Executive Summary

Mobile Banking is gaining increasing acceptance amongst various

sections of the society. This growth can be partly traced back to
technological and demographical developments that have been
influencing important aspects of the socio-cultural behavior in todays
world. The need/wish for mobility seems to be the driving force behind
Mobile Banking in general.
Mobile banking is a way for the customer to perform banking actions on
his or her cell phone or other mobile device. It is a quite popular method
of banking that fits in well with a busy, technologically oriented lifestyle. It
might also be referred to as M-banking or SMS banking.
Mobile phone banking is fast catching up in India, as a cost effective
alternative banking model. It is also a virtual banking model. However
there are security issues and regulatory concerns in its usage. Mobile
Banking could pave the way for a greener society, with the progressive
elimination of cash transactions
Nowadays everyone uses multimedia phones i.e. Blackberry, I-Phone
etc. Such handsets are enabled with WAP/GPRS which allows access to
the Internet. This helps Banking through your cell phone anytime and
anywhere.
Finacle mobile banking solution empowers retail and corporate banking
customers with access to banking services through SMS and
GPRS/WAP-enabled handsets, leveraging a single platform. It offers
both mobile commerce (m-commerce) and mobile payments within the
DNA of mobile banking, with built-in support for merchant-initiated
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payments and reversals, in addition to customer-initiated payments and

reversals. Leveraging recent technological advances in the mobility
space, the mobile banking solution empowers banks with the means to
innovate by easily deploying new services, with improved time to market.
The end user experience thus created is richer, secure and truly
convenient.
Mobile Banking uses existing and rapidly expanding mobile phone
infrastructure, and therefore, has the potential to be deployed widely and
affordably to expand access to easy electronic payment services without
the need for visiting a bank branch.
This research project examines the opportunities for banks to generate
revenues by offering value-added, innovative mobile banking services
while retaining and even extending their base of technology-savvy
customers.

Introduction to Mobile Banking

Across developing countries, millions of people rely on informal
economic activity and local level networks to earn their living. Most of
these populations are from bottom of pyramid and they dont have
access to basic financial services/banks as access to them is costly and
very limited. However, the outstanding growth of mobile sector worldwide
has created a unique opportunity to provide social and financial services
over the mobile network.
How many times you visit your bank or wait endlessly for a phone call to
get through customer care just to check your bank balance? You need
not waste your precious time for these small jobs anymore. Now you can
access your bank account and conduct a host of banking transactions
and inquiries through Mobile Banking service.
Mobile Banking is a service that allows you to do banking transactions
through your mobile phone without making a call, using the SMS / WAP
facility. You can check your balance, stop a cheque payment, or even
pay your utility bills. Mobile Banking service gives you account
information and real-time transaction capabilities from the mobile phones
anywhere, anytime.
Mobile Banking refers to the supply and availability of banking and
financial services through mobile telecommunications equipment. The
scope of services offered can also agree on banking and trading
operations, accounting and management of personal information for
reference.
The amount of banking you are able to do on your cell phone varies
depending on the banking institution you use. Some banks offer only the
3

option of text alerts, which are messages sent to your cell phone that
alert you to activity on your account such as deposits, withdrawals, and
ATM or credit card use. This is the most basic type of mobile banking.
A more involved type of mobile banking allows the user to log into his or
her account from a cell phone, and then use the phone to make
payments, check balances, transfer money between accounts, notify the
bank of a lost or stolen credit card, stop payment on a check, receive a
new PIN, or view a monthly statement, among other transactions. This
type of banking is meant to be more convenient for the consumer than
having to physically go into a bank, log on from their home computer, or
make a phone call.
Some financial institutions take a different approach to mobile banking to
offer their customers. They make customers with special software
downloaded on their mobile phones, which functions as a client for the
mobile banking services.

Mobile Banking in India

4

India is marching towards m-commerce - a world where you can make

all payments by keying in instructions on your mobile phone. In India,
however, there is a limitation on the availability of functions that can be
deployed by banking customers.
Most m-banking transactions today are information-based -- customers
engage in m-banking services like balance enquiry, last three
transactions, "alerts" for strange activities in bank accounts etc. Some
banks like IDBI Bank are also offering bill-payment services to
customers through m-banking.
However, actual cash transactions like fund-transfer, payment of bills at
a restaurant among others have not yet been introduced in India. There
are many reasons for this.
Firstly, as m-banking is currently SMS-based, the transaction delivery
time is not guaranteed since it is dependent on factors like SMSC (short
message service centre) congestion and network strength in the area
where the customer is located. Secondly, there is an issue of repudiation
as till date there are no clear guidelines on wireless payments.
In the very near future, one can see m-banking leaping into a new
phase. With the advent of Java-enabled mobile devices, the shape of mbanking services is in for a change. One would also be ensured the
same amount of security and comfort as one would be when using
internet banking.

Mobile Banking Perceptions

5

Over the last few years, the mobile and wireless market has been one of
the fastest growing markets in the world and it is still growing at a rapid
pace. Mobile phones have become an essential communication tool for
almost every individual. Mobile banking which is an integral part of m
Commerce has become very popular among mobile users ever since its
existence in 2007. It creates new, convenient communication and fast
financial transactional channel for mobile users which is accessible from
anywhere, anytime. Checking account information, balance available,
credit/debit card information, cheque status, setting alerts, payment
reminders, locating ATMs and bank branches, accessing mini statement,
accessing loan and equity statements, insurance policy management,
placing orders for cheque books etc via mobile phones are some of the
services offered in mobile banking. With multiple access channels such
as SMS, downloadable client, mobile Internet (WAP) mobile banking is
encouraging mobile users more to explore the service.
To know about the different perceptions of Mobile Banking the following
activities were carried out:
An opinion was taken from the Finacle Team (Mobile Banking Division),
Infosys Technologies.
To have a wider idea about mobile banking among common man a
survey was conducted with the common people to know its use.
Finally to know how it is helping the banks an interview was conducted
with Mr. Tarun Jain, Branch Manager, ICICI Bank (Khar West).

