PGDBA(Finance)-Project-Mobile Banking in India · 2 Mobile Banking In India SCDL, PGDBA (FINANCE)...

MOBILE BANKING IN INDIA

VIJAY MAHAWAR

200647705

SYMBIOSIS CENTRE FOR DISTANCE LEARNING

2006 BATCH

2MobileBankingInIndia

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VIJAYMAHAWAR(200647705)

NO OBJECTION CERTIFICATE

This is to certify that MR. VIJAY MAHAWAR is an employee of this organization for the

past 2 months.

We have no objection for him to carry out a project work titled “MOBILE BANKING IN

INDIA” in our organization and for submitting the same to the Director, SCDL as a part of

fulfillment of the PGDBA (Finance) Program.

We wish him all the success.

Seal of the company Signature of the competent authority

of the Organization

Place:

Date:


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DECLARATION BY THE LEARNER

This is to declare that I have carried out this project work myself in part fulfillment of the

PGDBA (Finance) Program of SCDL.

The work is original, has not been copied from anywhere else and has not been submitted to

any other University/Institute for an award of any degree/diploma.

Date: 15th April 2010 Signature:

(VIJAY MAHAWAR)

Place: GHAZIABAD


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CERTIFICATE BY THE SUPERVISOR (GUIDE)

Certified that the work incorporated in this Project Report “Mobile Banking in India”

submitted by MR. VIJAY MAHAWAR is his original work and completed under my

supervision.

Material obtained from other sources has been duly acknowledged in the Project Report

Date: Signature of Guide:

Place:


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TABLE OF CONTENTS CHAPTER 1: INTRODUCTION.......................................................................................................7

CHAPTER 2: OBJECTIVE AND SCOPE......................................................................................11

CHAPTER 3: CHALLENGES FOR A MOBILE BANKING SOLUTION....................................12

Handset operability...................................................................................................................12

Security.....................................................................................................................................12

Scalability & Reliability............................................................................................................13

Application distribution............................................................................................................13

Personalization..........................................................................................................................14

CHAPTER 4: THEORETICAL PERSPECTIVE............................................................................15

Account Information.................................................................................................................16

Payments, Deposits, Withdrawals, and Transfers.....................................................................16

Investments...............................................................................................................................17

Support......................................................................................................................................17

Content Services.......................................................................................................................17

CHAPTER 5: METHODOLOGY AND PROCEDURE OF WORK..............................................28

RBI Guidelines on Mobile Banking..........................................................................................29

CHAPTER 6: ANALYSIS OF DATA.............................................................................................42

CHAPTER 7: FINDINGS, INFERENCES AND RECOMMENDATIONS....................................48

LGTelecom,SouthKorea..........................................................................................................48

RelianceInfocomm,India..........................................................................................................49

Citibank.....................................................................................................................................50

ICICIBank..................................................................................................................................50

HDFCBank.................................................................................................................................51

RBI.............................................................................................................................................52

NokiaMoney.............................................................................................................................54

CHAPTER 8: CONCLUSION..........................................................................................................56

CHAPTER 9: SUMMARY..............................................................................................................57

ANNEXURES..................................................................................................................................59

ANNEXURE I (PROPOSAL)..................................................................................................59


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ANNEXURE II (REFERENCES)............................................................................................61

ANNEXURE III (FIGURES/CHARTS/DIAGRAMS).............................................................62

ANNEXURE IV (LIST OF TABLES).....................................................................................63

ANNEXURE V (GENERAL TERMS/ACRONYMS).............................................................64


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CHAPTER 1: INTRODUCTION

Internet Banking 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.

The main reason that Mobile Banking scores over Internet Banking is that it enables

‘Anywhere Anytime Banking'. Customers don't need access to a computer terminal to

access their bank accounts, now the can do so on-the-go while waiting for the bus to work,

traveling 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 40.6 million

in the August 2004. In September 2004 it added about 1.85 million more. 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. All 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.

How Mobile Banking Works


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You’ve probably seen the commercial: A woman, hanging from the side of a mountain,

receives a text message on her cell phone. The message is from her bank, telling her that her

account is about to be overdrawn. With just a few clicks on her phone, she transfers funds

from her savings account to her checking account. Problem solved. She finishes her climb,

confident that her financial life remains in order.

This scenario, though highly dramatized for effect, illustrates what many believe is the

future of banking. It’s mobile banking, or m-banking, which enables mobile phone users to

access basic financial services even when they are miles away from their nearest branch

orhome computer. In some parts of the world, such as the Philippines,Brazil and Africa,

mobile banking is already flourishing. But in theUnited States, only about 10 percent of

consumers -- about 1.7 million people -- currently use their cell phones to conduct bank

transactions. That number is expected to grow to 35 million by 2010.

Mobile Banking Background

For 30 years, financial institutions have been on a quest to satisfy their customers’ need for

more convenience. First came the automated teller machine (ATM), which New York’s

Chemical Bank introduced to the American public in 1969. It did little more than

dispense cash at first, but the ATM evolved over time to become a true bank-away-from-

bank, providing a full suite of financial transactions.

Then came Internet banking in the mid-1990s, which enabled consumers to access their

financial accounts using a home computer with an Internet connection. Despite its promise

of ultimate convenience, online banking saw slow and tentative growth as banks worked out

technology issues and built consumer trust. Today, Internet banking has reached a critical

mass, with about 35 percent of U.S. households conducting bank transactions online.

Yet banking at the living room computer still has some serious limitations. First, only 62

percent of American households have a computer, according to a 2003 study conducted by

the U.S. Census Bureau. And only 28 percent of Americans have broadband Internet access,

which is essential to efficient, convenient service. The biggest issue, however, is mobility.


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Even with a laptop, it’s almost impossible to stay connected in virtually any location on the

planet.

Not so with mobile phones. They can be carried anywhere and are -- by an enormous

number of people. More than 238 million people in the U.S. have mobile phones. That’s a

whopping 78 percent of the population. And worldwid e there are more than 3.25 billion

mobile phone subscribers, with penetration topping 100 percent in Europe.

If mobile phones only delivered voice data, then their use as a vehicle to deliver banking

services would be limited. Most phones, however, also provide text-messaging capabilities,

and a growing number are Web-enabled. That makes the mobile phone an ideal medium

through which banks can deliver a wide variety of services.

Banks classify these services based on how information flows. A pull transaction is one in

which a mobile phone user actively requests a service or information from the bank. For

example, inquiring about an account balance is a pull transaction. So is transferring funds,

paying a bill or requesting a transaction history. Because banks must respond or take some

action based on the user request, pull transactions are considered two-way exchanges.

A push transaction, on the other hand, is one in which the bank sends information based on

a set of rules. A minimum balance alert is a good example of a push transaction. The

customer defines the rule -- "Tell me when my balance gets below $100" -- and the bank

generates an automatic message any time that rule applies. Similar alerts can be sent

whenever there is a debit transaction or a bill payment. As these examples illustrate, push

transactions are generally one way, from the bank to the customer.

