Market Opportunity & Challenges According to business research study conducted by Pune based KPO SG Analytics; there are roughly 0.4 billion current and saving bank accounts in India and 0.7 billion mobile phone subscribers with total population of 1.2 billion people. Also the market research study estimates the post office network covers 89% of the population. It is estimated by business research that that the total internal remittance range from INR 260 billion to INR 400 billion per annum and total inward foreign remittance of USD 52 billion. The cost of internal remittances is estimated to range from 3%to 5% and external remittances from 3% to 9% of the remitted amount by market research studies. Market research indicates that majority of the remittances are in the informal sector due to quicker and lower cost service. Additionally there is benefit of ease of access for beneficiaries to informal service providers according to market research. India has adopted a bank-led mobile payment model instead of the mobile service provider model. This model requires a bank account for both the remitter and the beneficiary customers with mobile phones providing a communication platform, enabling tighter regulation of the sector, but market research indicates this will limit the utility to the weakest sections of the society typically migratory labor and people without identification. RBI favors a banking correspondent (BC) model for financial inclusion of this segment. Banks have targeted these population segments with simple no frills bank account and remittance products with service delivery through the local BC. Market research estimates that over 5,000 merchants across product and service categories have signed up for mobile based payment. Key Issues with Mobile based Payment System According to market research companies following are the key issues with a mobile based payment system Regulation The mobile banking and payment system is subjected to similar regulations to the normal banking transactions such as KYC (Know Your Customer) norms AML (Anti Money Laundering) norms. According to a business research, RBI has approved a bank-led mobile payment system instead of the mobile operator led to ensure tighter regulation of the payment system. Transaction Security and Beneficiary Authentication The mobile payment transaction follows a 2 factor beneficiary authentication and transaction authorization. The remitter of the funds needs to know the unique MMID (Mobile Money Identification) of the beneficiary along with the mobile number. Further the remitter provides its MMID and a PIN to effect the transaction. Business research indicates that the MMID also enables linkages of multiple customer accounts with a single mobile phone for the users. Cost of Transaction Market research indicates that cost of transaction can become a significant differentiator and the USP of the payment system vis a vis the bank branch based, ATM based, card based and internet based payment systems. The mobile payment system is estimated to cost INR 2 †5 per transaction significantly lower than the transaction costs incurred at other banking channels according to business research. This low cost of transaction is expected to widen and deeper acceptance of the mobile payment system potentially substituting the cash transactions according to a business research. Ease of Access / Operation Market research expects that with over 700 million mobile phone subscribers covering more than half of the Indian population mobile phone provides a widely available and easily accessible platform. Also business research indicates that to conduct basic transactions an entry level mobile phone with ability to send SMS is adequate. As per current guidelines transactions of up to INR 50,000 can be conducted from end to end encrypted mobile phones and up to INR 1,000 by unencrypted ones. Market research expects this to make the mobile phone an ideal mechanism to conduct small and micro payments for day to day transactions. Interoperability Seamless interoperability between the financial institutions and the mobile service providers based on standardized data exchange formats and open systems will enable the success of the nationwide payment mechanism. This will make it a open system and enable users to transact between any mobile service provider and any financial institution as per business research. Merchant Vendors Market research studies estimate over 5,000 merchant vendors that have joined this payment mechanism, notable among them â€Dish TV (Satellite based entertainment) â€Redbus.in (Travel booking) â€LIC (Insurance) â€MTNL (Telephone) â€Mahanagar Gas (Utility) â€Sidhhivinayak (Religion) Further market research estimates an exponential increase in merchants as service becomes more popular. Opportunities for Outsourcing Companies Implementation of mobile payment system is expected to generate business for outsourcing industry for outsourced implementation of the system, outsourced maintenance of infrastructure, outsourced transaction processing, outsourced vendor management, and outsourced customer analytics. Other Countries Business research identifies that other developing countries in Asia and Africa have initiated mobile based banking and payment systems. Business research indicates prominent among them are the M-PESA in Kenya, G-cash in Philippines and Celpay in Zambia, WIZZIT in South Africa. Business research finds both bank-led (G-Cash) and mobile service provider led (M-PESA) platforms. Market research indicates the most popular services used by consumers are internal remittances, external remittances and m-wallet. The key benefits identified by the market research studies for the customers ranged from quick money transfers, low cost transactions, anywhere banking, physical safety of money, and financial inclusion in mainstream economy. Eco System for mobile based payment system According to market research following are the key players. Regulator Reserve Bank of India (RBI), the central bank is the regulator for the mobile phone based banking and payment system for all domestic transactions. National Payments Corporation of India NPCI is promoted by 10 banks to facilitate creation and operation of a robust, scalable and low cost nationwide payment infrastructure. Interbank Mobile Payment Services (IMPS) has been conceived as an instant interbank fund transfer service operated by the mobile phones. It enables the mobile phone users to instantly remit and transfer funds from their bank accounts to beneficiary accounts across India. Also it enables the customers to access and perform multiple banking transactions such as balance enquiry. Banks Market research indicates that the PSU banks (Union Bank), private banks (Yes Bank, HDFC) and foreign banks have joined the National Payment Corporation of India to facilitate interbank mobile phone based transactions. As per market research by Dec 2010, 7 banks have joined NPCI and 7 additional banks are in process of system testing and are expected to join in near future. Mobile Application Developer The software application developers develop the various consumer applications both for the retail and institutional customers as well as the banks offering mobile based banking services. Business research indicates that banks have initiated tie ups with the service providers such as Yes bank and Union bank with Obopay for mobile payment solutions, Airtel and Visa with Mchek Mobile Phone Service Providers According to market research data, India has over 14 mobile service providers offering mobile services across the nation both on 2G and 3G mobile platforms. They will provide the underlying nationwide mobile phone infrastructure. Transaction Facilities Market research indicates that the IMPS based mobile banking platform will facilitate the following services â€Micro payments / Electronic Wallet â€Remittances internal â€Remittances inward Initially the micro payment and internal remittance services will be available with more payment services available later. Further market research indicates that the individual banks will provide bouquet of value added services on their respective mobile banking platforms to differentiate their services from competitors. Mutual fund subscriptions, fixed deposits, bill payments are likely to be most popular services according to a market research. Transaction Model The mobile payment system is bank led system where the customer funds will be present in their bank accounts and all financial transactions occur between the bank accounts of remitter and beneficiary via the National Financial Switch. Business research indicates that at no time will the funds be present with the mobile phone service providers. Transaction Mechanism The remitter provides the beneficiary MMID and the mobile number along with its own MMID, secured PIN and transaction amount. This is send to its bank via a simple SMS or using bank’s mobile payment application. The Remitter bank checks the remitter account and effects an instant transaction through the National Financial Switch of National Payment Corporation of India. The beneficiary bank authenticates the beneficiary MMID and the mobile number and completes the fund transaction. The success or failure of the transaction is communicated to both the remitter and beneficiary mobile phones.
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