download.

jpg

Human Resource Management Mobile Banking: A Study of Airtel Money

3/18/2013 NMIMS Mumbai DIV D

SAHIL GANDHI ANURAG RAO ELLINA RATH VISHAL SINGH SRIJAN SRIVASTAVA DEV SURTI

D016 D050 D051 D057 D058 D059

Contents Abstract: 3 1. Introduction. 4

1.1 Industry. 4 1.2 2. Company: Overview, Vision and Mission. 5 Organizational Strategies and Business processes: 6

2.1 Organizational Strategies. 6 2.2 3. Business Processes. 6 Problem Statement and Requirement analysis. 9

3.1 Problem statement. 9 3.2 Requirement Analysis. 9 4. Business Solutions. 10 A. B. C. D. E. F. G. H. I. 5. Attributes and characteristics: 10 Value to Stakeholders: 12 Infrastructure Requirement: 13 Delivering Value Proposition: 14 Cost- Benefit analysis: 15 Swot Analysis and PEST Analysis: 16 Competition analysis: 21 Challenges: 22 Ethical Issues: 23 Actual Scenarios. 24

5.1 Interbank Mobile Banking Service. 24 5.2 M-Pesa. 25 5.3 Money on Mobile. 25 5.4 Future scope. 26 5.5 Conclusion. 28 References: 29 Annexure: 30

Abstract:
The increased usage of mobile phones in todays age provides tremendous opportunities for the growth of mobile banking. Mobile commerce blatantly stands as a natural successor to the electronic commerce and a natural evolution that facilitates this successor is the scheme of mobile

payments. A mobile payment may be defined as where a mobile device is used to initiate, authorize and confirm an exchange of financial value in return for goods and services. Mobile devices may include mobile phones, PDAs, wireless tablets and any other device that connect to mobile telecommunication network and make it possible for payments to be made. The realization of mobile payments will make possible new and unforeseen ways of convenience and commerce. It can become a compliment to cash, cheques, credit cards and debit cards. It can also be used for payment of bills (especially utilities and insurance premiums) with access to account-based payment instruments such as electronic funds transfer, Internet banking payments, direct debit and electronic bill presentment. With Indian telecom operators working on offering services like money transaction over a mobile, it is a near possibility for a bank to offer phone based credit systems. This will make credit cards redundant and also aid in checking credit card fraud apart from offering enhanced customer convenience. The use of mobile technologies is thus a win-win proposition for both the banks and the banks customers. Mobile banking service is primarily available over SMS (Short Messaging Service) or through GPRS (General Packet Radio Service) or sometimes through USSD (Unstructured Supplementary Service Data). The services available range from funds transfer, balance enquiry services, request services, utility bill payments to merchant payment. To enable wide coverage of mobile banking services, major telecoms and banks are entering into deals and MOUs. The telecom companies will act as Business correspondents and provide a range of financial products and services offered by the bank through the mobile operators retail outlets. A mobile account will have to be opened by every user for doing mobile banking transactions. The present focus of the banks and telecom companies will be on the unorganized sector like migrant labourers who need money remittance services. A remitter in one city of India can send money back to his home in another city or village either by account transfer or instant money transfer module. The account transfer method is where money is transferred from the account of the remitter to that of the beneficiary when they both have accounts with the same bank. The second method is by the instant money transfer module, whereby, the remitter with an account with a particular bank remits money to the beneficiary who has a registered mobile connection but does not have a bank account.

1.

Introduction

1.1 Industry
Based on a recent analysis by the Boston consulting Group, $350 billion in payment and banking transactions could flow through mobile phones by 2015 compared with about $235 billion of total credit and debit card transactions today. The analysis depends on various factors such as the willingness of banks, telecom operators, regulators, and consumers collectively to embrace this form of payment. Recently, the transaction limit for mobile wallet card has been increased to INR 50k and Mobile Banking in India is all set to generate free based income of 20,250 crore over the next five years, mainly driven by lower transaction cost, favourable regulatory environment and UID project. As more and more mobile money initiatives take shape, the fee income that is projected in India from the mobile payment and banking transactions could exceed $4.5 billion by 2015. The two metamarkets of rural and urban make up the Mobile Banking market. Over the next five years, unbanked rural markets could begin to rival the urban markets in size. In urban areas, many consumers still rely on cash for 90 to 95 percent of small ticket transactions even when they have bank accounts. Mobile payments can prove to be a tremendous convenience for these consumers. According to NPCI (National Payments Corporation of India) data, the total number of mobile banking transactions has increased to 86,884 amounting to Rs 33.79 crore in November 2012 from 15,759 transactions amounting to Rs 5.30 crore in December 2011. The banking industry averages about 3 lakh transactions per day through mobile banking. For the countrys largest bank State Bank of India, of its total customer base of 200 million, about 5.2 million have registered for its mobile banking services. Two of the countrys largest private sector banks ICICI Bank and HDFC Bank have also launched services on its mobile banking platform.