You can also classify mobile banking based on the nature of the service. Transaction-based

services, such as a funds transfer or a bill payment, involve movement of funds from one

source to another. Inquiry-based services don’t. They simply require a response to a user

query. The chart below summarizes these various types of mobile banking services.


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Clearly, push transactions are not as complex as their pull counterparts. Mobile banking

solutions also vary in their degree of complexity, and some only offer a fraction of the

services you would find in a bricks-and-mortar branch. In this respect, mobile banking isn't

always full-service banking. The factors that affect this are the type of phone being used,

the service plan of the mobile subscriber and the technology framework of the bank. We’ll

look at these technologies next.


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CHAPTER 2: OBJECTIVE AND SCOPE

This paper describes the basic concepts, services offered, market survey and technology

which enables Mobile Banking. Over the last few years, the mobile and wireless market has

been one of the fastest growing markets in the world and it is still growing at a rapid pace.

This opens up huge markets for financial institutions interested in offering value added

services.

With mobile technology, banks can offer a wide range of services to their customers such as

doing funds transfer while traveling, receiving online updates of stock price or even

performing stock trading while being stuck in traffic. Mobile devices, especially smart-

phones, are the most promising way to reach the masses and to create “stickiness” among

current customers, due to their ability to provide services anytime, anywhere, with high rate

of penetration and potential to grow.

Mobile banking (also known as M-Banking, mbanking, SMS Banking etc.) is a term used

for performing balance checks, account transactions, payments etc. via a mobile device such

as a mobile phone. Mobile banking today (2007) is most often performed via SMS or

the Mobile Internet but can also use special programs called clients downloaded to the

mobile device.

Many believe that mobile users have just started to fully utilize the data capabilities in

their mobile phones.

In Asian countries like India, China, Bangladesh, Indonesia and Philippines, where mobile

infrastructure is comparatively better than the fixed-line infrastructure, and

in European countries, where mobile phone penetration is very high (at least 80% of

consumers use a mobile phone), mobile banking is likely to appeal even more.


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CHAPTER 3: CHALLENGES FOR A MOBILE BANKING SOLUTION

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 Java ME and others support SIM Application Toolkit, a 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

areas such as South Africa have defaulted to the USSD as a basis of communication

achievable with any phone.

The desire for interoperability is largely dependent on the banks themselves, where installed

applications (Java based or native) provide better security, are easier to use and allow

development of more complex capabilities similar to those of internet banking while SMS

can provide the basics but becomes difficult to operate with more complex transactions.

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 :


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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.

Recently in India there has been a phenomenal growth in the use of Mobile Banking

applications, with leading banks adopting Mobile Transaction Platform and the Central

Bank publishing guidelines for mobile banking operations.

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.


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Personalization

It would be expected from the mobile application to support personalization such as :

1. Preferred Language

2. Date / Time format

3. Amount format

4. Default transactions

5. Standard Beneficiary list

6. Alerts


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CHAPTER 4: THEORETICAL PERSPECTIVE

The advent of the Internet has enabled new ways to conduct banking business, resulting in

the creation of new institutions, such as online banks, online brokers and wealth managers.

Such institutions still account for a tiny percentage of the industry.

Over the last few years, the mobile and wireless market has been one of the fastest growing

markets in the world and it is still growing at a rapid pace. According to the GSM

Associationand Ovum, the number of mobile subscribers exceeded 2 billion in September

2005, and now exceeds 2.5 billion (of which more than 2 billion are GSM).

With mobile technology, banks can offer services to their customers such as doing funds

transfer while travelling, receiving online updates of stock price or even performing stock

trading while being stuck in traffic. Smartphones and 3G connectivity provide some

capabilities that older text message-only phones do not.

According to a study by financial consultancy Celent, 35% of online banking households

will be using mobile banking by 2010, up from less than 1% today. Upwards of 70% of

bank center call volume is projected to come from mobile phones. Mobile banking will

eventually allow users to make payments at the physical point of sale. "Mobile contactless

payments” will make up 10% of the contactless market by 2010. Another study from 2010

by Berg Insight forecasts that the number of mobile banking users in the US will grow from

12 million in 2009 to 98 million in 2015. The same study also predicts that the European

market will grow from 7 million mobile banking users in 2009 to 131 million users in 2015.

Many believe that mobile users have just started to fully utilize the data capabilities in

their mobile phones.

In Asian countries like India, China, Bangladesh, Indonesia and Philippines, where mobile

infrastructure is comparatively better than the fixed-line infrastructure, and

in European countries, where mobile phone penetration is very high (at least 80% of

consumers use a mobile phone), mobile banking is likely to appeal even more.


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Mobile Banking Services

Mobile banking can offer services such as the following:

Account Information

1. Mini-statements and checking of account history

2. Alerts on account activity or passing of set thresholds

3. Monitoring of term deposits

4. Access to loan statements

5. Access to card statements

6. Mutual funds / equity statements

7. Insurance policy management

8. Pension plan management

9. Status on cheque, stop payment on cheque

10. Ordering check books

11. Balance checking in the account

12. Recent transactions

13. Due date of payment (functionality for stop, change and deleting of payments)

14. PIN provision, Change of PIN and reminder over the Internet

15. Blocking of (lost, stolen) cards

Payments, Deposits, Withdrawals, and Transfers

1. Domestic and international fund transfers

2. Micro-payment handling

3. Mobile recharging

4. Commercial payment processing

5. Bill payment processing

6. Peer to Peer payments

7. Withdrawal at banking agent

8. Deposit at banking agent


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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

3. Location-based services

Based on a survey conducted by Forrester, mobile banking will be attractive mainly to the

younger, more "tech-savvy" customer segment. A third of mobile phone users say that they

may consider performing some kind of financial transaction through their mobile phone.


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But most of the users are interested in performing basic transactions such as querying for

account balance and making bill payment.

One way to classify these services depending on the originator of a service session is the

‘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, 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.

PULL BASED TRANSACTION BASED TRANSACTION BASED • Fund Transfer

• Bill Payment • Other financial services like share trading.

ENQUIRY BASED • Credit/Debit Alerts. • Minimum Balance Alerts • Bill Payment Alerts

• Account Balance Enquiry • Account Statement Enquiry • Cheque Status Enquiry. • Cheque Book Requests. • Recent Transaction History.

Table1:Classificationofmobilebankingservices.

Technologies Behind 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. IVR (Interactive Voice Response)

2. SMS (Short Messaging Service)


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3. WAP (Wireless Access Protocol)

4. 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).

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.

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.

However there have been few instances where even transaction-based services have been

made available to customer using SMS. For instance, customers of the Centurian Bank of

Punjab can make fund transfer by sending the SMS ‘TRN (A/c No) (PIN No) (Amount)'.


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One of the major reasons that transaction based services have not taken of on SMS is

because of concerns about security.

The main advantage of deploying mobile applications over SMS is that almost all

mobile phones 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.

