................................................................................................................. 12 Advantages of mobile Banking.............................................................................................................. 12 Mobile Banking in India ........................................................................................................................ 13 SMS VAS in India – Perspective......................................................................................................... 14 SMS VAS Users – City wise Distribution ............................................................................................ 14 Growth Trends .................................................................................................................................. 15 Challenges of mobile banking ............................................................................................................... 15 Handset operability........................................................................................................................... 15 Security ............................................................................................................................................. 16 Scalability & Reliability ...................................................................................................................... 16 Application distribution .................................................................................................................... 16 Personalization.................................................................................................................................. 16 Market Research ................................................................................................................................... 17 Primary Research Objective (PRO) .................................................................................................... 17 Secondary Research Objective (SRO)................................................................................................ 17 Secondary Data ................................................................................................................................. 17

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Mobile Banking: Untapped Potential 2010
Research Methodology ......................................................................................................................... 18 Data Collection Methods .................................................................................................................. 18 Questionnaire Design........................................................................................................................ 19 Sampling............................................................................................................................................ 19 Analysis Techniques .......................................................................................................................... 19 Major Findings and Recordings ......................................................................................................... 19 Chi-Square Findings .......................................................................................................................... 19 Conclusion ......................................................................................................................................... 20 Recommendations ................................................................................................................................ 20 RBI norms .............................................................................................................................................. 20 Regulatory & Supervisory Issues ....................................................................................................... 20 Registration of customers for mobile service ................................................................................... 21 Technology and Security Standards .................................................................................................. 21 Inter-operability ................................................................................................................................ 21 Clearing and Settlement for inter-bank funds transfer transactions ............................................... 21 Customer Complaints and Grievance Redressal Mechanism ........................................................... 22 Transaction limit ............................................................................................................................... 22 Board approval.................................................................................................................................. 22 Approval of Reserve Bank of India .................................................................................................... 22 PEST analysis of Mobile Banking ........................................................................................................... 22 Political Factors ................................................................................................................................. 22 Economic Factors .............................................................................................................................. 23 Social/Demographic/Infrastructure Factors ..................................................................................... 24 Technology Factors ........................................................................................................................... 24 Success Stories ...................................................................................................................................... 24 LG Telecom, South Korea .................................................................................................................. 24 Reliance Infocomm, India ................................................................................................................. 25 ABN Ambro, India ............................................................................................................................. 25 Citibank ............................................................................................................................................. 25 Conclusion ............................................................................................................................................. 26

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Mobile Banking: Untapped Potential 2010
Introduction to Mobile Banking
The last time that technology had a major impact in helping banks service their customers was with the introduction of the Internet banking. Internet Banking helped give the customer's anytime access to their banks. Customer's could check out their account details, get their bank statements, perform transactions like transferring money to other accounts and pay their bills sitting in the comfort of their homes and offices. However the biggest limitation of Internet banking is the requirement of a PC with an Internet connection, not a big obstacle if we look at the US and the European countries, but definitely a big barrier if we consider most of the developing countries of Asia like China and India. Mobile banking addresses this fundamental limitation of Internet Banking, as it reduces the customer requirement to just a mobile phone. Mobile usage has seen an explosive growth in most of the Asian economies like India, China and Korea. In fact Korea boasts about a 70% mobile penetration rate and with its tech-savvy populace has seen one of the most aggressive rollouts of mobile banking services. Still, the main reason that Mobile Banking scores over Internet Banking is that it enables ‘Anywhere Banking'. Customers now don't need access to a computer terminal to access their banks, they can now do so on the go – when they are waiting for their bus to work, when they are travelling or when they are waiting for their orders to come through in a restaurant. The scale at which Mobile banking has the potential to grow can be gauged by looking at the pace users are getting mobile in these big Asian economies. According to the Cellular Operators' Association of India (COAI) the mobile subscriber base in India hit 258 million at the end of 2008. Till September 2009 the subscriber base has increased to about approx 344 million. The explosion as most analysts say, is yet to come as India has about one of the biggest untapped markets. China, which already witnessed the mobile boom, is expected to have about 300 million mobile users by the end of 2004. South Korea is targeted to reach about 42 million mobile users by the end of 2005. All three of these countries have seen gradual roll-out of mobile banking services, the most aggressive being Korea which is now witnessing the roll-out of some of the most advanced services like using mobile phones to pay bills in shops and restaurants.

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Mobile Banking: Untapped Potential 2010
What is mobile banking?
Mobile banking (also known as M-Banking) is a term used for performing balance checks, account transactions, payments etc. via a mobile device such as a mobile phone. Mobile banking today is most often performed via SMS or the Mobile Internet & also uses special programs called clients downloaded to the mobile device. In one academic model, mobile banking is defined as: "Mobile Banking refers to provision and availment of banking- and financial services with the help of mobile telecommunication devices. The scope of offered services may include facilities to conduct bank and stock market transactions, to administer accounts and to access customised information & payment of bills."

Mobile banking business models
A wide spectrum of Mobile/branchless banking models is evolving. However, no matter what business model, if mobile banking is being used to attract low-income populations in often rural locations, the business model will depend on banking agents, i.e., retail or postal outlets that process financial transactions on behalf banks. The banking agent is an important part of the mobile banking business model since customer care, service quality, and cash management will depend on them. Many telecoms will work through their local airtime resellers. However, banks in Colombia, Brazil, Peru, and other markets use pharmacies, bakeries, etc. These models differ primarily on the question that who will establish the relationship (account opening, deposit taking, lending etc.) to the end customer, the Bank or the Non-Bank/Telecommunication Company (Telco). Another difference lies in the nature of agency agreement between bank and the NonBank. Models of branchless banking can be classified into three broad categories - Bank Focused, BankLed and Nonbank-Led. Bank-focused model The bank-focused model emerges when a traditional bank uses non-traditional low-cost delivery channels to provide banking services to its existing customers. Examples range from use of automatic teller machines (ATMs) to internet banking or mobile phone banking to provide certain limited banking services to banks’ customers. This model is additive in nature and may be seen as a modest extension of conventional branch-based banking. Bank-led model The bank-led model offers a distinct alternative to conventional branch-based banking in that customer conducts financial transactions at a whole range of retail agents (or through mobile phone) instead of at bank branches or through bank employees. This model promises the potential to substantially increase the financial services outreach by using a different delivery channel (retailers/ mobile phones), a different trade partner (Telco / chain store) having experience and target market distinct from traditional banks, and may be significantly cheaper than the bank-based alternatives. The bank-led model may be implemented by either using correspondent arrangements or by creating a JV between Bank and Telco/non-bank. In this model customer account relationship rests with the bank Non-bank-led model The non-bank-led model is where a bank does not come into the picture (except possibly as a safe-keeper of surplus funds) and the non-bank (e.g. Telco) performs all the functions.

