Mobile Banking Security

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INTRODUCTION Research Background
Mobility is one of the key factors which businesses thrive. Businesses that embrace the idea of mobile information society will re- invent themselves as real time organizations, where access and interaction can be instant. New brands, partnerships and customer loyalties are on the rise thanks to the growing number of mobile terminals. It is estimated that by the end of 2012 there will be over 10 billion mobile phones subscribers in the world and this is an evidence of their increased role in business both to the customers and to the companies. Three major segments that can substantially benefit from anywhere and have anytime access to information and services with the use of mobile phones are financial services, health care industry and corporations with a mobile workforce.

Tightening competition, globalization and changes in customer behavior present new challenges to many service organizations. Combined with advances in technology, they have put several industries into round-the-clock operations. Financial institutions are no exception their distribution systems and customer interfaces has gone through major changes by innovatively combining mobile technology with other distribution channels, financial service providers can establish closer, more profitable and more stable customer relationships.

It is important at this juncture to trace the genesis of mobile banking in Kenya. In 2005, a development agency requested for proposals from interested parties on cost effective ways of deepening Kenya’s financial sector through enhanced access to financial services and products. Safaricom, a mobile service provider in collaboration with Vodafone UK, one regulated commercial bank and two microfinance institutions submitted a proposal based on the use of mobile phones to transfer money.

The development agency found the proposal to be successful and a pilot of the mobile money transfer system was conducted in 2005/6. Before the pilot run, the regulated commercial bank requested the central bank for a go-ahead. The central bank agreed to the pilot run after discussions with the concerned commercial bank and the central bank was then approached in August 2006 to March 2007 when it was launched. The diligence focused on the requisite legal and regulatory framework, product/customer/agent security. However the principle concern of CBK related to the need for enabling legal and regulatory framework for mobile banking to protect the interests of consumer and ensure sustainability of the product and enabling regulatory framework.

Mpesa has become one of the most popular money transfers which have taken Kenya to another level. It has been a good competitor to companies like western union and has pushed others like Posta out of the market completely. Kenyan people have embraced this new technology as they find it cheap and very convenient for them especially people who live far away from towns and have no access to banks. To call Mpesa a success would be an understatement.

It has forced other financial institutions to follow suit in mobile banking. Financial service providers across the countries are estimated to have a total of up to 2 million accounts while Mpesa has 16 million accounts, which is 8 times more than the commercial banks. This made them see the need to provide the mobile banking service.

For financial service providers, the mobile phone has introduced a new channel to reach customers one that is personal, easy to use, secure, location and time independent. Bank branches are becoming increasingly expensive to operate and establish self service solutions, such as ATMs and internet banking cannot provide competitive efficiency to satisfy the needs of the new generation of customers who want to do...
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