Diagram1:SMSNetworkArchitecture

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.


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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 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 actually 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.

Diagram2:WAPNetworkArchitectureforMobileApplications

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


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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'.

Out of J2ME and BREW, J2ME seems to have an edge right now as Nokia has made the

development tools open to developers which has further fostered a huge online community

focused in developing applications based on J2ME. Nokia has gone an additional mile by

providing an open online market place for developers where they can sell their applications

to major cellular operators around the world.

Quite a few mobile software product companies have rolled out solutions, which enable

J2ME mobile applications based banking. One such product is Wireless Ibanco. The mobile

user downloads and installs the wireless I-banco application on their J2ME pone. The J2ME

client connects to the wireless I-banco 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-toend 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 7.01 million

users 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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Diagram3-MobileBankingArchitecture.

Advantages of Mobile Banking

The biggest advantage that mobile banking offers to banks is that it drastically cuts down

the costs of providing service to the customers. For example an average teller or phone

transaction costs about $2.36 each, whereas an electronic transaction costs only about $0.10

each. Additionally, this new channel gives the bank ability to cross-sell up-sell their other

complex banking products and services such as vehicle loans, credit cards etc.

For service providers, Mobile banking offers the next surest way to achieve growth.

Countries like Korea where mobile penetration is nearing saturation, mobile banking is

helping service providers increase revenues from the now static subscriber base. Service

providers are increasingly using the complexity of their supported mobile banking services

to attract new customers and retain old ones.

A very effective way of improving customer service could be to inform customers better.

Credit card fraud is one such area. A bank could, through the use of mobile technology,

inform owners each time purchases above a certain value have been made on their card.


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This way the owner is always informed when their card is used, and how much money was

taken for each transaction.

Similarly, the bank could remind customers of outstanding loan repayment dates, dates for

the payment of monthly installments or simply tell them that a bill has been presented and is

up for payment. The customers can then check their balance on the phone and authorize the

required amounts for payment.

The customers can also request for additional information. They can automatically view

deposits and withdrawals as they occur and also pre- schedule payments to be made or

cheques to be issued. Similarly, one could also request for services like stop cheque or issue

of a cheque book over one’s mobile phone.

There are number of reasons that should persuade banks in favor of mobile phones. They

are set to become a crucial part of the total banking services experience for the customers.

Also, they have the potential to bring down costs for the bank itself. Through mobile

messaging and other such interfaces, banks provide value added services to the customer at

marginal costs.

Such messages also bear the virtue of being targeted and personal making the services

offered more effective. They will also carry better results on account of better customer

profiling.

Yet another benefit is the anywhere/anytime characteristics of mobile services. A

mobile is almost always with the customer. As such it can be used over a vast geographical

area. The customer does not have to visit the bank ATM or a branch to avail of the bank’s

services. Research indicates that the number of footfalls at a bank’s branch has fallen down

drastically after the installation of ATMs. As such with mobile services, a bank will need to

hire even less employees as people will no longer need to visit bank branches apart from

certain occasions.


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With Indian telecom operators working on offering services like money transaction over a

mobile, it may soon be possible for a bank to offer phone based credit systems. This will

make credit cards redundant and also aid in checking credit card fraud apart from offering

enhanced customer convenience. The use of mobile technologies is thus a win-win

proposition for both the banks and the bank’s customers.

The banks add to this personalized communication through the process of automation. For

instance, if the customer asks for his account or card balance after conducting a transaction,

the installed software can send him an automated reply informing of the same. These

automated replies thus save the bank the need to hire additional employees for servicing

customer needs.

How Mobile Banking Reminders Work

John Shepherd-Barron came up with the idea for automatic teller machines (ATMs) in the

early 1960s while taking a bath; by 1967, the first such machine was up and working.

Shepherd-Barron developed the device because he was frustrated at not having access to his

own money on the weekends, when banks were closed. Now, with widespread ATMs and

developments such as online banking, people have access to their accounts anytime, day or

night.

Mobile banking is one way that people can pay bills, transfer funds and access account

information without setting foot in a bank or taking the trouble to boot up their computers.

All that's needed is a cell phone with wireless capabilities, and as more people buy phones

that can access the Internet, mobile banking is sure to grow. Most banks offer the service at

no additional charge to account holders, which means the only fees you'll accrue will

depend on your data and text plans with the cell phone company. TowerGroup, a finance

research company, estimates that by 2013, 53 million people will use mobile banking,

compared to the 10 million people who used it in 2009 [source: Choney].

One key factor that TowerGroup cited for mobile banking's growth was the ability to check

a balance at anytime and from anywhere. By sending a text message to your bank, you can


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get not only your balance, but recent account activity, upcoming payments owed and nearby

ATM locations. But if you'd rather have this information sent to you automatically, without

a prompting text, then you can sign up for mobile banking reminders. These alerts take the

form of text messages. If you'd like to get a comprehensive look at your bank account with

the ease of pushing a button, then read on to find out what reminders are offered and how

you can access them.

Setting Up Mobile Banking Alerts

Mobile banking allows you to pay bills on your commute, check your bank balance from

the store checkout line and transfer funds during television commercials. But another

feature mobile banking offers is the opportunity to sign up for text reminders about your

account.

Though different banks may offer slightly different alerts, these are the kinds of reminders

most users can receive:

1. daily balances

2. notifications that an account has been credited

3. notifications that an account has been debited

4. notifications that an account's balance is above or below a certain amount

5. reminders about upcoming due dates on bank-related loans or bills that are paid

online

6. reminders when those bills are overdue

7. reminders about maturity dates of certificates of deposit

Setting up these reminders can be done online or in person, depending on the bank. Let's say

you'd like to receive a text message when your checking account exceeds $10,000, because

you want to deposit the excess into your savings account. If your bank allows online setup,

you'd be able to view all your accounts, select the one that you'd like to receive updates

about (in this case, checking) and enter the values that will serve as your thresholds for

alerts ($10,000, for example). You would then likely need your phone's SMS address to

direct the messages. Once you received the alert, you'd be able to text your request for a

funds transfer to your savings account.


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With most banks, you could receive as many alerts as you'd like; you could have one

reminder that alerted you to more than $10,000 in your checking account, as well as one

that told you when your funds were dipping dangerously low. Remember, though, that

charges will vary according to your cell phone plan. Though the messages will not be

encrypted, banks assure that mobile banking is safe, even if you were to lose your phone.

However, treat these text messages the way you would any e-mail from your bank. Don't

click on links that may lead to phishing scams, and be wary of any e-mail that asks for

private information, such as a Social Security number or a password.

Though people are still getting the hang of mobile banking, one study already demonstrates

the possible benefits. In tests conducted in the Philippines, Peru and Bolivia, researchers

found that sending text messages about saving increased people's account balances by 6

percent, indicating that a quick reminder was more efficient than a financial lecture or a

long letter. The researchers believe these findings could translate to the United States as

well. It may be that a simple text message is all the reminder you need to keep an eye on

your financial future.

mCheque - Overview

mCheque is a secure card-present transaction system.