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Mobile Banking: Untapped Potential 2010
Mobile Banking Services
Mobile banking can offer services such as the following: Account Information 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. Mini-statements and checking of account history Alerts on account activity or passing of set thresholds Monitoring of term deposits Access to loan statements Access to card statements Mutual funds / equity statements Insurance policy management Pension plan management Status on cheque, stop payment on cheque Ordering check books Balance checking in the account Recent transactions Due date of payment (functionality for stop, change and deleting of payments) PIN provision, Change of PIN and reminder over the Internet Blocking of (lost, stolen) cards

Payments, Deposits, Withdrawals, and Transfers 1. 2. 3. 4. 5. 6. 7. 8. Domestic and international fund transfers Micro-payment handling Mobile recharging Commercial payment processing Bill payment processing Peer to Peer payments Withdrawal at banking agent Deposit at banking agent

Especially for clients in remote locations, it will be important to help them deposit and withdraw funds at banking agents, i.e., retail and postal outlets that turn cash into electronic funds and vice versa. The feasibility of such banking agents depends on local regulation which enables retail outlets to take deposits or not. A specific sequence of SMS messages will enable the system to verify if the client has sufficient funds in his or her wallet and authorize a deposit or withdrawal transaction at the agent. When depositing money, the merchant receives cash and the system credits the client's bank account or mobile wallet. In the same way the client can also withdraw money at the merchant: through exchanging sms to provide authorization, the merchant hands the client cash and debits the merchant's account. Investments 1. Portfolio management services 2. Real-time stock quotes 3. Personalized alerts and notifications on security prices 4. Mobile banking Support 1. Status of requests for credit, including mortgage approval, and insurance coverage 2. Check (cheque) book and card requests 3. Exchange of data messages and email, including complaint submission and tracking 4. ATM Location
Content Services

1. General information such as weather updates, news 2. Loyalty-related offers

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Mobile Banking: Untapped Potential 2010
3. Location-based services One way to classify these services depending on the originator of a service session: Push/Pull' nature. ‘Push' is when the bank sends out information based upon an agreed set of rules, for example your banks sends out an alert when your account balance goes below a threshold level. ‘Pull' is when the customer explicitly requests a service or information from the bank, so a request for your last five transactions statement is a Pull based offering. . The other way to categorize the mobile banking services, by the nature of the service, gives us two kind of services – Transaction based and Enquiry Based. So a request for your bank statement is an enquiry based service and a request for your fund's transfer to some other account is a transaction-based service. Transaction based services are also differentiated from enquiry based services in the sense that they require additional security across the channel from the mobile phone to the banks data servers. Based upon the above classifications, we arrive at the following taxonomy of the services listed before. Push Based Transaction Based Pull Based ? ? ? Fund Transfer Bill Payment Other financial services like share trading. Account Balance Enquiry Account Statement Enquiry. Cheque Status Enquiry. Cheque Book Requests. Recent Transaction History.

Enquiry Based

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Credit/Debit Alerts. Minimum Balance Alerts Bill Payment Alerts

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Technologies enabling Mobile Banking
Technically speaking most of these services can be deployed using more than one channel. Presently, Mobile Banking is being deployed using mobile applications developed on one of the following four channels. 1. 2. 3. 4. IVR (Interactive Voice Response) SMS (Short Messaging Service) WAP (Wireless Access Protocol) Standalone Mobile Application Clients

IVR – Interactive Voice Response IVR or Interactive Voice Response service operates through pre-specified numbers that banks advertise to their customers. Customer's make a call at the IVR number and are usually greeted by a stored electronic message followed by a menu of different options. Customers can choose options by pressing the corresponding number in their keypads, and are then read out the corresponding information, mostly using a text to speech program. Mobile banking based on IVR has some major limitations that they can be used only for Enquiry based services. Also, IVR is more expensive as compared to other channels as it involves making a voice call which is generally more expensive than sending an SMS or making data transfer (as in WAP or Standalone clients).

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Mobile Banking: Untapped Potential 2010
One way to enable IVR is by deploying a PBX system that can host IVR dial plans. Banks looking to go the low cost way should consider evaluating Asterisk , which is an open source Linux PBX system Asterisk, due to its open source nature has caught on in a big way and is being sold as an PBX solutions by quite a few companies commercially. However there has been considerable noise on multiple Asterisk related forums over the stability of Asterisk based systems. Companies planning to use Asterisk for their IVR solutions should certainly do a rigorous evaluation of its capabilities before committing their long term future on it. SMS – Short Messaging Service SMS uses the popular text-messaging standard to enable mobile application based banking. The way this works is that the customer requests for information by sending an SMS containing a service command to a pre-specified number. The bank responds with a reply SMS containing the specific information. For example, customers of the HDFC Bank in India can get their account balance details by sending the keyword ‘HDFCBAL' and receive their balance information again by SMS. Most of the services rolled out by major banks using SMS have been limited to the Enquiry based ones. However there have been few instances where even transaction-based services have been made available to customer using SMS. For instance, customers of the Bank of Punjab can make fund transfer by sending the SMS ‘ TRN(A/c No)(PIN No)(Amount)'. One of the major reasons that transaction based services have not taken of on SMS is because of concerns about security and because SMS doesn't enable the banks to deliver a custom user interface to make it convenient for customers to access more complex services such as transactions. The main advantage of deploying mobile applications over SMS is that almost all mobile phones, including the low end, cheaper one's, which are most popular in countries like India and China are SMS enabled. An SMS based service is hosted on a SMS gateway that further connects to the Mobile service providers SMS Centre. There are a couple of hosted IP based SMS gateways available in the market and also some open source ones like Kannel .

WAP – Wireless Access Protocol WAP uses a concept similar to that used in Internet banking. Banks maintain WAP sites which customer's access using a WAP compatible browser on their mobile phones. WAP sites offer the familiar form based interface and can also implement security quite effectively. Bank of America offers a WAP based service channel to its customers in Hong Kong. The banks customers can now have an anytime, anywhere access to a secure reliable service that allows them to access all enquiry and transaction based services and also more complex transaction like trade in securities

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Mobile Banking: Untapped Potential 2010
through their phone. A WAP based service requires hosting a WAP gateway. Mobile Application users access the bank's site through the WAP gateway to carry out transactions, much like internet users access a web portal for accessing the banks services. The following figure demonstrates the framework for enabling mobile applications over WAP. The actual forms that go into a mobile application are stored on a WAP server, and served on demand. The WAP Gateway forms an access point to the internet from the mobile network.