While more and more customer segment gets comfortable with using mobile banking, the consumers in the 18-32 year age bracket are more likely to adopt mobile banking than others. The growing popularity of mobile banking, particularly for small-value transactions, prompted the RBI to raise the limit for end-to-end encryption from Rs 1,000 to Rs 5,000 and remove the transaction limit of Rs 50,000 per customer per day for funds transfer and for purchase of goods and services. According to a KPMG report, with mobile Internet usage is expected to exceed desktop Internet use by 2014, mobile banking services will become even more important. With the ecosystem players i.e operators, banks and mobile manufacturers coming together and launching pilot services, the mobile banking industry is ready for a takeoff. However, a questions looms around the issue that whether these services plan to keep consumers at the center or is it just a proof of concepts? This project aims to answer this question by studying and analysing the Airtel money service launched by Airtel.

1.2 Company: Overview, Vision and Mission

Bharti Airtel Limited is a leading integrated telecommunications company with operations in 20 countries across Asia and Africa. Headquartered in New Delhi, the company ranks amongst the top 5 mobile service providers globally in terms of subscribers. In India, the company's product offerings include 2G, 3G and 4G services, fixed line, high speed broadband through DSL, IPTV, DTH, enterprise services including national & international long distance services to carriers. In the rest of the geographies, it offers 2G, 3G mobile services. Bharti Airtel had over 246 million customers across its operations at the end of February 2012. Bharti Airtel offers GSM mobile services in all the 22-telecom circles of India and is the largest mobile service provider in the country, based on the number of customers. Ranked among the six best performing technology companies in the world by Business Week, Bharti Airtel had over 223 million customers across its operations at the end of April 2011.

Airtel M Commerce Services Limited (AMSL) is a fully owned subsidiary of Bharti Airtel Limited. AMSL's flagship product is semi-closed wallet - launched under the brand name 'Airtel Money'. Semi-closed wallet is a prepaid payment instruments that is redeemable at a group of clearlyidentified merchant locations/ establishments, which contract specifically with the issuer (AMSL is the issuer in this case) to accept the payment instrument. In 2010, airtel M Commerce Services Limited (a wholly owned subsidiary of Bharti Airtel Limited) was granted the license to use the Semi Closed Wallet by the Reserve Bank of India. The company has designed a secure and robust backend system, to offer India's first mobile based wallet service - airtel money. These instruments do not permit cash withdrawal or redemption by the customer. Under the Airtel Money service launched, users can load cash on their mobile devices and use it to pay utility bills and recharges, shop at merchant outlets and make online transactions. It is available across 300 key cities in India as a fast, simple and secure service. It has now become the first mobile based service to offer customers the convenience of instant money transfer from an airtel money wallet to another airtel money wallet and bank accounts. The service has made cashless payments a reality for customers across cities. With a strong eco system of partnerships, Airtel money is now accepted in over 2200 merchant establishments across Delhi NCR alone. Today, a mobile wallet has the potential to cause large scale digitisation and/ or virtualisation of cash transactions. Ubiquitous mobile connectivity, wide distribution network, large scale customer service infrastructure and robust micro transaction processing are some of the key capabilities that Airtel has built over the years. Airtel has leveraged these capabilities to create a state-ofthe-art payments infrastructure across the country.

Vision:
To live an empowered, happy and sustainable life, millions need to be brought into digipresence. Ensure digital presence through far-reaching, even and efficient network coverage and

deep internet penetration Airtel through its Mobile, digital TV and Broadband platforms facilitates financial services, education and health. Providing financial, education and health services through mCommerce, mEducation and mHealth. Airtel leverages its reach and accessibility to foster sustainable community development. Enable community development and quality education through the Bharti Foundation, and regional community service.