Acceptance of VISA/Visa Electron in mChq mode does not require a PoS terminal. Any

GSM mobile phone (with an enhanced mCheque SIM) can be used to accept a VISA/Visa

Electron payment in mChq mode.

Upto 16 different VISA or VISA Electron cards from different Banks can be securely

personalized Over-the-Air (OTA) on mobile SIMs.

mCheque is inter-operable across multiple operators and banks.

Key management process is regulated by IDRBT-Hyderabad (subsidiary of Reserve Bank

of India) in agreement with the participating Bank.


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CHAPTER 5: METHODOLOGY AND PROCEDURE OF WORK

Mobile Banking Business Models

A wide spectrum of Mobile/branchless banking models is evolving. These models differ

primarily on the question that who will establish the relationship (account opening, deposit

taking, lending etc.) with the end customer, the Bank or the Non-Bank/Telecommunication

Company (Telco). Models of branchless banking can be classified into three broad

categories - Bank Focused, Bank-Led and Non Bank-Led.

Bank-focused model

The bank-focused model emerges when a traditional bank uses non-traditional lowcost

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 bankbased 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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RBI Guidelines on Mobile Banking

Mobile Payment in India - Operative Guidelines for Banks

1. Introduction

1.1 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. A few banks have started offering information based services like

balance enquiry, stop payment instruction of cheques, record of last five transactions,

location of nearest ATM/branch etc. Acceptance of transfer of funds instruction for credit to

beneficiaries of same/or another bank in favor of pre-registered beneficiaries have also

commenced in a few banks. Considering that the technology is relatively new and due care

needs to be taken on security of financial transactions, there has been an urgent need for a

set of operating guidelines that can be adopted by banks.

1.2 For the purpose of these Guidelines, “mobile payments” is defined as information

exchange between a bank and its customers for financial transactions through the use of

mobile phones. Mobile payment involves debit/credit to a customer’s account’s on the basis

of funds transfer instruction received over the mobile phones.

1.3 Providing the framework for enabling mobile payments services to banking customers

would generally involve the collaboration of banks, mobile payments service providers and

mobile network operators (MNOs). The service can also be provided as a proximity

payment system, where the transactions are independent of the MNOs. In mobile payment

systems, the banks provide the basic service framework, ensure compliance to KYC/AML

norms, creates a risk management and mitigation framework, and ensures settlement of

funds. The mobile payments service providers are intermediaries for providing the

technology framework for the implementation of the mobile payments services. The mobile

network operators provide the telecom infrastructure and connectivity to the customers.

Their role is limited to providing the SMS/WAP/GPRS/USSD/NFC GSM or CDMA voice


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and data services connectivity and in hosting the certain technology solutions like USSD. In

a Non-MNO based systems, proximity or contactless channels like IRDA, RFID, Optical,

NFC, etc. are used for communication between POS and the mobile phone of the customer.

1.4 As a first step towards building a mobile payment framework in India, these guidelines

are meant only for banking customers – within the same bank and across the banks. It

would be the responsibility of the banks offering mobile payment service to ensure

compliance to these guidelines.

1.5 A brief description of the regulatory framework for mobile payments in a few countries

is given at Annex – I.

2. Regulatory & Supervisory Issues

2.1 Only such banks which are licensed and supervised in India and have a physical

presence in India will be permitted to offer mobile payment services to residents of India.

2.2 The services should be restricted to only to bank accounts/ credit card accounts in India

which are KYC/AML compliant.

2.3 Only Indian Rupee based services should be provided.

2.4 Banks may use the services of Business Correspondents for extending this facility, to

their customers. The guidelines with regard to use of business correspondent would be as

per the RBI circular on Business correspondents issued from time to time.

2.5 The guidelines issued by RBI 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 equally apply to Mobile payments, since Mobile devices used for this

purpose have embedded computing and communication capabilities.


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2.6 The RBI guidelines on “Know Your Customer (KYC)” and “Anti Money Laundering

(AML)” as prescribed by RBI from time to time would be would be applicable to customers

opting for mobile based banking service.

3. Registration of customers for mobile service

3.1 Banks should offer mobile based banking service only to their own customers.

3.2 Banks should have a system of registration before commencing mobile based payment

service to a customer.

3.3 There can be two levels of mobile based banking service - the first or basic level in the

nature of information like balance enquiry, SMS alert for credit or debit, status of last five

transactions, and many other information providing services and the second or standard

level in the nature of financial transactions such as payments, transfers and stop payments.

The risk associated with the basic level of information services is much less compared to

the standard level of actual payment services. Prior registration of the customers would be

necessary irrespective of the type of service requested. For the standard level service one

time registration should be done through a signed document.

4 Technology and Security Standards

4.1 The technology used for mobile payments must be secure and should ensure

confidentiality, integrity, authenticity and non-repudiability. An illustrative, but not

exhaustive framework is given at Annex-II.

4.2 The Information Security Policy of the banks may be suitably updated and enforced to

take care of the security controls required specially for mobile phone based delivery

channel.

5. Inter-operability


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5.1 When a bank offers mobile payments service, it may be ensured that customers having

mobile phones of any network operator should be in a position to request for service.

Restriction, if any, to the customers of particular mobile operator(s) may be only during the

pilot phase.

5.2 To ensure inter-operability between banks and between their mobile payments service

providers, it is recommended that banks may adopt the message formats being developed by

Mobile Payments Forum of India (MPFI). Message formats such as ISO 8583 , which is

already being used by banks for switching of ATM transactions , may be suitably adapted

for communication between switches where the source and destination are credit card/ debit

cards/pre-paid cards.

5.3 The long term goal of mobile payment 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 mobile network a customer has subscribed to. This would

require inter-operability between mobile payments service providers and banks and

development of a host of message formats. Banks may keep this objective while developing

solution or entering into arrangements with mobile payments solution providers.

6. Clearing and Settlement for inter-bank funds transfer transactions

6.1 For inter-bank funds transfer transactions, banks can either have bilateral or multilateral

arrangements.

6.2 To meet the long term objective of a nation-wide mobile payment framework in India as

indicated at para 5.3 above, a robust clearing and settlement infrastructure operating on a

24x7 basis would be necessary. Pending creation of such an infrastructure on a national

basis, banks may enter in to multilateral arrangement and create Mobile Switches / Inter-

bank Payment Gateways with expressed permission from RBI.

7. Customer Complaints and Grievance Redressal Mechanism


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7.1 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.

Some of the key issues in this regard and the legal aspects pertaining to them are given at

Annex-III.

8. Need for Board level approval

8.1 Banks should get the Mobile payments scheme approved by their respective boards /

Local board (for foreign banks) before offering it to their customers. The Board approval

must document the extent of Operational and Fraud risk assumed by the bank and the

bank’s processes and policies designed to mitigate such risk.