WAP Network Architecture for Mobile Applications Standalone Mobile Application Clients Standalone mobile applications are the ones that hold out the most promise as they are most suitable to implement complex banking transactions like trading in securities. They can be easily customized according to the user interface complexity supported by the mobile. In addition, mobile applications enable the implementation of a very secure and reliable channel of communication. One requirement of mobile applications clients is that they require to be downloaded on the client device before they can be used, which further requires the mobile device to support one of the many development environments like J2ME or Qualcomm's BREW. J2ME is fast becoming an industry standard to deploy mobile applications and requires the mobile phone to support Java. The major disadvantage of mobile application clients is that the applications needs to be customized to each mobile phone on which it might finally run. J2ME ties together the API for mobile phones which have the similar functionality in what it calls 'profiles'. However, the rapid proliferation of mobile phones which support different functionality has resulted in a huge number of profiles, which are further significantly driving up development costs. This scale of this problem can be gauged by the fact that companies implementing mobile application clients might need to spend as much as 50% of their development time and resources on just customizing their applications to meet the needs of different mobile profiles. Quite a few mobile software product companies have rolled out solutions, which enable J2ME mobile applications based banking. One such product is Wireless I-banco . The mobile user downloads and installs the wireless I-banco application on their J2ME phone. The J2ME client connects to the wireless Ibanco server through the service providers GSM network to enable users to access information about their accounts and perform transactions. One of the other big advantages of using a mobile application client is that it can implement a very secure channel with end-to-end encryption. However countries like India face a serious obstacle in the proliferation of such clients as few users have mobiles, which support J2ME or BREW. However, one of the biggest CDMA players in the Indian telecom industry, Reliance Infocomm has about 10 million users (2008) all of which have handsets, which support J2ME. Reliance has unveiled one of the most ambitious data services deployment program in the country. On the other hand a country like South Korea with its tech-savvy population has a widespread adoption of the higher-end mobiles, which support application development.

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Mobile Banking: Untapped Potential 2010

Reason for genesis of mobile banking
Product Benefits ? Introduction of new technologies. ? Control costs, removal of cost duplication ? Cater to increasing online channel customers ? Personalize customer interactions ? Unparalleled convenience and proactive customer service Customer Benefits ? Secure, Convenient and easy method of payment ? Anywhere anytime payment Merchant Benefits ? Additional payment method for customers ? Small payment amounts can be accepted ? Portable payment options for merchants on move (Taxis, Couriers, Doctors etc) Banks ? Additional channel for customer payments ? Use of existing Infrastructure ? Value added service to customers

Advantages of mobile Banking
It is a WIN-WIN-WIN situation for everyone: ? ? ? End-users benefit from greater control of their personal finances, as well as time saved by not having to access account details via other channels (Internet, phone, ATM, among others). Bankers are of the opinion that mobile banking gives the banks an opportunity to expand their customer base without incurring additional infrastructure costs. It would also help in financial inclusion as it would provide a large number of unbanked people access to banking services. Banks would save a huge amount of money on card issuance and merchant acquiring with zero point of sale cost. Mobile banking could be used to make remittances from person to person, banking purposes and to make payments for purchases or services provided.

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Mobile Banking: Untapped Potential 2010
Mobile Banking in India
Mobile banking in India is in a budding stage, with the high penetration of mobile phones acting as a growth driver. India’s existing mobile phone user base consists of 347 million users, including 73 million rural users. It is expected that the mobile banking active user base to reach 2% by 2012, up from the current 0.2%. Mobile banking is currently free of cost to encourage customers to adopt this new channel. Despite this, the registered user base is only 25 million people, and the active user base is just 10% or 2.5 million of registered user base. One major reason for the current low adoption of mobile banking, especially among the urban population, is the availability of alternative modes of banking, such as accessibility to ATMs, online banking, etc. Additionally, there are security concerns about mobile banking among Indian customers. Mobile payments have evidenced better usage among youth. The young, banked, urban working population are tech-savvy and present short-term potential for the growth of mobile banking in India.

Rural India is a huge and challenging market to reach, and service providers need to develop a long-term strategy to serve this untapped market. Many banks have initiated pilot projects, because banks consider mobile banking to be one of the cheapest ways to reach the roads less travelled. India has close to 600,000 villages, making it nearly impossible to establish brick and mortar banks everywhere. India's rural markets are also harder to tap due to illiteracy, lack of accessibility for services and technology, regulatory barriers, etc. To serve this market, banks should make use of pre-existing networks like regional rural banks, microfinance institutions, local delis and post offices, and field officers and authorized outlets. It is also important to leverage the latest technology in reaching out to this market. Mobile Banking is one of the most popular services used by Indians – More than 43.7 million mobile users used Mobile banking services in one form or the other. Here are the breakup of various Mobile Banking services used for the quarter ending August 2009: Nature of Mobile Banking Services Used mobile banking Checking account balance View last three transactions Status of cheques Payment reminders Unique Users 43.70 39.97 28.15 21.06 20.92

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Mobile Banking: Untapped Potential 2010
Request a cheque book 19.11

As far as the demographic of users go – Close to 60% of mobile banking users fall in the bracket of Rs. 1 to 5 Lakh income group. While the most popular Bank which was accessed for Mobile banking was ICICI Bank with 17.75 million users. HDFC accounts for second most subscribers with 9.1 million subscribers followed by State Bank of India with 6.13 million subscribers. SMS, the humble messaging service of the mobile world recently celebrated its 15 th birthday, an accidental invention that has demonstrated remarkable resilience and is still at the top. SMS usage continues to grow every year with more and more new innovative ways of utilizing its potential coming to the forefront. Indians are using SMS as an extension of their lives more and more every year, an average Indian sends 29 SMS per month (TRAI data). It’s being used not just to keep in touch with friends and family but to check bank balances, mobile bills, and status of train/flight to name a few. The following report looks at SMS usage in Urban India to shed some light on its future and answer a critical question, “Is SMS here to stay or will it be replaced?” SMS VAS in India – Perspective Indians use SMS for all sorts of reasons from receiving jokes to checking on flight status to enquiring about exam results. It’s a very powerful medium for getting in touch with people without soliciting a backlash as seen on phone calls. It’s effective for getting the message out to potential customers or retaining existing ones. Some key points of this report are: ? ? ? ? 1 in 5 urban Indians have used a SMS based VAS service either as a one-off or on subscription basis SMS is an effective marketing tool, showing conversion rates a lot higher than other conventional mediums i.e. TV/Radio etc. 1 in 3 Urban Indian has acted in some manner over the SMS i.e. forwarding to others or enquiring about it. SMS, an advertising medium, has an interaction rate of around 5% A quarter of urban Indians have participated in some sort of SMS contest, a valuable tool for getting consumers involved with products/services