Mission: Including and empowering millions through Sustainable social and economic empowerment

2. Organizational Strategies and Business processes:

2.1 Organizational Strategies
Mobile banking and payment market is expected to grow to around 900 million users and more than $ 1 trillion in transactional value by 2015. Across the world, there are around 5 billion mobile phones whereas there are only 2 billion bank accounts. Hence, mobile banking is the way forward for the commercial banks. With the development of mobile technologies in late 2000s, banks have launched mobile payment applications or wallets, but with its inherent challenges on legal and business front. The banks have to understand that collaboration with mobile network providers will help them in generating business opportunities. The same concept should be understood by the service providers too. Here are some of the organizational strategies adopted by the banks: Mobile banking: Using a mobile phone to access a bank account and make payments provides more convenience to customers. Banks should actively invest and expand this channel in future, in particular for corporate treasurers; Mobile commerce: Using a mobile phone to buy products. This is driven by ecommerce companies looking to uplift their product sales and generate revenue from advertising. M-commerce provides great opportunity as financial services are provided as a part of shopping experience. Efficient payment mechanisms can greatly improve the shopping experience. Mobile money transfers: Using a mobile phone to send money to someone. These services are currently run by the mobile network operators but only on a domestic basis. These services can be extended to international person-to-person remittances in developed countries. This can provide a basic payments service to the under banked in a developing country by converting cash to electronic transactions. Telcos should form joint ventures with banks to provide global money transfer solutions.

2.2 Business Processes

The current model used by the telecom companies is a sms based model. The data sent by the customers passes through certain encryption processes using Wireless Application Protocol (WAP). WAP is used for communication between digital mobile devices, internet and PDAs. Encryption processes are used for secure transactions between the telcos and the customers. The

Encryption processes are used for secure transactions between the telcos and the customers. The customer needs to enter the password and some other reference codes to complete the transaction. However these encryption systems are not good enough to protect the sensitive data of the customers.

Airtel Money has entered in to a strategic alliance with Axis bank for financial inclusion. This partnership, like many such others, will provide payment and financial services to millions of people in India who does not have a bank account. A no-frills savings account of Axis Bank is opened for customers on the airtel money platform called Airtel Money.

SMS based transaction using Mobile networks

A customer can add balance to the account by online or mobile recharge. This amount is credited to a no-frills account registered with Axis bank.

 While making payment the customers to send a message to the Airtel money services using the biller nick name. The sms routes through the network and passes through several encryption processes. The customer is prompted for password and reference code before confirming the payment. The data is send across to the bank server where it again passes through the banks firewall.

The transaction is completed as the amount is debited from the bank account of that customer.

Services offered by Airtel Money:

Risks in the present business process:

3. Problem Statement and Requirement analysis

3.1 Problem statement
Given the security issues and the reachability challenges especially in rural India, how Airtel Money could increase the number of mobile transactions.

3.2 Requirement Analysis

AS-IS 1. People Users/Customers o People are hesitant in using the mobile services such as m- payments, money transfer, etc offered by the banks and other service providers because they find them too complex and unsecured o Fear of bank account hacking due to security issues o Skepticism about success of mobile transactions o Privacy issues Banks/Service providers o Integration of processes to ensure security and privacy o Technological challenges leads to lower customer satisfaction and thus loss of business for the banks/service providers

2. Process Security issues with WAP (Wireless Application Protocol)

The encryption process used currently is not good enough for the protection of sensitive data between bank and customer

SMS Spoofing attacks Virus Attacks in mobile banking Risk with Digital Signature

3. Technology Lack of proper mobile service infrastructure in rural India Non-compatibility of mobile handsets Server overloads at the banks Mobile Network issues: low speed, unreliable connection, and high cost

TO-BE 1. People Make m-payment application user friendly with little or no learning curve for the customers Strong Anti-hacking mechanisms to ensure security and privacy

Speedy and successful transactions will increase the customer satisfaction and hence increase m-commerce transactions

2. Process Increased security by using public key infrastructure security, biometrics and passwords integrated into the mobile payment solution architectures End to End process control using multiple security layers to prevent hacking and entry of viruses Strengthened SMS banking as it can be used by the small scale traders

3. Technology Sharing of tower infrastructure will increase the reach and strengthen the network facilities Mobile connections with high speed available at low cost Availability of low cost 2G/3G enabled mobile handsets

4. Business Solutions
A. Attributes and characteristics:

Convenient, flexible, affordable and proximity to the poor are four characteristics crucial for the success of mobile banking services. Security, Privacy and Trust

