Mobile payments/Mobile banking has been in vogue for some time now. There is lot of promise that this mode of mobile transaction has shown for taking banking to the rural geographies in Africa and Asia. This is the next big billion dollar opportunity. Here’s a continuation of the mobile banking/payments story.
A new report by Juniper Research estimates the total value of mobile payments for digital and physical goods, money transfers and NFC (Near Field Communications) transactions will reach almost $630bn by 2014, up from $170bn this year, representing the gross value of all purchases or the value of money being transferred. This represents a 38% CAGR opportunity over the next 4 years. Read an earlier estimate on growth here
SMS ticketing schemes such as those offered by OBB Austrian Railways and Skane Traffic in Sweden have been important developments in the mobile payments market. It also revealed that shopping by mobile at stores such as Amazon Mobile is also tipped for significant expansion over the next five years.
The evolution of Mobile payments will be such that whilst the digital goods segment will account for nearly half of the market in 2010, the emerging segments such as physical goods payments, NFC and money transfers will impact the market rapidly. By 2014 for example we forecast that physical goods mobile payments market will be worth $100bn and that in developing markets SMS driven money transfer services are the main driver, increasing at a rate of 30% per annum.
Mobile VAS services and Data ARPU is looked upon as the redeemer of ARPUs in India. However, for mVAS to make an impact, it needs to be more than mobile infotainment. Profiling Conferencing, Mobile Adevrtisements, Education, Healthcare, Live feeds of Wholesale Rates, Mobile Payments, Ticketing and the UID tagging which will lift the mVAS game to mass usage levels.Here’s the top few expected to drive mVAS big.
Conferencing: Video Conferencing is increasing with companies cutting down their traveling to reduce costs and also for security reasons. This trend will not only help reduce costs but also reduce the Carbon footprint of physical travel.
Even if Mobile advertising in India is still at a nascent stage, Mobile as a medium has the highest reach in the country and the potential remains extremely high. 2009 saw a dramatic rise in Mobile advertising through the two main delivery mechanisms i.e. Voice and SMS. Mobile sMS Advertising will likely shift from being a mass advertising medium to selected targeting which will be based on subscriber profiling.
While Business and Advertising and Infotainment will be the drivers to MVAS in times to come, but the greatest challenge would be in terms of making MVAS mainstream.
Experiences in rural India show that information and communications technology can enhance poor people’s opportunities by improving their access to markets, health care and education.
Education: One such successful example of this is The Stanford Learning Lab that has created a prototype SMS quiz to aid learning of new vocabulary. The aim of this project was to provide highly flexible, mobile learning material that users could access in very short time-spans ranging from 30 seconds to 10 minutes. The constraints of the 160 character limit of SMS messages turned out to be an advantage as it forced the construction of suitably concise chunks for such short-term learning opportunities.
Healthcare: Apollo Hospital group has set up a 50-bed telemedicine center at Aragonda village (Andhra Pradesh, South India). It has also set up freestanding centers at Guwahati and Kolkata. These centers are equipped with facilities like CT- scan, X-ray, ECG and integrated laboratory and are linked to Apollo’s specialized hospitals at Hyderabad, Chennai, and Delhi for seeking referral services, second opinion, post-acute care, interpretation services and health education. The hospital group has also a web portal, Apollo Life that allows patients to interact with doctors via the web, upload all their diagnostics and reports on the net. Escorts Heart Institute and Research Centre (EHIRC), Delhi through its Escorts Heart Alert Service (EHAS), Utilizes telemedicine in establishing prompt contact with patients in distress. The EHAS subscribers can record their ECG’s at the time of discomfort through the cardiac beeper provided and transmit them through a telephone to the “heart alert centre”. These tele-ECG”s can be monitored 24-hours at the dedicated center and fully equipped mobile cardiac care units from the centre can be rushed to provide intensive care to the patients before they brought to the hospital for medical investigation. India is a vast country and the role of Telecommunications for realizing tele-diagnosis, tele-consultancy and tele-education can be a boon to people who still have relatively low access to medicine and healthcare.
Access to Opportunity: With the advent of 3G, fishermen can negotiate prices for their catch before heading for shore by sending in pictures of the type of fish they have on board. Similarly, farmers and horticulturalists who have perishable produce can take advantage of 3G services to bargain for the best prices before harvesting, by bypassing middlemen. Services like Mobile Banking, Mobile Money Transfers, Utility Bill Payments, Payments for purchase of movie tickets etc are also likely to take off.
Giving the Indian billion an identity: Identity authentication at banks, gas connection centres or while providing rural jobs will just be an SMS away. The Nandan Nilekani’s project will provide a unique identification (UID) number, not a card and the authentication will be made by using mobile phones. Once the numbers are issued the authentication will be done Online. The authorities will send the UID number to the designated points through mobile phone message. Also, the fingerprint of the person can be sent to the central database and the authentication can be received within minutes verifying the identity of the person. It will help provide portability to our farmers, laborers. When they move from state to state, this UID will help them get employment without hassles. Banks, mobile service providers, LPG gas connection counters and many more partner organizations can use this UID to verify their customer. With the growing mobile phone network, this will become an easy process for authorities to verify people. Nandan Nilkeni’s team is likely roll out the first batch of UIDs in 2010. They plan to issue at least 600 million UIDs over the next 5 years.