Opinion taken from Finacle (Mobile Banking Division),

Infosys Technologies Ltd.
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1. What was the motivation behind development of Mobile Banking

product?
There are multiple opportunities and challenges faced by the bank in
todays environment:
Approximately 40% percent of the Indian population is unbanked.
Setting up branches in all these areas will increase the cost of
operations significantly.

All these service outlets need to be connected.

Given the low cost of most phones, wide penetration of mobile

technology and the ease of use, Mobile banking acts as an effective
tool for offering a cheap, cost efficient and convenient solution to the
wide range of customers.
2. What is Mobile Banking service?
Banks can provide the various services to the customer on their
mobile. The most popular being Balance Inquiry, Funds transfer,
Mobile payments and ATM Locator services.
3. In your experience what is business potential of Mobile
technology?

What are the new services which will become

widely accepted?
Mobile banking provides is a cheap channel for the banks to provide
their services due to the following reasons:
The cost of a mobile is far less than a computer hence services
hosted on the internet channel can be provided on the mobile.
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 Customer carry a mobile wherever they go and however remote

the place is, thus for the customer the bank is available in the
pocket all the time. Thus the customer is likely to do more
transactions than before.
In addition to the banking transactions offered in the mobile, there will
be other services like Mobile top up, movie ticketing and other value
added services which will be popular services on the mobile.

4. What are the Risks exposed by Mobile Banking?

How do

Industry / Providers / Regulators address to minimize these

risks?
There are multiple channels in mobile banking in which it can be
offered to the customer. The first one is the SMS channel where the
customer uses her mobile handsets to send and receive messages
on the mobile; the second channel is the browser based channel
where the customer uses the mobile browser to do transactions on
the mobile by accessing the banks web site and; the third channel is
the rich downloadable client where the customer downloads an
application and use the applications to do transactions.
The SMS channel being a store and forward channel is the most
convenient but the weakest channel in terms of security. As the
transactions go through two network the Telco network and the
internet it is susceptible to more risks.
Few measures taken by regulators, banks and solution providers are
as follows:
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 Limit on the number of transactions, velocity of transactions and

transaction amounts are enforced.
All transfer transactions to be implemented using two factor
authentication mechanisms.
Encryption of data over network.

5. What Percentage of banks customer use Mobile Banking

effectively?
There are no clear numbers which we have as of now, it depends on
the geographies, culture of the land the services offered on the
mobile. This being a nascent channel has around 5-10% of the
customers on this channel. This ought to improve with more
emphasis and knowledge of using this channel.
6. What are the challenges faced by Industry with Mobile Banking
technology and offerings?
The main challenge is to get the customer to use the mobile device to
access banking services which is smooth and easy for the customer.
It also aims at reducing the risk perception of the customer.
7. What

should

Regulators

or

Government

do

to

support

advancement of Mobile Technology?

There is a lot of emphasis from the RBI towards advancement of
mobile technology for offering mobile banking services. In fact, RBI
has one of the very well defined guidelines for implementation of
mobile banking.

8. With 3G network coming soon, what revolutions do you

envisage in the offerings?
With the introduction of 3G and new and more powerful devices,
banks will be able to offer a lot more services on the mobile. The user
experience for the customer in using mobile for accessing data
services will improve. In advanced countries like US we even have
services like Remote Deposit capture on the mobile.

Report of Survey taken with the common people

A survey was conducted with the common people to ascertain the level
of awareness about mobile banking, about the services offered, and
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about the banks that offered them; and two, to find out what services
were used, and with what frequency.
A sample of 25 people was taken and few questions were asked related
to their use and awareness of Mobile Banking. The result was that they
use mobile banking services only to check account balance, with very
few actually conducting transactions. The obvious reasons for thislack
of awareness of services offered by banks and equally important, a
perceived issue of security and confidentiality. Clearly, banks have not
done enough to push their bouquet of mobile banking services.
During the survey the following questions were asked:
1. Have you heard about Mobile Banking?

Courtesy - DATAQUEST

Approximately 26% (6 people) of the sample had heard about Mobile

Banking. This is due to lack of awareness among them.
2. What Mobile Banking services from the following do you use and
which of them are you aware of?

Balance check
Check Book Requests
Mini Statement transactions
Fixed Deposit/Other enquiries
Paying bills

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Courtesy - DATAQUEST

Out of those who were aware of Mobile Banking Services only

24% (6 People) were actual users where "checking of account
balance" scored high, followed by requests for cheque books and
mini-statements, fixed deposit enquiries and paying bills.
3. Would you like to use Mobile Banking Services?

Courtesy - DATAQUEST

While awareness remains at 26%, people are keen to try out mobile
banking. 63% (16 people) evinced interest in the services. Given the
convenience factorthe fact that mobile banking can be used from
anywhere in the world as long as one can send and receive SMS
most were interested.
4. Which option would you preferMobile or Online Banking?
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Courtesy - DATAQUEST

Out of those who actually use mobile banking 40% (10 people)
preferred online banking and 60% (15 people) preferred Mobile
Banking. Also, e-commerce as a medium of purchasing and
transacting has not really caught on, and the basket of mobile
banking offerings is, in itself, very limited though the technology
backbone is in place, and getting better.
5. Are you uncomfortable with M-Banking transactions? If Yes,
why?