Mobile banking platforms and applications offer unique security risks and challenges, but many financial institutions fail to adequately address those risks upfront. M-transactions should not compromise with the privacy of customer data. Mobile payments have to be as anonymous as cash transactions. The system should be foolproof, resistant to attacks from hackers and terrorists. This may be provided using public key infrastructure security, biometrics and passwords integrated into the mobile payment solution architectures. So to make mobile banking platform secure the main requirements are:

1. Customer awareness training: customers should be made to understand the risks and be safe about their behavior, so that they can protect themselves as they begin to use these mobile devices . 2. Encryption and active session management monitoring: Encryption algorithm should be sophisticated. 3. Use of biometrics : Use of fingerprints and facial recognition can help make the transaction more secure. 4. Apps: For institutions launching mobile apps, it's important to monitor app stores to ensure customers are downloading the right apps.

Interoperability:

Development should be based on standards and open technologies that allow one implemented system to interact with other systems.

Partnership

Partnership should be made with other banks and technological firms to understand the requirements and build a convenient and fully secure network for mobile banking. Current Partners and Resources Bank Partner Axis Bank: Axis bank has provided access to its NEFT portal to Airtel money allowing it to offer remittance services to its customers. Technology Partner - Infosys: Infosys offers its WalletEdge, the mobile commerce platform of Infosys to support cashless payment and settlement needs of Airtel money customers. It facilitates creation of unique ecosystem of merchants, financial and retail institutions to offer wide spectrum of payment options. The platform will enable end customers to pay bills recharge accounts, shop at over 7000+ merchant outlets, transact online through multiple channels including mobile phones, IVRs, ATMs and POS. The platform is secure and scalable.

Channel partner Distributors and Retailers of Airtel Communications:

1. Key activities-Distributor: Whole selling of Airtel money e-float, liquidity management, training and logistics support to retailers through their FOS network. 2. Key activities-Retailers: Retailing of Airtel money e-float, customer awareness and acquisition, resolving customer queries

Other partners Airtel (parent company): i. Made available its vast existing distribution channel. Association with brand Airtel helps Airtel money to gain brand recognition and trust.

Reach Out to Potential Mobile Banking Customers

Proximity to the customer is vital, and sales teams must proactively visit potential clients at their homes or workplaces, offering convenience and free credit upon purchasing mobile banking services. This strategy can be supported by a vast distribution is expensive, but rewarding in the long run owing to volume-based competition in mobile banking sector.

Consumer awareness

Being a product which has never been experienced by mass consumers in India, one of the key ingredients required for the success of Airtel money is consumer awareness. Airtel had understood this need early and launched rigorous marketing and media campaigns right from the start. Airtel money commercials were on air in most TV channels. The tagline used was Kyuki baat sirf paiso ke nahe hai (Its not just about money) which reflects their intention to focus on the value offered to the customers through this product. 1. On the ground too Airtel has been active in installing marketing collaterals right in time. Most of the agents received the boards, brochures, flipcharts and other collaterals within a reasonable interval. 2. Airtel had deployed its trainers to visit distributor locations who would train the field staff and distributor about the concept. Distributor staff then has to convey this knowledge to individual trainers. This step was made with an intention to enable every retailer to explain this product to the customers who have experience any similar product in past.

Money Transfer services

To increase the mobile banking inclusion in rural area banking institutes should promote money transfer services in remote villages, similar to one initiated by Vodafone M-PESA.

B.

Value to Stakeholders:

Convenience: From product design to channel development, all activities of Airtel money have been designed with customer convenience in mind. It starts right from the customer registration. Easy Registration : The entry level express account allows a customer to get enrolled through his mobile with an Airtel connection. It is not required to visit any place or execute any paperwork for enrolment. It takes 2-3 minutes and customer is ready to use his/her express account. Please refer annexure I for details of the process. Easy balance recharge : The next step for a customer is to load cash into his Airtel money account. Customers with access to online banking again can easily load their account online through Airtel moneys web portal. If in case customer does not have access to internet banking he/she can visit the nearest Airtel money agent and get e-load just like airtime. Please refer annexure I for the details of the process.

 Easy transactions : After their account has been loaded with cash customers will be able to use this account pay their bills, recharge their talk time, transfers money, and shop with few clicks on their mobile. Please refer annexure I for the detail of the process.