Finally, in a country that has been Infrastructure starved for all times, Indian companies have already laid out a 670,000 kilometres network of optical fibres even in the remotest areas and the progress on this front still continues. rural network based on the extensive optical fibre network, using Internet Protocol and offering a variety of services and the availability of open platforms for service development, viz. the Next Generation Network, appears not only to be an attractive proposition but a powerful one as well. Fibre network can be easily converted to Next Generation network and then used for delivering multiple services at cheap cost.
A study earlier had indicated the Telecommunications sector will increase its contribution to the India GDP from the existing 2% to 14%. That sounds a few degrees steep. But then the power that can be generated by linked a billion people together is also incomprehensibly powerful.
RBI Christmass gifted a relaxed and a more wider ambit to the banking and telecom eco-sytem in India with wider and more relaxed mobile payment transaction and banking guidelines
In the overall context the number of cell phone users is four and a half times the total number of bank accounts in India. So mobile banking is being looked at as an option for providing transfers across the length and breadth.
The transaction limit: Essentially the RBI has now said that banks will be able to do transactions with a daily cap of Rs 50,000 per customer for both funds transfer as well as transactions involving purchases of goods and services. Presently the transactions are subject to caps of Rs 5,000 and 10,000 respectively.
Lower Value transactions: RBI has relaxed the technology and security standards and allowed banks to undertake transactions upto Rs 1,000 without end to end encryption. So, they have basically in some ways reducing the cost of transactions.
Remittance of funds for disbursements in cash: Directly related to facilitating the use of mobile phones for cash. In the prepaid mobile phones which accounts for about 90% of the entire user base across the country, the transaction is essentially a cash transaction where the user puts in money, gets the credit and uses it. Mobile phone companies have been therefore talking about extending this for direct transfer so if you have a phone in Delhi where a person adds Rs 1,000 that money can be delivered somewhere in the hinterland of Bihar or UP. The maximum value of these transactions will be Rs 5,000 per transaction; the banks can place a cap on the velocity of such transactions subject to a maximum of Rs 25,000 per month per customer. The disbursal of these funds can be done through both, an agent or an ATM.
Given the lack of infrastructure/ATMs and Banks in the rural areas, banks have been allowed to appoint agents to do such transfers. Some of these agents could well be the mobile phone operators, the service providers and the handset resellers in the hinterland.
Analysts and experts and banks see this as a big push for financial inclusion across the country. Also, this is a move for retail payment from cash and cheque based transaction to mobile based transaction, which means great convenience and also reduces costs. While Operators, device makers and banks will now be able to drive this initiative across the geography, it is the consumer in India who will now be able to exercise more convenience for the money that he owns.
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%.
As economic concerns prompt consumers to manage their finances more closely, their desire for real-time access to- and control of- their aggregated financial information is increasing the urgency for banks to create a mobile banking channel. More broadly, the proliferation of mobile devices and smart phones symbolizes a pervasive, networked consumer market, revolutionizing many aspects of the consumer lifestyle, including finance. To this end, TowerGroup believes that mobility will be a major disruptive force in the financial services industry.
Financial services executives understand that mobile banking is a bridge to much more feature-rich, value-added mobile payments solutions. The ubiquity of mobile devices, coupled with customers’ craving for information on the go, is creating the perfect opportunity for banks to extend the reach of their banking services using the most personal possession for consumers – the mobile phone. At a time when every customer counts, mobile banking is an avenue for banks to reach new audiences and grow their business.
Most mobile banking strategies today are a result of banks’ efforts to extend financial services to their existing Internet banking customer base as a next step in the evolution of the self-service business model. As time progresses, mobile banking will flourish and services will continue to evolve, moving beyond basic banking functionality like balance inquiries, location finders and intrabank fund transfers to more sophisticated applications that leverage the rich functionality of mobile devices.
Vendors will continue the battle for market dominance, and the leaders will be those that embrace partnerships, platform integration and a holistic view of mobile financial services. To take advantage of the full potential of the mobile channel, TowerGroup recommends that banks begin now to incorporate mobile banking as a delivery channel with consideration for the following best practices:
1.Leverage other delivery channels to create synergies with the self-service model and utilize the full spectrum of device capabilities.
2.Develop smart integration models that give banks new segmentation and personalization capabilities for true one-to-one customer outreach based on customers’ relationship desires.
3.Think outside the bank’s customer base to capture new customers such as current unbanked customers with no bank accounts, ethnic markets and new generational users, such as the Generation Y segment, which desires self-service, innovation and paperless electronic transactions with no need for human interaction.
4.Create tight relationships between mobile banking and ATM vendors to build stronger ties with customers that currently do not have a relationship with a bank.
Check out this SlideShare Presentation, which lucidly explains the concept of mobile banking, expains the dimensions and provide a good refernce point.