Courtesy - DATAQUEST

Of the people who are both aware of and use m-banking services,
most say "security" is a key concern. While theres hardly any security
risk in sending SMS, a perception about it is therebanks, therefore,
need to educate consumers on this front.
The next reason is that people generally feel more comfortable
making physical transactions. This may seem technology-unsavvy,
but this is borne out by the survey.
6. Why do you use M-Banking Services?
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Courtesy - DATAQUEST

Saving on time is the key factor pushing mobile banking. Forget about
going to the nearest ATM or even logging on to the Internet via the
PC, or using the landline for phone banking and waiting... Get clicking
on the mobile keys, send an SMS, and voilayou have your answer.
Saving time and ease of usage will be the key enablers for mobile
banking services.
So what is the scenario like in India? Barring a few private banksICICI
Bank, HDFC Bank, IDBI Bankand a few MNC entitiesCitibank, ABN
Amro, Stanchart and Hongkong Bankfew others offer a wide portfolio
of mobile services. Public sector banks do not figure prominently in this
picture yet. But the number of users is growing.
Mobile devices and the cost of technology are also coming down fast,
and this has been making will ownership and access both viable and
affordable. Many banks now have a built-in delivery mechanism that
offers services and 24x7 access to them. Unlike Internet banking that is
PC-restricted, mobile banking provides banks with an unparalleled
opportunity to reach customers in an unrestricted environment. Betterintegrated customer relationship channel for better service is what these
banks believe in.

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Interview with Mr. Tarun Jain, Branch Manager, ICICI Bank,

(Khar West)
As the interview was conducted via email a copy of the email has been
attached in bibliography for reference
1. What is Mobile Banking according to you?
Mobile Banking according to me is using our mobile phones for
inquires pertaining to account & doing banking transactions. With
Mobile Banking, you can conduct any financial and non financial
transactions effortlessly and securely. From making payments to
15

checking your account information, Mobile Banking allows you to

bank from anywhere at any time.
2. What are the specific services offered by ICICI under mobile
banking?
The specific services offered by ICICI Bank under Mobile Banking are
Mobile Banking (thru SMS) & iMobile. ICICI Bank's mobile banking
service has revolutionized the way in which you can bank. It is not
only a convenient mode of banking but also offers you various
benefits like:
Anytime anywhere direct access to your bank accounts

Personalized and secure transactions

Ability to do transactions up to Rs.50,000, pay your credit card

bills, order cheque books, get provisional IT certificate, locate ATM
and branch , mobile recharge and many other commerce activities.

Get alerts from ICICI Bank on banking transactions

But in order to receive the benefit of services mentioned above you
need to be registered for mobile banking.
iMobile is a banking application that can be downloaded on your
mobile phone and can be used to conduct any banking operations/
transactions on your ICICI bank accounts directly from your mobile
phone. With iMobile you can access account information, transfer
funds, pay utility & phone bills, recharge prepaid mobile number etc.
You can access your savings account, credit card account, demat
account and loan accounts. iMobile also gives the benefit of mobile
16

shopping which allows you to recharge your prepaid mobile number

and book your movie tickets.
3. What are the charges applicable for the use of this service?
The customers can avail Mobile Banking service from the bank for
free. There are no specific charges as such. If there are any revised
charges ICICI Bank will inform all the customers.
Incase of iMobile, ICICI Bank offers iMobile at no cost to its
customers. You can download and use this application as and when
needed without any charges by the bank. Your mobile operator will
levy charges for GPRS/SMS used.

4. How is the registration process for mobile banking? Does the

customer have to be physically present at the bank during
registration?
If you are an ICICI Bank customer having a savings account, loan
account, demat account or credit card, you can avail of this Mobile
Banking Facility, by registering with us. The customer can register for
Mobile Banking Service either in the beginning while opening his
account with the bank or if he wishes to avail this service later he
needs to come to the branch with a valid ID proof & the same can be
registered. Also, the software for iMobile can be downloaded free of
cost through www.icicibank.com.
5. Do I need to be registered with any particular service provider to
receive alerts?

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Mobile Alerts are not restricted to any service provider. These alerts
are sent via SMS directly to your phone. If your service provider
supports the SMS facility, you can avail of this service.
6. Are there any limitations on fund transfer facility (like a
maximum transfer limit, or a limited scope of receivers)?
Yes, due to various security reasons there has to be a capping on the
upper limit for transfer of funds. Financial transactions are only
possible on iMobile. There is a limit of Rs.50000 per day for financial
transactions using Mobile Banking.
7. How has mobile banking helped you in increasing customer
base and generate more revenue?
This service is outstanding and it offers a value added service to the
customers & increases the stickiness of the customer for the bank.

8. What is the feedback you have received from customers about

this service?
The service is amazing. It has received an excellent feedback from
the customers.
9. Is the number of customers using mobile banking service
considerable or still a minority count?
No, due to absence of data to support, there are not many people
who use it.

18

10. Does the use of Finacle as your banking solution help you a
great deal with Mobile banking?
Yes. The solution provides a faster, richer, secure and convenient
user experience, ensuring inclusion of customers with various mobile
devices.
11. Where do you see mobile banking in the future?
The customer base is increasing at a very fast rate. Mobile banking is
growing very rapidly and will soon become the main channel for
banks to be in touch with their customers.

Implementation of Mobile Banking

The following steps need to be followed to implement Mobile Banking:
Designate a particular account linked to your Customer-id as the
Operative Account.
Balance inquiry will give you information on all accounts linked to your
Customer Identification Number.
All other transactions will give you information on your Operative
Account.
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Mobile Banking through SMS

Mobile Banking with SMS is conducted through SMS codes sent to a
particular number as directed by your bank. You will receive the
response in the form of a text message on your mobile phone screen
within a few seconds. For example to get details of your HDFC bank
account you will use codes like HDFCBAL, HDFCTXN, HDFCSTM,
HDFCSTP<6 digit cheque no.>, etc. for balance enquiry, last transaction
details, account statement, stop cheque payment etc. respectively.
How it works?
The message sent by you travels from your mobile phone to the SMS
Centre of the Cellular Service Provider, and from there it travels to the
Bank's systems. The information is retrieved and sent back to your
mobile phone via the SMS Centre, all in a matter of a few seconds.

