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    Sree Sankar
    Mobile banking is being rolled out across 12 Indian states to help distribute social security pensions and wages to rural citizens. In Andhra Pradesh alone, 250,000 people have registered for mobile banking services and the state aims to enroll 3 million people by the end of 2008. Pilot programs and full operations are being conducted using partnerships between governments, banks, telecom companies, and technology providers to manage the mobile banking ecosystem within India's banking regulations. Mobile banking can help reduce transaction costs for the government from distributing funds and help expand access to financial services for many Indians who currently lack access to banks.

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    Mobile banking is being rolled out across 12 Indian states to help distribute social security pensions and wages to rural citizens. In Andhra Pradesh alone, 250,000 people have registered for mobile banking services and the state aims to enroll 3 million people by the end of 2008. Pilot programs and full operations are being conducted using partnerships between governments, banks, telecom companies, and technology providers to manage the mobile banking ecosystem within India's banking regulations. Mobile banking can help reduce transaction costs for the government from distributing funds and help expand access to financial services for many Indians who currently lack access to banks.

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    Mobile banking is being rolled out across 12 Indian states to help distribute social security pensions and wages to rural citizens. In Andhra Pradesh alone, 250,000 people have registered for mobile banking services and the state aims to enroll 3 million people by the end of 2008. Pilot programs and full operations are being conducted using partnerships between governments, banks, telecom companies, and technology providers to manage the mobile banking ecosystem within India's banking regulations. Mobile banking can help reduce transaction costs for the government from distributing funds and help expand access to financial services for many Indians who currently lack access to banks.

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    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    7 views3 pages

    Get Quote Get Quote Get Quote Get Quote Get Quote

    Uploaded by

    Sree Sankar
    Mobile banking is being rolled out across 12 Indian states to help distribute social security pensions and wages to rural citizens. In Andhra Pradesh alone, 250,000 people have registered for mobile banking services and the state aims to enroll 3 million people by the end of 2008. Pilot programs and full operations are being conducted using partnerships between governments, banks, telecom companies, and technology providers to manage the mobile banking ecosystem within India's banking regulations. Mobile banking can help reduce transaction costs for the government from distributing funds and help expand access to financial services for many Indians who currently lack access to banks.

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    of 3

    Thousands of people from rural areas across 12 states are likely to get their social security pension and

    wages paid
    under the National Rural Employment Guarantee Act (NREGA) scheme with the help of mobiles over the coming few
    months.

    In Andhra Pradesh alone, for instance, 250,000 people have registered for mobile banking services. The state
    government is rolling out a programme to enroll three million people by the end of 2008.

    Mobile banking pilots and full-scale operations are being conducted across 12 states, and the entire ecosystem is
    being managed by the government with the help of the Reserve Bank of India, banks, leading telecom operators and
    technology implementation partners.

    The ecosystem is important since banking regulations in India currently do not allow cash for exchange of another
    'unit' such as 'airtime' in the case of mobiles. Only banks and the Indian Post (through money orders) are currently
    allowed such transfers.

    Mobile banking, which is catching up fast in the cities and hinterland, is not only helping the government to take a
    step forward towards fulfilling its aim of having one bank account for every household, but also saving it crores of
    rupees by way of reduced transaction costs.

    While the government incurs a transaction cost of Rs 12-13 for every Rs 100 it shells out, mobile banking helps it
    reduce the cost to a mere Rs 2. RBI estimates that around 40 per cent of Indians lack access to formal financial
    services and are largely 'unbanked'.

    For instance, the AP government has tied up with banks like the State Bank of [ Get Quote ] India [ Get Quote ], Union
    Bank of India [ Get Quote ], Axis Bank, Andhra Bank [ Get Quote ], State Bank of Hyderabad, Andhra Pradesh
    Grameen Vikas Bank, and Punjab National Bank [ Get Quote ].

    A Little World (ALW), a technology implementation partner, has collaborated with NXP Semiconductors to design a
    mobile for the AP government that encloses an RFID card, and works with ALW's micro-banking platform ZERO.

    The mobile acts as a branch of the bank by storing a database of customers. It also has a smartcard, which
    biometrically stores the identity of the customer such as name, address, photograph, fingerprint templates and
    relevant details of the savings or loan accounts held by the issuing bank.

    Customers get a secure electronic identity via phone or smartcard, while agents take deposits and dispense cash.
    ALW works with the banks on a revenue-sharing basis.

    Anurag Gupta, founder director & CEO of ALW, says: "We have carried out pilot projects with SBI in villages located
    in some of the most inaccessible and difficult terrains of the country such as Pithoragarh in Uttarakhand [ Images ],
    Mizoram, Meghalaya, and remote villages in Andhra Pradesh."

    Lokanath Panda, director, ALW, also pointed out that SBI had tied up with the Indian Post to extend banking services
    especially in unbanked/under-banked areas. "Select post offices will make available to the public SBI's deposit and
    loan products, and ALW is the technology partner."
    ALW is also conducting a pilot programme with SKS Microfinance and the Bank of India to provide a mobile banking
    service that works on BSNL SIM cards.

    New Delhi-based Ekgaon Technologies too has developed a system for tracking transactions made by self-help
    groups. It has partnered with the likes of CARE, WorldVision and the World Bank to conduct a pilot, which it plans to
    extend to 14 Indian states.

    Bharti Airtel [ Get Quote ], too, is in the process of tying up with two leading banks to extend its mobile remittance
    services to rural areas, according to its president (Mobile Services), Sanjay Kapoor.

    Airtel has already partnered with the Indian Farmers' Fertiliser Cooperative Limited (IFFCO) to set up IFFCO Kisan
    Sanchar Limited in Rajasthan [ Images ].

    Under this initiative, the cooperative department will provide mobile handsets to farmers at marginal price through its
    outlets in the rural areas. These handsets would be loaded with green SIM cards, which will flash daily updates on
    agricultural practices and weather forecast free of cost.

    While he did not provide details, Kapoor hinted that the partnership deal would be extended to mobile banking
    services too. Kapoor reasons that with 55 per cent of the mobiles being internet-enabled, mobile banking would help
    bridge the digital divide.

    Reliance Communications [ Get Quote ], on its part, allows ICICI Bank [ Get Quote ] account holders with Reliance
    handsets (even the low-end Rs 1,000 ones - with or without Internet connectivity) to make intra-bank (to ICICI
    account holders) money transfers. It has already tied up with HDFC [ Get Quote ] to offer Reliance mPay - a virtual
    credit card.
    Rural India is a huge and challenging market to reach, and service providers need to develop a long-term
    strategy to serve this untapped market. Many banks have initiated pilot projects, because banks consider
    mobile banking to be one of the cheapest ways to reach the roads less traveled. India has close to 600,000
    villages, making it nearly impossible to establish brick and morter banks everywhere.

    India's rural markets are also harder to tap due to illiteracy, lack of accessibility for services and technology,
    regulatory barriers, etc. To serve this market, banks should make use of pre-existing networks like regional
    rural banks, microfinance institutions, local delis and post offices, and field officers and authorized outlets. It is
    also important to leverage the latest technology in reaching out to this market.

    The report analyses urban and rural India as two distinct markets requiring different products, service offerings,
    networks, and technology. The report also highlights possibile opportunities and limitations, providing
    suggestions for overcoming market constraints. It gives examples of the experiences of foreign countries where
    mobile banking has already proven successful, which will help Indian service providers develop similar
    strategies.

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