8.2 Banks who have already started offering mobile payment service may review the

position and comply to these guidelines within a period of three months from issuance of

these guidelines.


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Annex-I

International Experience

There is very little material available on the regulatory frame work for mobile payments by

central banks. Although there are a number of research articles available, they refer to the

practices available rather than regulatory guidelines. Efforts to collect specific regulatory

guidelines, from a few countries where person to person remittance through mobile channel

has been implemented, have not been a success. Mobile payment framework in most

countries is covered under the General Electronic Banking Guidelines. However, on the

website of Consultative Group for Assisting the Poor(CGAP), there are several discussion

papers on mobile payments. Examples of Kenya, Philippines, South Africa and Tanzania

have been described in great detail. In these countries, cash-in and cash-out for the purpose

of remittance is permitted to be done by the distributors of mobile companies. State Bank of

Pakistan has also placed a 'Draft policy paper on Regulatory Framework for Mobile

Payments in Pakistan' on their website for public comments.


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Annex- II

Technology and Security Standards

The security controls/guidelines mentioned in this document are not exhaustive. The

guidelines should be applied in a way that is appropriate to the risk associated with services

provided by the bank through the mobile platform, the devices used, the delivery channels

used (SMS, USSD, WAP, WEB, SIM tool kit based, Smart phone application based, IVR,

IRDA, RFID, NFC, voice, etc) and the system which processes the mobile transactions and

enables the interaction between the customers, merchants, banks and other participants.

2. The mobile payments could get offered through various mobile network operator based

channels (SMS, USSD, WAP, WEB, SIM tool kit, Smart phone application based, IVR,

voice, etc) and non MNO based proximity or contactless channels (IRDA, RFID, Optical,

NFC, etc) and these various mobile channels offer various degrees of security and

interaction capability. While the objective of the RBI is to have a fully functional digital

certificate based inquiry/transaction capabilities to ensure the authenticity and non-

repudiability, given the complexities involved in getting this through all the channels and

given the need for enabling mobile payments to facilitate financial inclusion objectives, it is

suggested that the banks evaluate each of these channels in terms of security and risks

involved and offer appropriate services and transactions. Banks are also advised to provide

appropriate risk mitigation measures like transaction limit (per transaction, daily, weekly,

monthly), transaction velocity limit, fraud checks, AML checks etc. per channel depending

on the nature of the security features, risk perception by the bank offering the services and

interaction capabilities.

3. It is suggested that the banks issue a new mobile pin (mPIN). To facilitate the mobile

payments mPIN may be issued and authenticated by the bank or by a mobile payment

application service provider appointed by the bank. Banks and the various service providers

involved in the m-banking should comply with the following security principles and

practices with respect to mPIN :


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a. Implement a minimum of 4 digit customer mPIN (6 digit mPIN may be the

desirable goal)

b. Protect the mPIN using end to end encryption

c. Do not allow the mPIN to be in clear text anywhere in the network or the

system

d. Authenticate the mPIN in tamper-resistant hardware such as HSM (hardware

security modules)

e. Store the PIN in a secure environment

f. In case of offline authentication, the banks should ensure that a proper

process is put in place to positively identify the customer the first time when

the service is being enabled. An offline PIN may be used as the

authentication parameter with security levels being as strong as in the case of

online authentication. The bank may choose to issue its own offline PIN or

adopt a customer-defined PIN.

g. A second factor of authentication may be built-in for additional security and

as such the second factor can be of the choosing of the bank

4. All transactions that affect an account (those that result in to an account being debited or

credited, including scheduling of such activity, stop payments, etc) should be allowed only

after authentication of the mobile number and the mPIN associated with it in case of MNO

based payment service. In case of Non-MNO based mobile proximity payment, specific

static or dynamic identifier should be used as second factor authentication along with

mPIN.. Two factor authentication may be adopted even for transactions of information

nature such as balance enquiry, mini statements, registered payee details. ,

5. Proper system of verification of the mobile phone number should be implemented,

wherever possible. This is to guard against spoofing of the phone numbers as mobile phones

would be used as the second factor authentication. It may also be suggested but not

mandatory, that either card number or OTP (one time passwords) be used as the second

factor authentication rather than the phone number.


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6. Proper level of encryption should be implemented for communicating from the mobile

handset to the bank’s server or the server of the mobile payments service provider, if any.

Proper security levels should be maintained for transmission of information between the

bank and the mobile payments service provider. The following guidelines with respect to

network and system security should be adhered to:

a. Use strong encryption for protecting the sensitive and confidential

information of bank and customers in transit

b. Implement application level encryption over network and transport layer

encryption wherever possible.

c. Establish proper firewalls, intruder detection systems ( IDS), data file and

system integrity checking, surveillance and incident response procedures and

containment procedures.

d. Conduct periodic risk management analysis, security vulnerability

assessment of the application and network etc at least once in a year.

e. Maintain proper and full documentation of security practices, guidelines,

methods and procedures used in mobile payments and payment systems and

keep them up to date based on the periodic risk management, analysis and

vulnerability assessment carried out.

f. Implement appropriate physical security measures to protect the system

gateways, network equipments, servers, host computers, and other

hardware/software used from unauthorized access and tampering. The Data

Centre of the Bank and Service Providers should have proper wired and

wireless data network protection mechanisms.

7. The dependence of banks on mobile payments service providers may place knowledge of

bank systems and customers in a public domain. Mobile payment system may also make the

banks dependent on small firms ( i.e mobile payment service providers) with high employee

turnover. It is therefore imperative that sensitive customer data, and security and integrity of

transactions are protected. It is necessary that the mobile payments servers at the bank’s end

or at the mobile payments service provider’s end, if any, should be certified appropriately,

say through a PCI DSS certification or in compliance with each participant banks security

guidelines. In addition, banks should conduct regular information security audits on the


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mobile payments systems to ensure complete security. Further, if a mobile payments service

provider aggregates and processes transaction, including verification of mPINs, additional

security measures such as a Hardware Security Module (HSM) must be deployed over and

above link encryption to ensure that mPIN data is protected adequately.

8. It is recommended that for channels such as WAP and WEB which do not contain the

phone number as identity, a separate login ID and password be provided as distinct from the

internet banking either by bank or the payment service provider. It is recommended that

Internet Banking login ids and passwords may not be allowed to be used through the mobile

phones. Allowing Internet banking login id and password usage on the mobile phone may

compromise their usage on the Internet banking channel. This restriction may be

communicated to the customers while offering mobile payments service. However, Internet

Banking login ids and passwords can allowed to be used through the mobile phones

provided

a. https connectivity through GPRS is used and

b. end to end encryption of the password and customer sensitive information

happens.

9. Plain text SMS is the simplest form of communication through mobile phones, but is

vulnerable to tampering. As long as there is a second level of check on the details of the

transaction so as to guard against data tampering this mode of communication can be used

or financial messages of micro payment transactions (say about rupees One thousand five

hundred) and repetitive utility bill payment transactions (say not exceeding rupees two

thousand five hundred).