Operative Guidelines by RBI

Mobile phones as a delivery channel for extending banking services
have off-late been attaining greater significance. The rapid growth in
users and wider coverage of mobile phone networks have made this
channel an important platform for extending banking services to
customers. With the rapid growth in the number of mobile phone
subscribers in India, banks have been exploring the feasibility of using
mobile phones as an alternative channel of delivery of banking services.
In order to ensure a level playing field and considering that the
20

technology is relatively new, Reserve Bank has brought out a set of

operating guidelines for adoption by banks.
Regulatory & Supervisory Issues
Only banks which are licensed and supervised in India and have a
physical presence in India will be permitted to offer mobile banking
services.
The services shall be restricted only to customers of banks and
holders of debit/credit cards issued as per the extant Reserve Bank of
India guidelines.
Only Indian Rupee based domestic services shall be provided. Use of
mobile banking services for cross border transfers is strictly
prohibited.
The guidelines issued by Reserve Bank on Know Your Customer
(KYC), Anti Money Laundering (AML) and combating the Financing
of Terrorism (CFT) from time to time would be applicable to mobile
based banking services also.
Only banks who have implemented core banking solutions would be
permitted to provide mobile banking services.
Banks shall file Suspected Transaction Report (STR) to Financial
Intelligence Unit India (FID-IND) for mobile banking transactions as
in the case of normal banking transactions.
Registration of customers for mobile service

21

 Banks shall put in place a system of document based registration with

mandatory physical presence of their customers, before commencing
mobile banking service.
On registration of the customer, the full details of the Terms and
Conditions of the service offered shall be communicated to the
customer.
Inter-operability
Banks offering mobile banking service must ensure that customers
having mobile phones of any network operator is in a position to avail
of the service. Restriction, if any, to the customers of particular mobile
operator(s) is permissible only during the initial stages of offering the
service, up to a maximum period of six months subject to review.
The long term goal of mobile banking framework in India would be to
enable funds transfer from account in one bank to any other account
in the same or any other bank on a real time basis irrespective of the
mobile network a customer has subscribed to. This would require
inter-operability between mobile banking service providers and banks
and development of a host of message formats
Clearing and Settlement for inter-bank funds transfer transactions
To meet the objective of a nation-wide mobile banking framework,
facilitating inter-bank settlement, a robust clearing and settlement
infrastructure operating on a 24x7 basis would be necessary.
Pending creation of such a national infrastructure, banks may enter
into bilateral or multilateral arrangement for inter-bank settlements,
22

with express permission from Reserve Bank of India, wherever

necessary.
Transaction limit
A per transaction limit of Rs. 2500/- shall be imposed on all Mobile
Banking transaction subject to an overall cap of Rs. 5000/- per day,
per customer.
Banks may also put in place monthly transaction limit depending on
the banks own risk perception of the customer.
Board approval
Approval of the Board of Directors (Local Board in case of foreign
banks) for the product as also the related security policies must be
obtained before launching the scheme.
Approval of Reserve Bank of India
Banks wishing to provide mobile banking services shall seek prior
one time approval of the Reserve Bank of India, by furnishing full
details of the proposal.

Mobile Banking Services

Who can avail Mobile Banking services?
To avail Mobile Banking services you must have:
An account in a Bank that offers Mobile Banking service e.g. HDFC
Bank, ICICI Bank
23

 You must be a subscriber of any of the Cellular Service Providers

which have tie up with your Bank
You have to Apply for Mobile Banking through an appropriate
Application Form with your bank
Most of the Banks offer Mobile Banking service absolutely FREE.
Although SMS Charges for outgoing messages would be charged as
usual by your mobile phone Service Provider.
Mobile Banking Alerts
Some banks also provide the facility of Mobile Banking Alerts where you
can get regular updates of transactions in your account as they happen.
These include:
Credits to your account (you choose a threshold credit amount, above
which you'd like to be alerted)
Debits to your account (you choose a threshold debit amount, above
which you'd like to be alerted )
Cheque returned (Get to know every time a cheque deposited in your
account is returned)
Some of the Services that are available through Mobile Banking
are:
You can get your Balance details
Get Transaction details
Request for a Cheque Book
Stop a Cheque payment
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 Inquire about a cheque status

Request an account statement
Get Fixed Deposit details
Get Bill payment details for Electricity, Mobile phone and Telephone
services
Pay your bills

M-Banking: The Services Bouquet

ICICI Bank HDFC Bank IDBI Bank HSBC Bank of America
Balance enquiry
Last few transactions

Cheque payment status

Stop payment of cheques
Statement request
Cheque book request

Citibank ABN Amro

Business Models for M-Banking

Source: Professional Banker Magazine Mobile Phone Banking Dr.
Ashish Srivastava - IUP Publications Issue March 2010

25

Business Models for Mobile Banking can be broadly classified into three
categories:
Alternative Banking Model
Virtual Banking Model
Bank-on-Mobile Model
Alternative Banking Model
Under this model, banks use mobile phones as an alternative banking
channel, similar to Internet banking, to provide certain banking facilities
to their existing customers. A customer needs to register his mobile
number with the bank, which, in turn, uses the number to provide
banking facilities over mobile such as balance enquiry, alerts, funds
transfer, etc.
The mobile operators role in this model remains limited to the extent of
transmitting messages between the bank and the customer for which
they charge normal rates. Such model is in use by a number of banks in
India, yet its scope remains restricted since, only the existing bank
customers get such facilities and, hence, it does not meet the
requirements of the hitherto unbanked masses.
Further, the scope of funds transfer is limited to a registered payee
maintaining a bank account and, hence, it cant be used at the Point-ofSale (POS) or effecting various small payments and remittances. In
India, this type of M-Banking model has been approved by the RBI.
Virtual Banking Model
Under the virtual banking model, banks have no role to play and the
entire services are provided by the Mobile Service Providers (MSP) by
26