SMS VAS Users – City wise Distribution SMS is a popular medium for delivering Value Added Services (VAS); it’s a valuable revenue source for service providers, almost 5% of service provider revenue comes from SMS VAS services the highest revenue earning VAS. Almost 20% of Urban Indians or 1 in 5 have used a SMS VAS service over the quarter ending May 2009. On looking at the big 7 Indian cities, Delhities are the most avid users of SMS VAS services, accounting for 6% of all SMS VAS users in Urban India followed by Mumbai and Chennai at 5% each.

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Mobile Banking: Untapped Potential 2010
Growth Trends Despite the general downturn in the banking industry, 2009 will be a pivotal year for mobile banking as it turns from a niche channel to a mainstream channel for consumer banking. Mobile banking usage will grow from 10 million active users in 2009 to over 53 million active users in 2013, representing a compound annual growth rate of 51.8%. Two factors that have helped the rapid growth of mobile banking are the lower cost of mobile calls and the rapidly growing mobile penetration. The figure below is from a comprehensive article from Technology Review

Some ground realities According to Financial Chronicle “State-owned banks have received a much poorer response from their clients compared with their private-sector peers for mobile banking, with only a small number of PSB customers showing interest to avail the services” ? ? Union Bank of India, the first state-owned bank which introduced mobile-based banking services in the market, has so far added only 1,700 customers in mobile banking, bank’s, India’s largest lender State Bank of India (SBI) has also received poor response for its mobile banking product, which it launched in December 2008. It rolled out the service in association with local technology-service provider, Spanco Tele-systems. SBI has so far received only 10,000 registrations for mobile banking IDBI Bank has also received a lukewarm response from its retail customers for its mobile banking roll out. The bank has a tie-up with service provider Paymate for the service. Since the launch the scheme, around 10,000 customers have registered for the service. ICICI Bank has 80 lakhs customers registered so far for mobile banking while HDFC Bank has 40 lakhs registered clients. Kotak Mahindra Bank has around 52,000 clients under the mobile banking fold.

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Challenges of mobile banking
Key challenges in developing a sophisticated mobile banking application are: Handset operability There are a large number of different mobile phone devices and it is a big challenge for banks to offer mobile banking solution on any type of device. Some of these devices support J2ME and others support WAP browser or only SMS. Initial interoperability issues however have been localized, with countries like India using portals like R-World to enable the limitations of low end java based phones, while focus on

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Mobile Banking: Untapped Potential 2010
areas such as South Africa have defaulted to the USSD as a basis of communication achievable with any phone. There is a myth that there is a challenge of interoperability between mobile banking applications due to perceived lack of common technology standards for mobile banking. In practice it is too early in the service lifecycle for interoperability to be addressed within an individual country, as very few countries have more than one mobile banking service provider. In practice, banking interfaces are well defined and money movements between banks follow the IS0-8583 standard. As mobile banking matures, money movements between service providers will naturally adopt the same standards as in the banking world. Security Security of financial transactions, being executed from some remote location and transmission of financial information over the air, are the most complicated challenges that need to be addressed jointly by mobile application developers, wireless network service providers and the banks' IT departments. The following aspects need to be addressed to offer a secure infrastructure for financial transaction over wireless network: 1. Physical part of the hand-held device. If the bank is offering smart-card based security, the physical security of the device is more important. 2. Security of any thick-client application running on the device. In case the device is stolen, the hacker should require at least an ID/Password to access the application. 3. Authentication of the device with service provider before initiating a transaction. This would ensure that unauthorized devices are not connected to perform financial transactions. 4. User ID / Password authentication of bank’s customer. 5. Encryption of the data being transmitted over the air. 6. Encryption of the data that will be stored in device for later / off-line analysis by the customer. Scalability & Reliability Another challenge for the CIOs and CTOs of the banks is to scale-up the mobile banking infrastructure to handle exponential growth of the customer base. With mobile banking, the customer may be sitting in any part of the world (true anytime, anywhere banking) and hence banks need to ensure that the systems are up and running in a true 24 x 7 fashion. As customers will find mobile banking more and more useful, their expectations from the solution will increase. Banks unable to meet the performance and reliability expectations may lose customer confidence. There are systems such as Mobile Transaction Platform which allow quick and secure mobile enabling of various banking services. Application distribution Due to the nature of the connectivity between bank and its customers, it would be impractical to expect customers to regularly visit banks or connect to a web site for regular upgrade of their mobile banking application. It will be expected that the mobile application itself check the upgrades and updates and download necessary patches (so called "Over The Air" updates). However, there could be many issues to implement this approach such as upgrade / synchronization of other dependent components. Personalization It would be expected from the mobile application to support personalization such as: 1. 2. 3. 4. 5. 6. Preferred Language Date / Time format Amount format Default transactions Standard Beneficiary list Alerts

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Mobile Banking: Untapped Potential 2010
Market Research
Primary Research Objective (PRO) To determine the extent in which ‘mobile banking’ is being favored and used by the hostel students for their day-to-day banking operations. Secondary Research Objective (SRO) ? ? ? ? ? To determine the awareness level among students about mobile banking features vis-à-vis other related features. To determine the level of security expected by the students with regards to mobile banking. To determine the availability of compatible of compatible phones owned by students for mobile banking. To determine the level of operational knowledge possessed by students for using mobile banking. To determine the quickness and efficiency of query response feature in mobile banking.

Secondary Data There were two objectives behind conducting the Dataquest Mobile Banking Survey—one, to ascertain the level of awareness about mobile banking, about the services offered, and about the banks that offered them; and two, to find out what services were used, and with what frequency. The first question was asked of the entire sample size of 360 respondents, while the second was posed only to those respondents who were aware of m-banking services. Since only a few private and MNC banks offer m-banking services in India, and because only people in ‘Class A’ cities would be able to use these services, a few filters were put in place. One, all respondents had to be mobile phone users. Two, they had to have accounts in banks that offer m-banking services. And three, they would either belong to the IT industry or be from prominent corporates. Finally, the survey was conducted in upmarket locations and IT campuses across the three cities of Bangalore, Mumbai and Delhi (NCR). Mobile Banking - The Services Bouquet ICICI Bank HDFC Bank Balance enquiry Last few transactions Cheque payment status Stop payment of cheques Statement request Cheque book request ? ? ? ?

