M-commerce is a process where mobile users can carry out financial transactions through their cellphones.
So, even though we marvel at the way the Internet has changed our lives, the increasing popularity of mobile phones (with almost 504 million subscribers at the end of November 2009) and developments in mobile technology have brought forth the potential of this ubiquitous instrument as a tool for conducting business, including electronic transfers.
“While e-commerce has skipped the majority of the population due to the cost of setting-up such channels (computers, etc.), m-commerce has the capability to be inclusive due to the widespread use of mobile phones,” said Dr K.C. Chakrabarty, deputy governor, RBI, at the India Telecom 2009 Conference in New Delhi.
Technology For All
The RBI had issued guidelines for mobile banking in October 2008 permitting banks to provide such transactions though mandating that all transactions have to originate one bank account and terminate into another.
However, this leaves out a large chunk of people who belong to the non-banked sector thereby making m-commerce a facility of the classes intead of the masses.
“Let me admit that despite a wide network of bank branches spread across the length and breadth of the country, banking has still not reached a large section of the population. They are deprived of basic banking services like savings accounts or minimal credit facilities,” said Chakrabarty.
However, RBI has now taken measures to achieve increased financial inclusion through the Banking Correspondent (BC) model that uses a biometric card for fund transfers.
The scheme, which involves subsidising the cost of issue of biometric access/smart cards by banks, was initially implemented in Andhra Pradesh in 2008. It will be extended to the rest of the country by June 30, 2010.
So, now not only John Thomas or Raju Pallangappan, but everyone will be able to avail such services.
Understanding BC model
Projects that use smart card solutions with biometric authentication have already been implemented in the country. In such arrangements the account details and transaction data are stored on the smart card held by the account holder.
BC agents are given hand-held point of sale terminals and are approached by customers for carrying out transactions. Similar, solutions based on high-end mobile phones have also been implemented. In this arrangement, all transaction data are held on the mobile phone. Customers are only given receipts of their transactions/account statements.
Beyond Macro-economics
Telecom operators are fast tying up with banks to provide mobile banking solutions to customers. Most operators like Bharti Airtel, Bharat Sanchar Nigam Ltd. (BSNL) and Mahanagar Telephone Nigam Ltd. (MTNL) are collaborating with banks to offer services beyond “balance updates”.
Manoj Kohli, CEO, Bharti Airtel, had said at last year’s India Economic Summit that Bharti's pilot mobile banking project with leading bank State Bank of India had received a positive response. He added that a commercial launch would be possible as soon as the project got approval the central bank.
State-run operators like BSNL are also not far behind in this endeavour and have introduced two types of policies for customers -- open prepaid and closed prepaid. In the open policy banks have to be associated for transaction cards or for cashing in or cashing out. However, banks are not required in the closed policy and the telco can offer banking cards for monetary transactions.
“We are in an advanced stage of implementing mobile banking facilities and have tied up with Triotech Trivinet and Obopay for rolling out the services for BSNL,” says S.S. Sirohi, principal general manager (VAS), BSNL. “We are also in discussions with State Bank of India and Central Bank of India for tie-ups,” he adds.
Latest Trends
The trends in mobile banking and m-commerce have shifted balance updates to somewhat serious transactions. And with new innovations and lenient regulations, the non-banked sector is also coming under the umbrella of banking services.
Says Abhinav Mathur, chief technology officer, Spice Digital, “Given the pace at which we are moving, m-commerce as a practice is yet to pick up. However, it should see the light of day in the next six months.”
Another innovation has been Near Field Communication (NFC). Though at a nascent stage, NFC is a short-range high frequency wireless communication technology, which enables exchange of data between devices over a 10-centimetre (around 4 inches) distance. The technology allows customers to tap their mobile phones on a contactless reader at the point of sale to pay for purchases, eliminating the need for traditional swiping of credit cards.Currently, this service is available only in Bangalore where Citi Innovation launched 'Citi Tap and Pay' on a pilot basis last year. It was launched in collaboration with Nokia, Vodafone, MasterCard and VIVOtech.
“The service does away with the need for customers to send SMSes or incur mobile data charges to make these payments,” Jeff Semenchuk, executive vice-president and head of growth ventures, Citi Innovation, had said at the launch in June 2009.
All these examples depict how constant innovations are giving customers a multitude of choices on how to bank.
Last Word
The convenience of the mobile phone as an instrument for conducting monetary transactions and encouraging financial inclusion is immense. However, facilitation of m-commerce should be done with caution and a well considered approach should be followed keeping in view the concerns of money laundering financial terrorism and stability of payment systems.