acting as virtual banks. The operator enables customers to purchase

goods and services through their mobile phones and payments are
debited to their prepaid cards or post paid bills. Operators allow usage of
talk-time as a virtual currency, whereby users can purchase and transfer
talk-time to another person, who, in turn, can get the same redeemed for
cash from the nearest operators outlet. Although this model is simpler
and has better scope in spreading financial inclusion, yet, the lack of
involvement of the banking system in the process makes it vulnerable to
inherent risks (such as money laundering and systemic risk) involved in
a payment system. Such risks are better managed by the banking
system under the supervision of the Central Bank. Besides, the model
also suffers from an inherent legal weakness that in India it can not carry
out full-fledged

banking activities in terms of prohibition contained

under Section 7 of the Banking Regulation Act, 1949. The simplicity and
wide coverage of this model needs to be supplemented by the strong
foundation of the banking system so as to make M-Banking a real
success.
Bank-on-Mobile Model
Bank-on-Mobile presents another model of M-Banking by using a hybrid
system in which the mobile service provider enters into a tie up with a
bank to offer M-Banking Services. Financial messages are sent across
the mobile network in an encrypted form to the bank where the message
is decrypted and authenticated using the mobile operators public key
infrastructure (a set of public key-private key and hashing algorithm)
integrated into banks application software. The desired payment and
settlement is carried out through the banks existing infrastructure and a
confirmation is sent to the concerned parties related. A sound
communication

system

ensures
27

instantaneous

completion

of

transactions. This kind of arrangement provides a sufficient leverage in

creation, distribution and management of M-Banking services due to
synergic benefits of the combined entity of mobile network operators and
banks. Such an arrangement is regarded as more credible, secure and
better positioned to cater to the requirements of a large cross-section of
the population including unbanked ones.

Advantages of Mobile Banking

The biggest advantage that mobile banking offers to banks is that it
drastically cuts down the costs of providing service to the customers. For
example an average teller or phone transaction costs about $2.36 each,
whereas an electronic transaction costs only about $0.10 each.
Additionally, this new channel gives the bank ability to cross-sell up-sell

28

their other complex banking products and services such as vehicle

loans, credit cards etc.
Mobile Banking uses existing and rapidly expanding mobile phone
infrastructure, and therefore, has the potential to be deployed widely and
affordably to expand access to easy electronic payment services without
the need for visiting a bank branch.
Mobile Banking presents an opportunity for banks to retain their existing,
technology-savvy customer base by offering value-added, innovative
services. It might even help attracting new customers. Further, Mobile
Banking presents a chance to generate additional revenues.
For service providers, Mobile banking offers the next surest way to
achieve growth. Countries like Korea where mobile penetration is
nearing saturation, mobile banking is helping service providers increase
revenues from the now static subscriber base. Also service providers are
increasingly using the complexity of their supported mobile banking
services to attract new customers and retain old ones.

M Banking Implications
Micropayments
In the more affluent economies, a good infrastructure for a cashless
environment is already prevalent and most people have bank accounts
and access to both debit and credit facilities. These factors are
incentives in the developing countries to move the population at large
29

away from cash with introductions of low cost solutions such as micropayments to further efficiency gains.
SMART Money
The service was launched in December 2000 in co-operation with First
E-Bank, which has since been acquired by Banco de Oro, and
MasterCard, one of the worlds leading payment services providers.
According to SMART, SMART Money was the worlds first re-loadable
electronic cash wallet, linked together by their cellular network. Once
cash has been transferred to the SMART Money account, it can be used
in thousands of shops and restaurants. The cash value can also be used
to load airtime, pay utility bills, or transfer money from one SMART
Money card to another.
G-Cash
The service was launched in October 2004, with an initial set of three
anchor services; international and domestic remittance, P2P (phone-tophone or person-to-person) transfers and payments for retail purchases.
With G-Cash, all of GLOBEs subscribers are m-Commerce-enabled. As
users do not need to have a card or bank account to be part of the
service, G-Cash is able to provide M-Commerce capability to a
previously underserved segment of the market, including those who
currently do not do banking. Unlike SMARTs approach whereby it
operates the service jointly with BDO, GLOBE on its own maintains
records of all transactions and arranges settlement between the retailers
and the G-Cash customers. G-Cash provides services through close to
4,900 retail outlets nationwide and more than 500 G-Cash partners.
Mobile Remittance
Migrant remittances, which are personal flows from migrants to their
30

friends and families, have become a major source of external

development finance, and in the process, play an effective role in
reducing poverty. Capitalizing on the benefits of such a system,
remittance services can become cheaper and more convenient, thus
improving financial access of migrants, their beneficiaries and the
financial intermediaries in the origin countries.
Microfinance through Mobile Technology
Currently, a major constraint to microfinance is the high cost of operating
in remote areas. Many institutions are now working toward low-cost
delivery options such as Internet banking and cashless transactions to
help the rural poor. The mobile devices could be a more efficient tool for
such transactions for people in such rural areas, using computers is
often a problem due to faulty Internet connections and frequent power
failures. Hence, providing microcredit through a mobile platform (SMSbased) could be the best way to reach out to the poor.