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Annex-III

Customer Protection Issues

Considering the legal position prevalent, there is an obligation on the part of banks not only

to establish the identity but also to make enquiries about integrity and reputation of the

prospective customer. Therefore, even though request for opening a savings / current

account can be accepted over Mobile Telecommunication, these should be opened only

after proper introduction and physical verification of the identity of the customer using

prevalent KYC norms.

2. From a legal perspective, security procedure adopted by banks for authenticating users

needs to be recognized by law as a substitute for signature. In India, the Information

Technology Act, 2000, provides for a particular technology as a means of authenticating

electronic record. Any other method used by banks for authentication should be recognized

as a source of legal risk. Customers must be made aware of the said legal risk prior to sign

up.

3. Under the present regime there is an obligation on banks to maintain secrecy and

confidentiality of customers‘ accounts. In the mobile payments scenario, the risk of banks

not meeting the above obligation is high on account of several factors. Despite all

reasonable precautions, banks may be exposed to enhanced risk of liability to customers on

account of breach of secrecy, denial of service etc., because of hacking/other technological

failures. The banks should, therefore, institute adequate risk control measures to manage

such risks.

4. As in an Internet banking scenario, in the mobile payments scenario too, there is very

limited or no stop-payment privileges for mobile payments transactions since it becomes

impossible for the banks to stop payment in spite of receipt of stop payment instruction as

the transactions are completely instantaneous and are incapable of being reversed. Hence,


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banks offering mobile payments should clearly notify the customers the timeframe and the

circumstances in which any stop-payment instructions could be accepted.

5. The Consumer Protection Act, 1986 defines the rights of consumers in India and is

applicable to banking services as well. Currently, the rights and liabilities of customers

availing of mobile payments services are being determined by bilateral agreements between

the banks and customers. Considering the banking practice and rights enjoyed by customers

in traditional banking, banks’ liability to the customers on account of unauthorized transfer

through hacking, denial of service on account of technological failure etc. needs to be

assessed and banks providing Mobile payments should consider insuring themselves against

such risks, as is the case with Internet Banking.

6. Bilateral contracts between the payee and payee’s bank, the participating banks and

service provider and the banks themselves will form the legal basis for mobile transactions.

The rights and obligations of each party must be clearly defined and should be valid in a

court of law. It is likely that there will be two sets of contracts; one would be a commercial

contract between service providers and the second, a contract between the customer and the

bank, to provide a particular service/ s. At all time, legal obligations of each party must be

made clear through these contracts.

7. Banks must make mandatory disclosures of risks, responsibilities and liabilities of the

customers in doing business through Mobile phone, through a disclosure template on their

websites and/or through printed material.

8. The existing mechanism for handling customer complaints / grievances may be used for

mobile payment transactions as well. However, the technology is relatively new, banks

offering mobile payment service should set up a help desk and make the details of the help

desk and escalation procedure for lodging the complaints, if any public on their websites.

Such details should also be made available to the customer at the time of sign up.

9. In cases where the customer files a complaint with the bank disputing a transaction, it

would be the responsibility of the service providing bank, to address the customer


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grievance. Banks may formulate chargeback procedures for addressing such customer

grievances.

10. Banks may also consider covering the risks arising out of fraudulent/disputed

transactions through appropriate insurance schemes.

11. The jurisdiction of legal settlement would be within India.


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CHAPTER 6: ANALYSIS OF DATA

According to research firm Ovum, mobile commerce is expected to grow to over $35 billion

by 2007. And banking is going to be a major benefactor of the same. According to studies

by some global firms, one of the most used services for mobile commerce would be mobile

banking—with services like transfers, balance and trading bringing in the revenues for

mobile bankers.

No wonder then, banks are making their infrastructure

"mobile-enabled". 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 wire free banking experience.

IDBI Bank’s mobile banking infrastructure is based on

the GSM Data Suite of products that makes its services

accessible through any GSM operator across the world.

The systems at IDBI Bank are also interfaced online

with its banking, demat and payment systems. HDFC

Bank, on the other hand, does not have any separate

infrastructure for mobile banking service. Rather, the bank uses the same server/database as

used for Net-banking. "We have

a Web Server and Application Server which runs on WebSphere 4.04 on Win2000 using

SQL 2000 as the database for storing the profile information.

In 2000, fewer than 8 million Africans had a mobile phone - now over 100 million do.

That's one in nine. Now, anyone with access to a cell phone has a place to keep his or her

savings without needing a traditional bank account. We won't see millionaires suddenly

emerging from the shantytowns just because they're "banked," but even a small nest egg

needs a safe resting place.

Chart1:WhichoptionwouldyoupreferMobileoronlineBanking?


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At the moment, enthusiasm for m-banking has outrun its implementation. For one thing,

regulators break out in a cold sweat at the thought of all the overlapping issues involved.

But there are success stories. Leading the way is the Philippines, with over 3.5 million users

split between G-cash and competitor SMARTmoney. South Africa is the other

heavyweight, with MTN Mobile Banking and Wizzit both entering their second year of

operations. In Brazil, mbanking may even surpass Internet banking in just five years. And

on January 22, SafariCom, partly owned by Vodafone, is set to expand its MPesa pilot to all

of Kenya.

Have you heard about mobile banking?

Base: 360 IT industry and corporate users of mobile phones and banks offering Mbanking

Source: DATAQUEST

Given the profile of the people surveyed, it’s

no surprise that over 26% of the sample had

heard about mobile banking services.

Dataquest did a mix of 60:40 (non-IT: IT

people) in the NCR region. Awareness about

mobile banking services was higher among

‘IT people’. HDFC Bank’s CN Ram agreed—

"We have 1.75 lakh registered users for

mobile banking services. And we are hitting

4,000 transactions per day."

Chart2:Haveyouheardofmobilebanking?


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Would you like to use mobile banking services?

Base: 265 respondents not aware of m-banking services

Source: DATAQUEST

While awareness remains at 26%, people

are keen to try out mobile banking. 63% of

the respondents evinced interest in the

services. Given the convenience factor—the

fact that mobile banking can be used from

anywhere in the world as long as one can

send and receive SMS’—most were

interested. Since m-commerce is still about

the core virtues of mobile communication,

issues like mobility, any-time access and

ease of usage emerged as the driving factors in the ongoing year.

Some ground realities

According to Financial Chronicle· “State-owned banks have received a much poorer

response fromtheir clients compared with their private-sector peers for mobile banking, with

only a small number of PSB customers showing interest to avail the services”

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 service.

· 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 Telesystems. SBI has so far

Chart3:Wouldyouliketousemobilebankingservices?


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received only 10,000 registrations for mobile banking but hopes to attract more clients to

avail the service in the months ahead, an SBI official said.

· 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 lakh customers registered so far for mobile banking while HDFC

Bankhas 40 lakh registered clients. Kotak Mahindra Bank has around 52,000 clients under

the mobile banking fold.