IDBI Bank ? ? ?

HSBC ? ? ?

Bank of America ? ? ?

Citibank ? ? ?

ABN Amro ? ? ?

? ? ? ? ? ? ? ? ? ?

Are you aware of mobile banking and do you use it? All Delhi Bang Kolka Mum alore ta bai Aware? 48 73 45 58 36 Use? 7 12 15 8 3 All Sourc figures e: in Voice

Chen nai 65 13

Ahmed abad 3 0

Trivand rum 58 4

Hydera bad 11 0

Pune 19 5

Chandi garh 63 1

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Mobile Banking: Untapped Potential 2010
percent & age Data Sample Size: 754 mobile phone subscribers across 10 cities While 47.7% of Indian cellphone users are aware of mobile banking services, only 7.4% of them actually use the facilities. The level of awareness was highest in Delhi (72.8%), followed by 65% in Chennai and 63.4% in Chandigarh. Cellphone users in Ahmedabad, Hyderabad and Pune were the least aware, with awareness levels of 3.4%, 11% and 18.5%, respectively. Also, while none of the respondents reported using the facility in Ahmedabad and Hyderabad, Pune showed a much higher usage trend—5.3%. Interestingly, despite a #3 position in terms of awareness, Chandigarh was much below in the usage table, with a hit ratio of only 0.6%. Dataquest’s estimated user base of under 10,000 for mobile banking services in 2000, there are over 120,000 today who SMS from their mobiles to do their banking. Even this number of 120,000 represents only 1% of the overall mobile user base. Also, a majority of those who do use mobile banking services only do it to check account balance, with very few actually conducting transactions. Reasons for this—lack of awareness of services offered by banks and equally important, a perceived issue of security and confidentiality. Clearly, banks have not done enough to push their bouquet of mobile banking services. Also, e-commerce as a medium of purchasing and transacting has not really caught on, and the basket of mobile banking offerings is, in itself, very limited. The good news—the technology backbone is in place, and getting better. There’s CDMA, there’s GSM. Barring a few private banks—ICICI Bank, HDFC Bank, IDBI Bank—and a few MNC entities—Citibank, ABN Ambro, Standard charted and Hongkong Bank—few others offer a wide portfolio of mobile services. Public sector banks do not figure prominently in this picture yet. But the number of users is growing. Unlike Internet banking that is PC-restricted, mobile banking provides banks with an unparalleled opportunity to reach customers in an unrestricted environment. Better-integrated customer relationship channel for better service is what these banks believe in. While, some like HDFC Bank are riding on their existing infrastructure of Net banking, others like the IDBI Bank are making considerable investments to provide wirefree banking experience The most frequent transactions performed by a customer include personal financial management services, messaging, portfolio management, etc. Since many of these "on-demand" services are driven by customer mobility, this kind of information is considered crucial and will accelerate a customer’s decision-making process. Of the people who are both aware of and use m-banking services, most say "security" is a key concern. While there’s hardly any security risk in sending SMS’, a perception about it is there—banks, therefore, need to educate consumers on this front. The next reason is that people generally feel more comfortable making physical transactions. In the case of mobile payments, willingness to pay bills "the old-fashioned way" was cited by 15% of respondents, indicating that mobile payments must show a clear value-add over cheque-writing. One important factor to be addressed by banks in the future would be that of trust. Today, lack of service availability is the concern for potential users, but that should be addressed in coming times. (SOURCE:www.dqindia.ciol.com/content/top_stories/103012702.asp)

Research Methodology
Data Collection Methods ? ? Data was collected from the respondents using primary data collection method – direct structured questionnaire was used. Since the data entered was verified immediately, there was no necessity to use item non response handling strategies.

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Mobile Banking: Untapped Potential 2010
Questionnaire Design ? ? ? ? ? Open ended questions were used to know if any other specific category preferred by respondents. Multiple choice questions were also used to determine the type of mobile phone used and also the valueadded features used by the respondent. Rating methods were used to find out the awareness levels of mobile banking function, expected security level and level of customer satisfaction among features offered by mobile banking Ranking methods were used to gauge the preference levels of mobile banking functions. The questionnaire used was pre tested among 10 respondents and necessary changes were made based on the feedback received.

Sampling 1. 2. 3. 4. Universe: Students of the SCMHRD,SIIB and SCIT who used mobile phones and have a bank account in their name. Determination of Variable: The study attempts to determine features essential for a student in a mobile phone. Sample Unit: Responses were obtained from 100 randomly selected respondents and the responses were analysed to arrive at the key findings. Sample Method: Respondents (SCMHRD, SIIB and SCIT students from MBA-I and MBA-II batches) were selected for analysis using judgmental sampling.

Analysis Techniques ? ?
?

Cross Tabulation Statistical methods Frequency Tables and Chart

Major Findings and Recordings 1) 57% of hostel students have an account in State bank of India followed by ICICI bank with 23 % and remaining banks have a minor share among hostel students. 2) A mere 28% of the hostel students use mobile banking feature. 3) 36% of respondents came to know about mobile banking through banks followed by 33% of students from media and 29% from peers and colleagues. 4) There is a rarity in changing the password on a frequent basis. 5) All respondents require confidentiality in password followed by 31% saying account number as well and also 24% tilting also in favour of account balance. 6) 81% of the mobile phones used by the hostel students are compatible to upload software’s which is important for initiating mobile banking feature. 7) Almost every mobile banking user uses mobile banking to find out balance enquiry followed by ticket booking and monetary transactions. 8) On the whole, the respondents are almost sure that they prefer online banking over mobile banking. 9) On any parameter headed (The SROs) , we can find that online banking is preferred to mobile banking by almost 3 times on a average. 10) It can be infered that on a majority, hostel students use customer care at 55% followed by peers at roughly 30%. 11) It can be inferred that respondents are satisfied 5/10 scale levels which means they are moderately satisfied. Chi-Square Findings ? Awareness level of mobile banking is dependent of the type of bank the respondent has an account in at 90% confidence level.

