Mobile banking: A technology gradually permeating into the system
Shelley Singh, ET Bureau Dec 11, 2012, 06.30AM IST
(It's still in its infancy,…)
The question for mobile banking in India is not whether, but when. A string of parallel developments - greater bank innovation, broadband spread and user inclination - is providing new charge to mobile banking. There is still a long way to go before m-banking achieves mass acceptance, but it's on its way, reports ET. [pic]
Last month, HDFC bank, India's second-largest private-sector bank, launched two services on its mobile banking platform. The first was a Hindi banking service, which made accessible its 30-odd m-banking services-like transferring funds, stop-cheque requests and opening a fixed deposit-to account holders who prefer Hindi as a medium of communication.
The second was a feature called 'net safe light', which limits damages from credit-card misuse. An account holder with a credit-card limit of, say, Rs 5 lakh might hesitate to make a purchase of Rs 2,000 via mbanking. This new feature lets the account holder create a virtual credit card on the mobile for the transaction value-in this case, Rs 2,000.
This is a fair leap from where m-banking was when it started in India about five years ago-text alerts for cheque deposited or ATM withdrawals. The way the m-banking ecosystem is evolving, and the numbers they are adding, indicate banks in India are going mobile at a speed never seen before.
Sure, the small base exaggerates the change, but it is significant in that it shows a technology gradually permeating into the system. "There's an opportunity to leapfrog: take banking to the masses via mobile banking," says AP Hota, managing director & CEO, National Payments Corporation of India (NPCI), which, among other things, sews up back-end connections to enable m-banking.
Of its total customer base of 200 million, State Bank of India (SBI), the country's largest bank, has 5.2 million registered users for its mbanking services. "Two lakh new users are registering every month," says Thandapani G, deputy general manager, SBI. The bank's account holders do 90,000 transactions per day on mobile phones and did m-transfers of Rs 180 crore in November.
The same is true of leading private banks. Adds Rajiv Sabharwal, executive director, ICICI Bank, the country's largest private-sector bank: "We have seen a 100% growth in the number of people using mobile banking in past year. Transactions are up 300%." Out of HDFC Bank's 26 million account holders, 1.2 million use mobile banking, and this is increasing by 30% every quarter. And Sridhar Iyer of Citibank India says 63% of its customers are on m-banking.
"It is picking up, but we are still at least five years away from largescale mobile banking," says Murali Balaraman, partner, financial services, Ernst & Young.
"Today, mobile banking is a surrogate to busy schedules." What Balaraman means is that it is the preserve of the urban user with a smartphone, who is comfortable with Internet banking, and is graduating to m-banking. The real adoption would be when the masses, urban and rural, take to it.
THE CASE FOR M-BANKING
In a country like India, where there are only 90,000 bank branches and banking services reach only about 40% of the population, the need to open more branches is compelling. Mobile banking, backed by a robust banking-correspondent architecture, overrides the need to set up more branches. "Mobile banking will help lot of customers who are financially excluded," says Sabharwal.
It also works for banks because a physical bank is expensive. According to Thandapani, renting, staffing and running expenses account for 40-60% of a branch's total cost, with IT systems making up most of the rest. "The bank branch is 10 times more expensive than reaching out to the bank on a handset," says Sridhar Iyer, director, digital business, Citibank...