Accessibility : Airtel money offering includes three basic services viz. registration, loading cash and spending cash. Airtel money has developed its operational model to enable its customers to access these services with minimal efforts. Airtel money has deployed a large number of agent points in all the major cities of India which offer registration and cash in service. Airtel claims at have enrolled 7000 plus merchant points in 300 cities across India where customers can shop with their e-cash. Apart from shopping other services like mobile recharge, money transfer, and bill payments can be availed directly through customers mobile. Usability : Airtel money uses a very easy to use simple menu with option to use USSD strings too. The menu is self-explanatory and` does not require any special skill to operate. The security is provided by using a personal m-PIN similar to ATM pins most customers are already aware about. Novelty : It is the first full featured MNO led wallet based service in India. Apart from serving as an easy alternative to cash/card payment options, Airtel Money has now become the first mobile based service to offer customers the convenience of instant money transfer from an Airtel money wallet to another Airtel money wallet and bank accounts

C.

Infrastructure Requirement:
Channel recruitment Along with the mass media campaign, Airtel money has rapidly built up the infrastructure to offer these services throughout India. The parent company of Airtel already had distribution network throughout India. Airtel money has utilised this existing infrastructure to offer their services. This allowed it to rapidly build up reach in all key cities of India. The distributors of Airtel were asked to sign up for distribution of Airtel money too. They in turn motivated their key retailers to sign up for Airtel money. The result has been that Airtel money has been fairly successful in rapidly developing a large network of retail agents and distributors, but most of these have been coerced into the system. The result of these developments is well evident on the fields. Among all the Airtel money agents contacted for this study, most of them had less than 10 customers per agent with a negligible transaction volume.

Operational support The operations team working for Airtel money is not visible on field. As per the field study conducted for this research, majority of the retailers enrolled for Airtel money have never met any of their staff. They have only been in touch with the FOS from the distributor who visits on a regular basis for their Airtel airtime business. These FOS who are the staff of distributor though trained on Airtel money are often not able to convince the retailers with their information. Further these agents have no direct contact in Airtel money to clarify their doubts about the service. Thus the retailers do not completely understand the service and in most case also refrain from pushing it to their customers.

D.

Delivering Value Proposition:

Channel Structure v Territory Sales Manage v Distributor The distributors for Airtel Money and Airtel are common. Mandatory for all distributors to offer Airtel Money 5-10 distributors per district Separate structure for Airtel Money from Airtel at this level One TSM handles 5-10 distributors

v Feet on Street Employed by distributors to service the retailers. Functions include visiting retailers, communicating company policies and resolving retailer grievances. v Retailer Recruited from the existing Airtel retailer. One FOS handles about 10-20 retailers

A typical distributor has about 250 retailers. An average of only 10% has agreed to retail Airtel Money. The reasons are low margins and lack of information. v Customer Customer uptake at present is low. a typical retailer has on an average 10 customer, in many cases even less.

Customer relations The customer relationship is shaped by the service provider meeting the customer expectations. At this stage the customers expect the full rage of services to be available, assistance in terms of knowledge sharing about the products and services, facilitation of transactions and resolution of queries. As mentioned earlier, most of the services are not available leading to disappointment to the customers. The retailers feel that they have received very basic level of training and it does not equip them to handle the customer queries concerning the products. The unfavourable commission structure, when compared to airtime sales, adversely affects the motivation of the retailers to build strong customer relation. The commission structure has been dealt in detail in later slides. Low commission is also the reason the distributors shy away from following up with retailers in building relationships with the customers. The visit by the Airtel money officials lasted around the time of launch. Since then there has been no follow up visits. This also has affected the motivation of the channel in building strong customer relationships. The ATL marketing by Airtel Money created the initial buzz, but it could not translate into mutually beneficial customer relation due to the above factors. This has led to the current status wherein even the enquiries about Airtel Money have stopped.

E.

Cost- Benefit analysis:

Profitability 1. Robust Inclusivity Framework : It enable banks to include its various customer segments, ranging from NHW1 to specific unbanked community, surmounting the complexity of diverse location and dissimilar mobile devices. 2. Robust Security : The solution offers extensive application security features like encryption, referral URL check and session management to provide a robust security framework. 3. Cost Savings: Solution present bank with the advantages of reduced integration by leveraging common interface messages, maintenance and deployment cost. This translates in to significant cost savings without bank having to compromise on features or range of devices supported. 4. Customer Delight : It allows the banks to offer convenience of anywhere anytime banking using GPRS, WAP or SMS.