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Mobile Banking: Untapped Potential 2010
? Satisfaction level of information provided by banks about mobile banking is independent of the type of bank the respondent has an account on at 90% confidence level. ? The reliability level of transactions in mobile banking is independent of the service provider at 90% confidence level. ? The efficiency and reliability of GPRS service provided is independent of the actual service provider at 90% confidence level. ? The level of satisfaction is dependent of the type of query resolution technique at 90% confidence level. All the graphs & chi square tables have been provided in a different report. This report consists of only findings from those tables. Conclusion ? All respondents require confidentiality in password followed by 31% saying account number as well and also 24% tilting also in favour of account balance. ? Most of the students are using Mobile Phones that are compatible to upload software’s which is one of the most important feature for initiating Mobile Banking ? Most of the mobile banking users use mobile banking to find out balance enquiry followed by ticket booking and monetary transactions. On the whole, the respondents are almost sure that they prefer online banking over mobile banking. Therefore, Mobile banking is yet to make a significant impact on hostel students for their day-to-day banking operations. The level of impact is only 28/100 students who have bank account, use mobile banking facility.

Recommendations
Rural Expansion: The penetration of telecom & media industry into far-flung areas of India, presents a great opportunity. This segment can be targeted at a very low cost with decent returns. Instead of setting up branches to cover rural India, we can reach the doorsteps of their customer using wirelessly online handhelds. The mobile workforce can act as mini-branches equipped to conduct financial transactions and update the central servers at the company's headquarters, all in a jiffy. This would cost no investment in brick-and-mortar infrastructure or headcount. The handheld will be pre-loaded with indigenously developed custom-made, multi-lingual business application modules to capture on-site data and update the central servers directly through the Internet. Tier I & Tier II cities: In order to promote Mobile Banking the Banks should take more initiatives in advertising through all sources in order to improve the awareness levels about the feature among the students as well as the working population. The banks can have collaboration with Mobile service providers for the purpose of promoting the feature. I suggest the usage of Pre-paid cards in order to overcome the disadvantage of overspending & security posed by credit cards & debit cards. To make it reachable & attractive to all the segments, we can have cards with different cash limits for each segment. These kinds of facilities are already available in some of the foreign countries (like octopus cards in Hong Kong) & it definitely presents a huge potential to be tapped. Moreover the cards should be recharged through mobiles. . This kind of instrument will be a big first mover advantage for any bank.

RBI norms
In order to ensure a level playing field and considering that the technology is relatively new, Reserve Bank has brought out a set of operating guidelines for adoption by banks. Regulatory & Supervisory Issues

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Mobile Banking: Untapped Potential 2010
? ? ? ? ? ? ? ? Only banks which are licensed and supervised in India and have a physical presence in India will be permitted to offer mobile banking services. The services shall be restricted only to customers of banks and holders of debit/credit cards issued as per the extant Reserve Bank of India guidelines. Only Indian Rupee based domestic services shall be provided. Use of mobile banking services for cross border transfers is strictly prohibited. Banks may also use the services of Business Correspondent appointed in compliance with RBI guidelines, for extending this facility to their customers. The guidelines issued by the Reserve Bank on ‘Risks and Controls in Computers and Telecommunications’ vide circular DBS.CO.ITC.BC. 10/ 31.09.001/ 97-98 dated 4th February 1998 will apply mutatis mutandis to mobile banking. The guidelines issued by Reserve Bank on “Know Your Customer (KYC)”, “Anti Money Laundering (AML)” and Combating the Financing of Terrorism (CFT) from time to time would be applicable to mobile based banking services also. Only banks who have implemented core banking solutions would be permitted to provide mobile banking services. Banks shall file Suspected Transaction Report (STR) to Financial Intelligence Unit – India (FIDIND) for mobile banking transactions as in the case of normal banking transactions.

Registration of customers for mobile service ? ? Banks shall put in place a system of document based registration with mandatory physical presence of their customers, before commencing mobile banking service. On registration of the customer, the full details of the Terms and Conditions of the service offered shall be communicated to the customer.

Technology and Security Standards ? Information Security is most critical to the business of mobile banking services and its underlying operations. Therefore, technology used for mobile banking must be secure and should ensure confidentiality, integrity, authenticity and non-repudiability.

Inter-operability ? Banks offering mobile banking service must ensure that customers having mobile phones of any network operator is in a position to avail of the service. Restriction, if any, to the customers of particular mobile operator(s) is permissible only during the initial stages of offering the service, up to a maximum period of six months subject to review. The long term goal of mobile banking framework in India would be to enable funds transfer from account in one bank to any other account in the same or any other bank on a real time basis irrespective of the mobile network a customer has subscribed to. This would require interoperability between mobile banking service providers and banks and development of a host of message formats. To ensure inter-operability between banks, and between their mobile banking service providers banks shall adopt the message formats like ISO 8583, with suitable modification to address specific needs.

?

Clearing and Settlement for inter-bank funds transfer transactions ? To meet the objective of a nation-wide mobile banking framework, facilitating inter-bank settlement, a robust clearing and settlement infrastructure operating on a 24x7 basis would be necessary. Pending creation of such a national infrastructure, banks may enter into bilateral or multilateral arrangement for inter-bank settlements, with express permission from Reserve Bank of India, wherever necessary.

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Mobile Banking: Untapped Potential 2010
Customer Complaints and Grievance Redressal Mechanism ? The customer /consumer protection issues assume a special significance in view of the fact that the delivery of banking services through mobile phones is relatively new.

Transaction limit ? ? ? A per transaction limit of Rs. 2500/- shall be imposed on all Mobile Banking transactions. Subject to an overall cap of Rs. 5000/- per day, per customer. Banks may also put in place monthly transaction limit depending on the bank’s own risk perception of the customer.

Board approval ? Approval of the Board of Directors (Local Board in case of foreign banks) for the product as also the related security policies must be obtained before launching the scheme.

Approval of Reserve Bank of India ? Banks wishing to provide mobile banking services shall seek prior one time approval of the Reserve Bank of India, by furnishing full details of the proposal.