Growth Trends

Despite the general downturn in the banking industry, new research from TowerGroup finds

that 2009 will be a pivotal year for mobile banking as it turns from a niche channel to a

mainstream channel for consumer banking. TowerGroup estimates that 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


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Chart4:GrowthTrendsinMobileBankinginIndia

Mobile Trends

Mobile devices are proving to be the most compact technological aid of the future, set to

overtake PCs and laptops.

Use of mobile handsets as a payment device is already well established in Europe and the

leading Asia-Pacific markets.

eg. Almost a million Koreans now do their banking via 3G cell phones (CNN report)

Services which link credit/debit cards with mobile hand held devices have started to pick up

and are expected to play a major role.


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Diagram4:Mobiletrendsindicatethepotentialofm-Banking


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CHAPTER 7: FINDINGS, INFERENCES AND RECOMMENDATIONS

Ten years ago, online banking leapt from nice-to-have status to must-have. In hindsight, it’s

pretty obvious why it became so popular, but at the time there were still questions as to if

and when it would break out into its own “channel,” on par with telephone and in-branch

delivery.

Today, we are at a similar point in the development of mobile banking. The adoption curve

of mobile banking in the next 10 years will look a lot like the 1995-to-2004 take-up of

online banking. However, there is a huge difference. With higher penetration than internet

and broadband, Mobile banking offers a lot more potential, especially in the developing

countries. With voice prompts and text-to-voice capabilities it seems only a little while

when one-button mobile banking will be the industry standard.

We believe mobile banking and payments are at a tipping point. While they have already

taken root in much of the world, Indian financial institutions are finally arriving at the party,

one they largely abandoned in 2001/2002 when the first generation of PDAbased banking

failed to take root. This time around adoption is expected to be relatively rapid, especially

with names like ICICI, Bank of America and Citibank launching mobile services.

Success Stories

LGTelecom,SouthKorea

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


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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 handsets in Korea.

Users can now use their cell phones to pay for everything, from restaurant bills, travel

tickets, merchandise and even haircuts.

RelianceInfocomm,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.

Banking: The Services Bouquet


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Table2:M-Banking:TheServicesBouquet

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.

ICICIBank

ICICI Bank have launched mobile services in India to

convenience our customers.


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You can do your banking operations sitting anywhere, anytime. It is discreet, personalised

and on your phone. Use it when at a meeting, in a movie hall, while having your Sunday

brunch or at any other place you cannot usually expect to get the information you want from

your bank. It is an empowering and user-friendly mode of accessing your bank account.

Following figure (Snapshot from ICICI Bank) shows the Mobile banking services offered

by ICICI Bank.

Figure1:MobileBankingofferedbyICICI

HDFCBank

HDFC Bank offers following service using Mobile Banking :

§ Balance Inquiry of all accounts linked to your Customer Identification Number

(maximun up to five accounts)

§ Checking the last 3 transactions in your primary account for MobileBanking

§ Placing a Stop Payment on a cheque

§ Requesting a cheque book


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§ Requesting an Account Statement

§ Cheque Status inquiry

§ Bill Presentment

§ Fixed Deposit Inquiry

§ A Help menu, which gives you the transaction codes for the various transactions

§ IPIN registration request (Only for customers who have registered for HDFC Bank

NetBanking)

RBI

As per RBI Governor Dr Y.V. Reddy that

experiments are currently on at the Institute

for Development and Research in Banking Technology (IDRBT) on using mobile

telephony technology for banking transactions.

According to him, technology - mobile technology in particular - helps in

bringing the masses into the overall financial system and in ensuring easy

financial inclusion.

Mobile telephony makes the financial transactions quicker, safer and cheaper.

RBI would consider using mobile technology for financial transactions provided

there are adequate safeguards.

"We have to make sure that there are enough safeguards. We have to check its

feasibility, the security and safeguards, including the know-your-customer

norms."

One of the recent technological advances that had a significant positive impact on

the payment systems related to chip-based processing. The integration of smart

cards with mobile phones holds exciting promises for the future.


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Perhaps the payment and settlement chain may soon witness a sea change with

the bank account transaction being initiated through a mobile phone, followed,

within a few seconds, by the inter-bank settlement effected in Central bank

money. If and when that happens, the benefits would accrue to all concerned."


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NokiaMoney

Nokia to roll out mobile banking in many Indian cities soon.

Finnish telephone supplier Nokia is planning to roll out its mobile

banking service, Nokia Money, in many Indian cities soon, a Nokia

official said Wednesday.

A pilot of this service launched in Pune in February with YES Bank

had received "extremely encouraging" response.

The company is now looking to have similar tie-ups with other banks to roll out the service

in other parts of the country.

Nokia Money is like a wallet on phone as it lets people transfer money through the mobile

phone. Subscribers also can pay utility bills and top up SIM cards. There will also be the

facility to pay for goods and services. By using this facility a person living in one place can

transfer the money to another person not having bank account and the latter can receive the

money from Nokia dealer in his area.

Nokia has 200,000 retailers in India who could serve as mobile money services agents.

India today is the world's fastest growing cell phone market. There are 500 million mobile

phones in the country and this is expected to cross 900 million by the end of 2013.

At the same time, an estimated 41 per cent of Indians and 46 per cent of mobile subscribers

do not have bank accounts.

Nokia feels the potential for mobile money services is huge. It expects the value of mobile

payment transactions in India will reach up to $1.28 billion by 2013.

Nokia Money Services

Mobile money services puts you in control of your daily finances – transfer funds, pay bills,

and buy goods and services quickly and securely with your mobile phone.

What’s in it for you?


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1. Transfer money securely to your friends and family in a convenient and cost-

effective way.

2. Pay your utility bills from almost anywhere and keep track of everything with

reminders for due dates, overdue charges and payments.

3. Check your balance on the go and manage your expenses and payments at the same

time.

4. Recharge your pre-paid account wherever and whenever you like – adding funds is

easy and it only takes a few moments.

5. Make convenient cashless payments to informal merchants without having to carry

money or bank cards as you travel from place to place.

6. Manage your money with confidence – the latest mobile technology is used to

handle all your finances securely.

7. Save time when dealing with your personal finances – no more waiting in line at the

bank or making unnecessary trips into town.

A smart, cost-effective way to manage your finances:

1. No annual fees*

2. No bank account, credit card or debit card needed

3. No cash loading charges

4. No minimum balance limit

5. Unlimited number of transactions


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CHAPTER 8: 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.

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.

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 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 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. Nevertheless, Bank's need to

take a hard and deep look into the mobile usage patterns among their target customers and

enable their mobile services on a technology with reaches out to the majority of their

customers.


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CHAPTER 9: SUMMARY

India’s mobile market has grown to over 50 million subscribers and this number is

constantly on the upswing. India is one of the world’s largest markets for mobile phones. –

A fact acknowledged by Nokia, Motorola and LG among others.