Finacle - A Banking Solution

Finacle is the heart of the entire technology infrastructure in a bank. It
looks after all back-office operations, where every transaction in the
bank actually happens. It is the lifeblood of the bank. All other
applications interface with Finacle.
Finacle (from Infosys) is an integrated, centralized, multi-currency and
multi-language-enabled and functionally rich banking solution to address
retail and corporate banking requirements. Finacle helps banks by
31

providing an integrated transformation approach, complete with banking

solutions and services.
Finacle helps banks WIN IN THE FLAT WORLD by providing solutions
and services that enable a shift in their strategic and operational
priorities. The offerings address the comprehensive technology-led
business transformation requirements of retail, corporate and universal
banks worldwide by maximizing their opportunities for growth, while
minimizing the risks that come with such large scale transformation.
Finacle from Infosys partners with banks to power-up their innovation
agenda, enabling them to differentiate their products and service,
enhance

customer

efficiency. Finacle

experience
solutions

and

address

achieve
the

greater

core

operational

banking,

wealth

management, CRM, Islamic banking and treasury requirements of retail,

corporate and universal banks worldwide. Finacle solutions also
empower banks with multiple sales, service and marketing channels
including e-banking, mobile banking and call centers. These offerings
make Finacle a strong innovation-facilitator enabling banks to
accelerate growth, while maximizing value from their large scale
business transformation.
As a leader in banking transformation, Finacle has a global footprint
across 60 countries and has been acknowledged by top analysts
including Gartner, Forrester and Celent among the leaders in the core
banking solution space. Finacle is also the winner of a series of awards
for its innovation and implementation capabilities, the most notable ones
being The Banker Technology Award and The Asian Banker IT
Implementation Award.
32

Several differentiating features make Finacle one of the most

comprehensive, flexible and scalable universal banking solution.
Finacle is used in over 111 banks across 63 countries as on 2008.

Finacle Mobile Banking Solutions

Finacle Mobile Banking solution provides retail and corporate banking
customers with access to banking services through SMS and
GPRS/WAP-enabled handsets, leveraging a single platform. It offers
both mobile commerce and mobile payments within the DNA of
mobile banking, with support for merchant-initiated payments and
reversals, in addition to customer-initiated payments and reversals
through manual SMS banking. The solution provides a faster, richer,

33

secure and convenient user experience, ensuring inclusion of customers

with various mobile devices.
Mobile banking solution Finacle functions in combination with different
host systems, the core banking solutions, payment networks and third
party applications. The solution is orchestrated with Infosys M-Connect
locally advanced middleware, transactions between mobile users,
devices, and the AO universal banking solution Finacle interface.
Infosys M-Connect manages multiple form factors and mechanisms for
access to multiple devices, make a context for Adaptive Server
transaction. This provides the banks with a strong channel to customer
segments, serving from mass tourism tributary of the under steer or
without a bank account, made to tackle the challenge posed by the
variety of mobile devices.
The solution supports downloaded the synchronization clients, AOs own
data on their mobile phones without re-downloading the application on
the client mobility. It allows the banks to their transactions over the
Internet use and support existing capabilities to expand the mobile world,
in almost real time. This opens the way for the benefits of integration
through the use of the common interface for mail, maintenance and
deployment costs are reduced.
Key Modules
The bank offers mobility of Finacle is a logical extension of the proven
solution for Internet banking. All Finacle, the online capabilities AOS can
be translated into the mobile channel, minimizing delays, providing a fast
time of placing on the market for banks.
34

Customer on-boarding
Finacle enables the bank AOS existing customers should be directed to
the mobile channel for banking and payment transactions by using the
following methods:

Phone banking leveraging the banks tele-banking call center

Mobile banking facility requested by sending SMS request in

prescribed format

Registering for mobile banking through the banks Internet banking site

Mobile banking capabilities by sending SMS application desired format

prescribed Application for Mobile Banking by the Bank, AOS Internet
banking site.
The different variants of mobile banking are:
Browser-based mobile banking
Downloadable client-based mobile banking
Manual SMS Banking
Finacle offers several features for the consumer and corporate
customers to use GPRS or WAP-based transmission. A preliminary list
of features is as follows:
Account Management and Applications
Local payments, bill payments and transfers
Approvals for the transaction of business customers
Merchant Payments and recoveries for the POS, telephone or Internet
purchase transactions
35

 Support for administrative tasks such as secure e-mail to relationship

manager, permits, change password, data synchronization and selfaudit
Business Benefits
A Strong Framework Inclusivity
Finacle mobile banking solution leverages Infosys M Connect to
smoothly hurdle the challenges posed by the multiplicity of form
factors and access mechanisms on multiple devices to provide a
context-adaptable view to the transaction server. This enables banks
to include, through the mobile channel, its various customer
segments, ranging from the HNWI to specific unbanked communities,
surmounting the complexities of diverse location and dissimilar mobile
devices.
Maximize Innovation
Banks can leverage Finacle mobile banking solutions indigenously
developed middleware Infosys M Connect, to configure an unlimited
palette of services from any channel, to the mobile space, with ease.
The need for development of new back end services is precluded due
to the availability of a banking solution behind the mobile interface.
Finacle also provides the flexibility to deploy services over the
existing online banking platform or through a standalone delivery
channel interfaced directly with the relevant host systems. This
ensures the rapid delivery of a comprehensive range of financial
services, embellished with new innovative features, on mobile
devices.

36

 Cost Savings
The solution presents banks with the advantages of reduced
integration by leveraging common interface messages, maintenance
and deployment costs. This translates into significant cost savings
without banks having to compromise on features or the range of
devices supported. The mobile banking solution is inherently
independent of the network service provider, obviating the need to
build a business model that involves costs and profits sharing with
them.
Robust Security
The solution offers extensive features such as encryption of Web
Application Security, check references on the Web and session
management to create a solid security framework. The solution also
supports OTP (One Time Password), which provides a mechanism for
the two-factor authentication for users to communicate with the
mobility of customers to download to make. This allows the bank to
products that are now very safe and adapted to withstand the
onslaught of threats associated with mobile transactions.

Customer Delight
Finacle mobile banking solution enables banks to offer the
convenience of comprehensive anywhere anytime banking, using
GPRS, WAP or SMS. It supports a wide range of mobile devices and
mobile browsers. Banking customers can query on account balances
and make fund transfers. Banks can also proactively send timely
37

information to customers in a completely secure environment,

whenever a customer-defined event occurs. The mobile banking
solutions self-service capabilities empower customers to manage
their banking activities better. The solution also addresses data
transmission and storage related security concerns adequately,
delivering a truly streamlined customer experience.