PEST analysis of Mobile Banking
The table below shows the Political, Economic, Social and Technology (PEST) factors that affect the mobile banking industry in India Political Economic Only banks can offer Cost of handsets mobile transaction services Business Correspondent Mobile penetration regulation rural India Regulations on Security Daily Transaction Limit Goal of Financial Inclusion Political Factors Only Banks can Offer Mobile Transaction Services: Only licensed banks that a have a physical presence in India are allowed to offer mobile-banking services. The banks are responsible for ensuring Know Your Customer norms, and must have core banking systems in place. Several MFIs today act as a business correspondent (BC) (agents who work on behalf of banks) for commercial banks to reach areas where opening a bank branch is not viable. Usually at the business correspondent’s office, a bank representative is present who oversees the enrolment of clients and ensures that the KYC requirements are complied with. The bank through a BC can enroll clients, the clients can be served by the bank using mobile banking thus fulfilling the objective and the spirit of financial inclusion Mobile operators and mobile-application developers require a separate set of guidelines for nonbanking providers who want to offer mobile banking services. Social Technology A required be behavioral One comprehensive change application for all mobile handsets in Illiteracy Security concerns

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Mobile Banking: Untapped Potential 2010
Regulations on Security: The RBI’s guidelines call for a two-factor authentication for validation of a customer. The industry has reacted to this by interpreting that two-factor authentication can be supported only by GPRS and not through SMS. Media has also criticized RBI by saying that the new mobile banking regulations such as the two factor authentication do not facilitate financial inclusion since basic mobile phones owned by majority of people in rural India do not support GPRS. Secure transactions can happen even via SMS. SMS’es are of two types – Normal and Encrypted SMS. Normal SMS is what we use for day-to-day communication and is not secure. The SMS is not encrypted when it passes through the pipe it can be accessed. On the other hand, an encrypted SMS is converted into non-readable text using a RSA / AES (security) algorithm. The text that can be encrypted are numbers from 1-9, capital letters from A-Z and small letters from a-z. Special characters cannot be encrypted. When the bank client sends a sms from his phone to the server, a sms along with an encrypted key is sent to the server. If the encryption algorithm is strong enough, it is not possible to read the SMS. The server then decrypts (opens) the encrypted key using a RSA encryption algorithm. This technology is perfectly secure and GPRS is not mandatory. Not many phone users in India subscribe to GPRS and even fewer have phones that can support GPRS. Around 60 percent of the 306 million handsets or mobile connections in India are without GPRS and WAP. Due to lack of GPRS connectivity, Smart Trust applications, secure SMS based applications will be the prominent at least in the initial years of mobile banking. Daily Transaction Limits: The RBI has capped daily mobile transaction limits at Rs 5,000 for transfer of funds and Rs 10,000 for purchase of goods or services. This regulation, at least in the early stages of mobile banking, does not affect customers who will be vary of performing high value transactions. It will surely not affect rural customers who rarely receive more than Rs.5000 per day through remittances. It is also unlikely that the rural customer will pay more than Rs.10,000 for paying his utility bills or other services. Goal of Financial Inclusion: Currently in India, 134 million households are financially excluded, which is 60 percent of country’s population. Moreover, Financial Exclusion in Urban India is about 44 percent where as exclusion in Rural India is about 76 percent. Among the recent Government initiatives it has been proposed that a National Rural Financial Inclusion Plan should be launched with a clear target to provide access to comprehensive financial services to at least 50 percent of the financially excluded households (approximately 55.77 million) by 2012 through regional and semi-urban branches of Commercial Banks and Regional Rural Banks. The remaining households are to be covered by 2015. The Finance Minister in his budget for 2007-08 announced the setting up of a fund for financial inclusion of about Rs. 500 Crore to meet cost of technology adoption. Looking at financial inclusion especially in unique nature of states such as Uttarakhand and Himachal where a ‘money order’ economy prevails and transferring money is problematic; mobile phone banking would prove an effective way to expand the reach of financial service delivery. The topography in hilly terrains is such that banks cannot open branches in every corner. Mobile banking as a technology is certainly an answer to the growing demand for banking facility at the village level. Economic Factors Cost of Handsets: Handsets are priced currently at less than $25 (Rs.1000) and call rates are less than 0.05 cents (Rs.2) per minute. Industry participants like Bharati Airtel have already awarded a contract worth $2 billion over two-years to Telefonaktiebolaget LM Ericsson, to expand its network in rural areas and provide capacity management. Gartner expects 58 percent of the rural population and 95 percent of the urban population to be covered by mobile networks by 2011. Increased Penetration in Rural India: Approximately 400 million Indians do not have a bank account. India has a base of approximately 300 million mobile handsets. Also, the Indian mobile phone market is worth up to 10 million handsets a month. With the advent of an exponential growth in mobile phones in India, mobile banking applications can be used as an efficient channel to deliver financial services to the farthest parts of the country at significantly low costs both for the financial institution as well as the client. Only 2% of rural India has access to cell phones today. With most mobile companies focusing aggressively on rural India, this situation is likely to change in the very near future. In remote geographies of India,

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Mobile Banking: Untapped Potential 2010
mobile recharge cards are a fast moving product and Kirana (packed, to-the-brim stores) storeowners earned a significant portion of their revenues by selling prepaid mobile recharge cards. Social/Demographic/Infrastructure Factors A Required Behavioral Change: Banks plan to capitalise on this gap to increase penetration. There are 300 million mobile users, with 6 million being added every month. Despite such potential for convenience and business opportunity, few people use mobiles even for simple banking queries. But people have their reasons for not yet lapping up the opportunity. They find many features complex to handle. That apart, there is the issue of sensitising customers. There have been cases where help-desks at banks have not been able to offer much to willing users. Mobiles have become ubiquitous, and using them for banking is the logical step. But in order for banks to explore full potential, increasing awareness is essential. A good strategy for banks to ride on the mobile way will be to initially offer some services for free. Banking Network in the Country: There are about 68,000 bank branches in this country and 23,000 ATMs. But what’s astounding is that the number of mobile subscribers in India, which is 85 million, is growing by 5 million each month. So while today mobile banking is still not as widely used, the possibilities are limitless Illiteracy: Illiteracy could prove an issue when using technologies like mobile phones, especially for tribal communities. Moreover, mobile banking pre-supposes that the mobile holder has a bank account, and thus along with providing capacity building organizations will have to focus on financial inclusiveness. This challenge can be overcome by service provider developing a user friendly mobile application using local languages. Technology Factors One Comprehensive Application for All Mobile Handsets: A major challenge for mobile application development is the great variety of different target devices with different capabilities, features and restrictions. There are a large number of different mobile phone devices and it is a big challenge for application providers to offer mobile banking solution on any type of device. Some of these devices support J2ME and others support WAP browser or only SMS. Ideally, the technology provider should ensure that the application should function on all handsets ranging from a Nokia 1010 to a I Phone. Security Concerns: Security of financial transactions, being executed from some remote location and transmission of financial information over the air, are the most complicated challenges that need to be addressed jointly by mobile application developers, wireless network service providers and the banks’ IT departments. Security applications will gain a lot of ground during the period 2009-12. These applications will include anti-theft and device recovery features via GPS. There will also be a lot of interest in areas such as remote data locking.