Indian telecom market is galloping with 162.3 million mobile users as on March 2006 and

an average of 5-6 million mobile users being added every month. Given that mobile phones

in India have become affordable, wherein a user can now go mobile for as low as Rs. 1,500,

mobile banking can be a powerful tool to bank the un-banked. Banks and telecom

companies can collaborate to offer the latest in banking services to rural areas.

Mobile banking is the evolutionary step after Internet banking. It is an additional service

bolted on top of an existing solution, making access to services more immediate and

reducing customer reliance on branch infrastructure or access to the Internet. As customer

confidence increases over the security, it is expected that mobile phones will be the most

preferred and convenient device for conducting banking transactions and emerge as one of

the major payment channels in India.

MOBILE BANKING IN THE WORLD

Mobile banking has come in handy in many parts of the world with little or no

Infrastructure development, especially in remote and rural areas. This part of the mobile

commerce is also very popular in countries where most of their population is unbanked. In

most of these places banks can only be found in big cities and customers have to travel

hundreds of miles to the nearest bank.

Countries like Sudan, Ghana and South Africa received this new commerce very well.

In Latin America countries like Uruguay, Paraguay, Argentina, Brazil, Venezuela,

Colombia, Guatemala and recently Mexico started with a huge success.

In Colombia was released with Redeban.


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In Iran banks like Parsian, Tejarat, Mellat, Saderat, Sepah, edbi and bankmelli offer this

service. Guatemala have the support of Banco industrial.

Mexico released the mobile commerce with Omnilife, Bancomer and a private

company(MPower Ventures). Kenya's Safaricom (Part of the Vodafone Group) has had the

very popular M-Pesa Service - mainly used to transfer limited amounts of money, but has

been increasingly used to pay utility bills. Zain in 2009 launched their own mobile money

transfer business known as ZAP in Kenya and other African countries.


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ANNEXURES

ANNEXURE I (PROPOSAL)

NAME OF THE LEARN VIJAY MAHAWAR

REGISTRATION NUMBER 200647705

PROGRAM NAME PGDBA (Finance)

ADDRESS Flat No: 17/05, 1st Floor,

Banyan Road, Shipra Suncity,

Indirapuram, Ghaziabad

Uttar Pradesh, India – 201014.

TITLE OF THE PROJECT MOBILE BANKING IN INDIA

OBJECTIVES India’s mobile market has grown to over 50 million

subscribers and this number is constantly on the upswing.

India is one of the world’s largest markets for mobile

phones. – A fact acknowledged by Nokia, Motorola and LG

among others.

Mobile banking can be a powerful tool to bank the un-

banked. Banks and telecom companies can collaborate to

offer the latest in banking services to rural areas.

MY GUIDE Mr. Vijay P. Singh

(Manager-Training Operations at Dell Services, Noida)

1. Complete Training Operations of Dell Services

Academy in Noida.

2. Organizing Technical Induction Program for campus

hires.

Designing, Planning and rolling out strategic directions

for new learning interventions.

3. Fulfilling OCDP,ACDP or any project's specific

training needs.


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4. Operational control on Prometric & LOMA testing

facilities.

5. Managing linguistic dept-(I18N) Analysing trends and

tracking utilization of e-learning tools like MindLeaders

& SkillSoft.

6. Rolling out TNA and training plans for onsite and

offshore projects.

7. Budget planning and cost centre Management.

Contribute to quality system and processes enhancement.

-Managing and supporting training operations for China

delivery centre.


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ANNEXURE II (REFERENCES)

I had used following source for preparing my project report:

1. Website: www.wikipedia.org 2. Articles from India Today Magazine and 3. Times of India and Economic Times Newspaper.


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ANNEXURE III (FIGURES/CHARTS/DIAGRAMS)

TYPE CAPTION PAGE NO.

Chart 1 Which option would you prefer Mobile or online Banking?

Chart 2 Have you heard of Mobile Banking?

Chart 3 Would like to use Mobile Banking Services?

Chart 4 Growth Trends in Mobile Banking in India

Diagram 1 SMS Network Architecture

Diagram 2 WAP Network Architecture for Mobile Applications

Diagram 3 Mobile Banking Architecture Diagram.

Diagram 5 Mobile trends indicate the potential of m-Banking

Figure 1 Mobile Banking offered by ICICI


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ANNEXURE IV (LIST OF TABLES)

TYPE CAPTION PAGE NO.

Table 1 Classification of mobile banking services.

Table 2 M-Banking: The Services Bouquet.


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ANNEXURE V (GENERAL TERMS/ACRONYMS)

Sr. No. Acronyms Description

1 MMS Multimedia messaging service: An evolution from SMS,

allowing messages to contain multimedia objects such as images,

audio, video, and rich text.

2 CSC Common short codes: Special short telephone numbers of just

four to six digits used typically by businesses to make it easier to

send text messages their way.

3 WAP Wireless Application Protocol: An open, international standard

for applications that use wireless communication; primarily used

to enable Web access from mobile devices.

4 MOBILE

IM

Mobile instant messaging: Similar to desktop instant messaging,

but slimmed down to fit on a much smaller mobile device screen.

5 SMS OR

TEXT

ALERTS

Simple one-way messages from the financial institution or

payments provider to the mobile user with account-specific

information.

6 MOBILE

PAYMENTS

Payments initiated through a mobile device, could be via SMS,

WAP, or a device-specific application.

7 MOBILE

BANKING

Online banking functions performed via a handheld mobile

device (PDA, cell phone, etc.); the general term that encompasses

WAP Banking, SMS Banking, or True Mobile Banking.

8 WAP

BANKING

Accessing secure online banking functions through a mobile

device's browser.

9 SMS OR

TEXT

BANKING

Two-way messaging; for example, using text messaging to query

the server for account-specific information and have it returned

to the mobile device, or responding to a bank-initiated text

message to initiate a transaction.

10 TRUE

MOBILE

BANKING

Term used for banking functions delivered through a downloaded

application run locally on the mobile device.


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11 MCHEQUE mCheque is a secure debit/credit card payment system using

mobile phone SIM with security based on EMV 2000

specifications.

12 AML Anti Money Laundering

13 CDMA Code Division Multiple Access

14 GPRS General Packet Radio Service

15 GSM Global System for Mobile

16 IDS Intruder Detection System

17 IRDA Infrared Data Association

18 ISO International Standards Organization ( Some times also

written as International Organization for Standardization)

19 IVR Integrated Voice Response

20 KYC Know Your Customer

21 MNO Mobile Network Operator

22 mPIN Mobile Personal Identification Number

23 MPFI Mobile Payment Forum of India

24 NFC Near Field communication.

25 OTP One Time Password

26 PCI-DSS Payment Card Industry Data Security Standard

27 PIN Personal Identification Number

28 RFID Radio Frequency Identification

29 SIM Subscriber Identity Module

30 SMS Short Messaging Service

31 USSD Unstructured Supplementary Service Data

32 WAP Wireless Application Protocol

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