Mobile Commerce
Mobile Commerce can be defined as any transaction, involving the
transfer of ownership or rights to use goods and services, which is
initiated and/or completed by using mobile access to computer mediated
networks with the help of an electronic device
38

Finacle M-Commerce solution converts the ubiquitous mobile phone into

a secure proxy for bank accounts, credit and debit cards, enabling a
comprehensive

transactional

experience,

secured

by

robust

authentication mechanism. A simple one-time registration process

initiated through the POS terminal at the merchant location, the bank's
ATM or Internet banking site ensures ease a adoption for customers.
Finacle offers e-commerce capabilities on its mobile and Internet
platforms. Dealers and consumers can benefit from Finacle solution for
mobile banking transactions at the point of sale, with support for mobile
and / or Internet banking. The solution provides out-of-the-box support
for dealers and customer-initiated payments, and resolution. Finacle
solution for mobile banking can serve consumers in retail and
institutional, including the customer segment of small banks.

Security Aspects of Mobile Banking

A Multifaceted Approach to Mobile Security
The mobile channel emerged as the perfect solution for financial
institutions in search of a way to extend reach, improve customer
convenience and lower operating costs. That being said, mobile banking
may have enhanced customer experience and supported financial
39

inclusion, but it has been dogged by security issues all along. Service
providers have to safeguard transactions at three levels authenticate
user identity, protect devices against replication and secure data
transmission. While various technologies such as user and mobile PIN,
data encryption, limited on-device data storage and multi-factor
authentication improved the safety of mobile transactions, they could not
be universally applied and hence, excluded a huge number of older or
less powerful devices.
Four risk factors, viz., Anonymity, Elusiveness, Rapidity and Poor
Oversight are very crucial in M-Banking. Anonymity is the risk of not
knowing a customers actual identity. Elusiveness is the ability to
disguise mobile transaction totals, origins and destinations. Rapidity is
the speed with which illicit transactions can occur. Poor oversight identity
refers to the level of regulation of service providers. Any model of mobile
financial service needs to address these issues. Mobile Banking reduces
costs to the provider and makes the banking experience more
convenient and more cost-effective to the customer. Yet, the facility of
banking from remote locations without face to face interaction between
the bank and customer increases the risk of money laundering. As such
the M-Banking service providers need to establish the best ways to open
accounts and to monitor transactions subsequently in terms of Know
Your Customer (KYC) requirements.
With mobile banking morphing into the much larger mobile-payment,
involving any number of third parties, the risks got bigger, extending as
far as money laundering and terror financing. M-payments, which can be
classified as proximity or non-proximity transactions depending on
whether the paying and receiving devices are physically located near
each other or not, present different security issues. One of the key
40

concerns of regulatory authorities, banks and other service providers is

to safeguard stolen instruments so that they cannot be used to
perpetrate identity or financial fraud. They are addressing this threat
through the use of firmware such as security-enhanced SIM or memory
cards. Other measures include better KYC regulation, compliance and
identity verification by the banks agents.
Although mobile security is making progress, there isnt yet a "one size
fits all" miracle solution mainly because of enormous device diversity.
Hence, banks and other financial participants in the mobile transactions
chain will have to pursue a multi-pronged approach, at least for some
time. Moreover, they cannot go it alone, and will need to collaborate with
regulators, telecom operators and technology vendors to ensure that
transactions

are

secured

from

the

regulatory,

networking

and

infrastructure angles.
Most experts advise against performing any large transactions over
mobile banking, which is good advice. However, it is equally important to
use an alphanumeric password and to keep your PIN safe. Change your
password often, and do not use your pets' names, your child's name, or
any birthdays. This advice applies to all passwords, not just those used
for mobile banking. Though you are logging on to a secure server at the
bank through your cell phone, you need to do your part to protect your
information. For this reason, many banks are now sending one-time use
passwords for an extra step in security.
A one-time use password might be sent to a cell phone or other device
when you wish to log into your account. You will then usually need to
enter both the password you have already set, along with the one-time
use password, within a certain period of time. The one-time use
41

password expires, naturally, after it is used once or after a time limit has
passed. Using two passwords increases the security of the account, an
important concern with mobile banking.

Mobile Banking Scope and Opportunities

Over the past few years, mobile telephony has been one of the fastest
growing markets in the world, especially in Asian countries such as
China, Indonesia, India and the Philippines. The Indian Mobile sector
has crossed 50 crore subscriber base as on 30 th November, 2009 with
easily affordable handsets, lower tariffs and better network coverage. MBanking is fast emerging as a major driver for the adoption of wireless
technology in rural areas in developing countries.

42

The fact that mobile phones is the easiest to operate among the
alternative banking channels and its proliferation is much faster than that
of computers, has made it an effective channel for conducting mass
banking. In the more affluent economies, a good infrastructure for a
cashless environment is already prevalent and most people have bank
accounts and access to both debit and credit facilities.
On the contrary in the developing economies, a very large population
segment remains unbanked and relies heavily on cash based
transactions for all their day to day expenses.
Even those who hold an account with the bank prefer carrying cash, as
the alternative mechanisms are still not widely available and reliable.
These factors are major incentives in the developing countries to move
the people away from cash with introduction of low cost solutions like
mobile payments.