Success Stories
LG Telecom, South Korea In terms of the evolution of services being offered on mobile applications, South Korea is showing the way. The big push came when LG Telecom Ltd., the smallest of Korea's three mobile service providers teamed up with the Kookmin bank to launch the ‘Bank on' service. Under this scheme mobile users were able to use smart chips embedded in cell phones for accessing all of the transaction and enquiry based services. The chip-based service automated the authentication of users when they accessed their bank's financial services to make the whole process much faster and convenient. The icing on the cake came with the ability of these chip enabled cell phones to be used simultaneously as cash cards. By October 2004 there were already about 100,000 infrared readers adapted to take payment directly from mobile phone

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Mobile Banking: Untapped Potential 2010
handsets in Korea. Users can now use their cell phones to pay for everything, from restaurant bills, travel tickets, merchandise and even haircuts. Reliance Infocomm, India When Reliance Infocomm, India rolled out its CDMA network, (at the time the mobile market in India was still in its infancy, and data services were almost never heard off) it made sure that all handsets supported Java.The Reliance application platform, also known as R-World brought Java compatibility even to the lower end phones. Reliance used a novel way to overcome the memory limitations of lower-end mobile phones, which hampered deploying of multiple standalone J2ME based clients. Instead of storing applications statically on their cell phones, users access a single menu based application called R-World, which connects them to the Reliance servers. Using the menu based user interface, mobile users select the application, which they want to run and download them over-the-air to their cell phones. These applications are then executed locally on the mobiles. From mid-2004 Reliance tied up with two of the popular private sector banks, HDFC and ICICI, to provide a host of their enquiry and transaction based mobile banking services through its R-World environment. ABN Ambro, India ABN AMRO Bank brings to the convenience of mobile banking using an application called MPOWER. It allows customers to access their account for inquiry & transactions using simple SMS messages. One can do the following using MPOWER: • Balance & Transaction Inquiry • Share Holdings in Demat Account • Funds Transfers to ABN AMRO & other banks • Bill Presentment and Payment • Cheque Inquiry & Stop Cheque • Online Fixed Deposit Opening • Request for Cheque Book & Statement • Request for new PIN & change PIN online Citibank Banks are hoping to extend mobile banking as technology improves. Citibank has two ongoing cell phone trials. The first is a partnership with MasterCard, AT&T, and Nokia that places chips in cell phones allowing Citi debit and credit to make payments by waving the cell phone at a participating store’s register. Citi’s other pilot is with Obopay that lets debit and credit customers transfer money between mobile phones. Analysts say even more revenue is possible in the coming years when more functions are added to cell phones like international transfers, and booking travel arrangements. While mobile banking is relatively new, the service has shown some traction with customers. Citi Mobile says it had more subscribers than expected while the service was being piloted around the country in the spring. Wachovia Mobile says their service has been getting about 50,000 unique visitors a week since its launch. Celent predicts that by the end of 2010, 35% of all online banking households will be using mobile banking.

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Mobile Banking: Untapped Potential 2010
Conclusion
Mobile banking is poised to become the big killer mobile application arena. However, banks going mobile the first time need to tread the path cautiously. The biggest decision that banks need to make is the channel that they will support their services on. ? SMS based Service: Mobile banking through an SMS based service would require the lowest amount of effort, in terms of cost and time, but will not be able to support the full breath of transaction-based services. However, in markets like India where a bulk of the mobile population users' phones can only support SMS based services, this might be the only option left. ? WAP based mobile applications: On the other hand a market heavily segmented by the type and complexity of mobile phone usage might be good place to roll of WAP based mobile applications. A WAP based service can let go of the need to customize usability to the profile of each mobile phone, the trade-off being that it cannot take advantage of the full breadth of features that a mobile phone might offer. ? Mobile application standalone clients: It bring along the burden of supporting multiple mobile device profiles. According to the Gartner Group, mobile banking services will have to support a minimum of 50 different device profiles in the near future. However, currently the best user experience, depending on the capabilities of a mobile phone, is possible only by using a standalone client. Mobile Banking is the most spoken about factors in the area of development in the banking sector as a whole and is expected by industry experts to replace the credit/debit card system in future. During the last quarter of 2008, there are 47 million mobile users, with an average of 2 million being added every month While the government incurs a transaction cost of Rs 12-13 for every Rs 100 of loan disbursement, mobile banking helps it reduce the cost to a mere Rs 2. As per the findings, from the primary research done, Mobile banking is yet to make a significant impact on hostel students for their day-to-day banking operations. The level of impact is only 28/100 students who have bank account, use mobile banking facility. Students are inclined towards the mobile banking but awareness, security & services provided are essential. Some techniques that can be implemented for security concerns include ? ? ? Using the phone-lock function on your mobile device when it is not in use Choosing passwords which are difficult to crack and keeping them safe Ensuring that the phone is configured securely, especially when it comes to configuring the Web browser and email software.

Product Services: Apart from the basic facilities provided on phone, the banks need to attach mobile banking with debit/credit cards so. With increasing usage of debit/credit cards, the mobile banking would spread. This could be done as recommended: ? Launching of Pre-paid cards in order to overcome the disadvantage of overspending & security posed by credit cards & debit cards. To make it reachable & attractive to all the segments, we can have cards with different cash limits for each segment. These kinds of facilities are already available in some of the foreign countries (like octopus cards in Hong Kong) & it definitely presents a huge potential to be tapped. Moreover the cards should be recharged through mobiles. This kind of instrument will be a big first mover advantage for any bank. Initially providing free mobile banking service to all its customers.

?

Mobile banking has the potential to do to the mobile phone what E-mail did to the Internet. Mobile Application based banking is poised to be a big m-commerce feature, and if South Korea's foray into mass mobile banking is any indication, mobile banking could well be the driving factor to increase sales of high-end mobile phones. Increasing sales of high end phones would be an incentive for mobile phones manufacturer to spread mobile banking. Collaboration of bank & mobile phone companies & service providers can help in penpretation of mobile banking. Nevertheless, Bank's need to take a hard and deep look into the mobile usage

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Mobile Banking: Untapped Potential 2010
patterns among their target customers and enable their mobile services on a technology with reaches out to the majority of their customers. Finally, unless the experience on the mobile device is as frictionless and simple as possible, consumers will wait to check their account status by visiting the bank.

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