Future and Growth of Mobile Banking

Mobile banking is growing very rapidly and will soon become the main
channel for banks to be in touch with their customers. While the largest
banks in the financial and technical resources to move into the mobile
channel, most mid-tier and small banks are not obliged to innovation and
ways to discover this. Many of the largest banks have mobile banking
services, which capture the customer and generate positive operating
results. Recent months have led to a stream of messages from the
mobile banking mobile banking provider, the answer to growing demand
43

from its customers and the recognition of its strong position in mobile
banking vendor ecosystem.
With the growing interest in mobile banking software to use banks,
mobile banking software with a clear conscience that their mobile
banking providers will be able to key engine of mobile banking to start.
Latest news from the mobile banking technology aims at the beginning
of an evolutionary strategy for the integration of mobile banking deeper
into the banking infrastructure.
In developing software for mobile banking and payments throughout the
year would radically change the appropriate mobile banking vendor
ecosystem. Mobile banking is a degree of maturity reached the
measures in the eyes of mobile banking reaches the manufacturer.
Mobile banking is important for providers of mobile banking from the
perspective of both existing customers and new deals. The customers
are anxious to try and use mobile banking capabilities for a large part,
because the top banks competitive entry in the geographic markets are
the smaller banks.
Pure-play mobile banking vendors have a hard time penetrating these
smaller institutions, because the core banking technology vendors play
the role of gatekeeper. It is quite possible that the core banking vendors
will be as important players in the vendor ecosystem for mobile banking.
The Technology Innovation can, core banking providers are not
trendsetters, but they are trendsetters. Their familiarity with the core
banking operations of these suppliers exceed to see through the hype in
terms of mobile banking software for banks to act and to wait until the
market is so far matured in convergent innovation and profitability.
44

Conclusion
While it may be argued that M-Banking may not be the most necessary
factor for improved banking services, yet its utility in supplementing the
traditional banking services through easy and cost effective alternative
channel to bring in significant improvement in the state of financial
inclusion in the country need no overemphasis.
Mobile Banking, as has been demonstrated, has gained non-negligible
relevance for banks today. Mobile banking technology vendors have a
major role in helping mid-tier and small institutions take advantage of
playing this nascent channel.

45

Developments in the banking sector, e.g. increased competition on

account of technological developments coupled with the process of
globalization have produced new challenges for banks.
Its main contribution, however, can be expected to take place in the
strategic field as it is all set to become an instrument of differentiation.
Many banks recognize this threat and are already taking preventive
measures by introducing mobile services. The foremost significance of
Mobile Banking would therefore be of a defensive nature. Instead of
providing a positive differentiation, Mobile Banking would be employed to
thwart negative differentiation vis--vis rivals.
Mobile Banking seems to possess the potential to become one of the
widely spread and accepted application in the field of Mobile Commerce,
particularly in the backdrop of its high acceptance across commercially
important sections of the society. We may expect to see Mobile Banking
go into the footsteps of Online Banking, i.e. to become a standard
service offered by every bank worth its name.
Taking advantage of recent technological advances in the field of
mobility, enabling the mobile banking solution for banks to innovate in
providing new services easily, with improved time to market, the
experience of the created user is successful, safe and very practical.
Mobile usage, today, transcends all classes of the society and is
expanding at an exponential rate. Given its mass appeal, mobile
payments shall definitely be accepted with grater ease in comparison to
any other form of e-money. In the time to come we will see more and
more banks offering such services in India which will definitely make our
life easier.

46

Suggestions

Mobile banking is certainly going to be the next wave of banking;

however there are certain hurdles which need to be overcome at least
from the Indian perspective.
Firstly, cheaper GRPS plan and availability of GPRS service from the
network providers across all geographies whether urban or rural.
Secondly, Guidelines need to be put by the RBI, where the threshold
of transaction can be limited.
47

 The use of the mobile phone for bringing about much-needed (and
talked about) financial inclusion is a critical social need with good
economics for all stakeholders. Nearly half of the rural and farmer
households have no formal access to credit or financial services. It is
these missing markets that banks want to bring under their fold. It is
clear that banks by themselves can't roll out such services across the
country.
The use of mobile for banking i.e., towards payments and settlements
(remittances) would help in financial inclusion. The use of non banks
to accept cash for topping up the accounts can only make financial
inclusion successful till such time all the payments and settlements
happen electronically. However, the use of non banks is not flexible
and has to satisfy various guidelines issued by the regulator from time
to time.
The registration process needs to be made simpler and on par with
other channels. While one can initiate registration by ATM, mobile or
telephone, its fulfillment can be done by the very means that other
secure channels employ currently, rather than requiring physical
presence. The absence of a simple registration process will grossly
handicap the adoption of m-banking without adding to safety and
security.
Multiple PIN numbers to be remembered for each delivery channel
(product) are an obstacle to adoption. As it is, everyone has to
remember a plethora of numbers, be their phone, PIN, PAN short
codes, passwords, user ids for mobile, credit and debit cards, internet
and telephone banking, internet mail, commerce and social
networking, ATM, etc. Some banks do have the same PIN for internet
48

and telephone banking. This is a good start. It is, therefore, imperative

to have a minimum number of PIN numbers (if not just one) for an
account holder without prejudicing security.
Lastly, the next important factor which might the take the mobile
banking to the next level would be making micro payments through
mobile, where small amounts can be transferred through mobile
phones from ones bank account to any other bank account, otherwise
it does not make any sense in the future,
Other services like SMS based mobile alerts will remain unexcited in the
coming days for customers.

Bibliography
Interview taken via email with Mr. Tarun Jain, Brach Manager, ICICI
Bank (Khar West) copy of email attached for reference
Opinion taken from the Finacle Team (Mobile Banking Division),
Infosys Technologies
Books Referred:
Banking with Technology RK Uppal New Century Publications
2008
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Newspapers and Magazines:

Professional Banker Magazine Mobile Phone Banking Dr. Ashish
Srivastava - IUP Publications Issue March 2010
Mint The Wall Street Journal 29th June, 2008
Websites Visited:
http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=1365
http://www.infosys.com/finacle/solutions/solutions_mobile.asp
http://www.livemint.com/2008/06/29134925/SBI-plans-Mbanking-rollout-i.html
http://www.global-innovation.net/team/tiwari/PDF/Working_Paper_37.pdf
http://www.worldjute.com/mbank.html

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