F.

Swot Analysis and PEST Analysis:

F.1 SWOT analysis

Strength Strong parent company Brand Name : As Airtel is a huge brand in India, this new service had instant recognition amongst the customer.

 Experience from earlier deployment : Airtel Money is also functioning in some African countries (like Kenya, Ghana). Experience earned from those countries will help Airtel Money to function better in India Ability to face Initial Financial Hiccups : Airtel Money have a strong financial backing of the parent company because of which it will be easier to face initial financial hiccups. Marketing Drive : Airtels strong financial backing helped Airtel Money to launch an extensive marketing campaign across the country Support of existing channel : Airtel Communication have a very strong channel, which was instrumentals in quick deployment and pan India launch of Airtel Money

Product Suite Airtel Money offers a wide range of products and also have multiple billers which makes the product suite very attractive Easy Adoption : Signing up for the basic offering (express account) is very easy. This will help the customer to experiment with the product without going through the hassle of any documentation. Easy Graduation : Once the customer starts liking the Airtel money service then he can move to the next level account which is the power account. The documentation needed for this is also very simple. Easy to use customer interface : Airtel uses very simple menu based technology Processes: Quick and simple Agent On-boarding process is very quick and involves simple documentation. This makes the agent roll-out swift and effortless Cash In : Similar to pre paid mobile recharges, time taken less than one minute Customer Initiated Processes : All the process are menu driven, easy to understand, quick and secured via mPIN Technology No Glitches: Technology used by Airtel Money is steady. Retailers have not experienced any server downtime till now. Though it might happen once the volumes start coming in. Strong technology partner * : Airtel Money has a very strong technology partner, Infosys. Proven technology : Airtel Money uses USSD technology which is real time, easy tom operate and sends confirmation SMS after each transaction Weakness

Channel conflict For a new customer, airtime recharge is the service which s/he uses first on Airtel Money because it is low value. It has potential to get in conflict with airtime channel, which can act as a big hurdle initially until other services (offered by Airtel Money) pick up. Commission: Airtels airtime recharge offers a commission of 2.5% to its retailers while e-money (return 0.5%) Roll-out

 Airtels extensive marketing campaign created buzz all over the country but at that time field level operations were still at nascent stage. If the marketing campaign would have started once the operation were running smoothly it would have attracted much more number of clients. Retailer selection : Many airtime retailers were forced by distributors and Airtel field staff to become Airtel Money retailers. Most of such retailers may have joined this business just for the sake of relationships they have and may not be interested enough to invest their time, money and energy in this business Liquidity Management Distributor to Retailer : As the turnover time of money invested in Airtel Money is high, distributors are not locking-in money. When retailer asks for value from the distributor, he need to first contact Airtel for the value and then he transmits the same to retailer. This process often takes 2-3 days Weakness

Low Customer Trust False Promise: Customers signed up for this service because of the services advertised in the marketing campaign like electricity bill payments. But majority of the services promised are still not active on the Airtel Money platform. This results in lost of trust of the customers. Mysterious Deductions: According to customers, Airtel communication has a history of mysterious deductions from their balance. Because of this most of the customer prefer to keep low balances, this trend will most likely extend to Airtel Money Customer Segmentation Marketing campaign focussed on upper and upper middle class which already have strong options for bill payments and money transfers Communication Gap Company to Retailer : Existing airtime channel is being utilised to service the Airtel Money retailers. For their staff Airtel money business is subsidiary, so they invest lesser time and energy in the nitty-gritty's of Airtel Money. Because of this details of product suite, product offerings, commissions and customer pricing are not known to the retailers. Moreover, Airtel Money do not provide any retailer manual which can cover all the basic details. Retailers are trained either by Distributors FOS or by Airtel Communications staff in one of their daily visits. This training is not sufficient to transfer all the required knowledge to the retailer. Due lack of effective Retailer Training, retailer is not able to give complete/ correct information to the customer Opportunities

Moving from Wallet to Bank Account Presently, customers dont have an option to withdraw their money at a retailer point (except by NEFT transfer and withdrawal from a bank). Withdrawal from a retail point can be a major opportunity for Airtel Money. Signing up Billers and Merchants Airtel has a great opportunity if they tie-up with some big retail chains and online portals (like Big Bazaar, Easy Day, Future Bazaar, Flipkart, Yebhi.com etc). By doing so, it would drive transaction volumes and hence would ensure overall profitability of business model. Opportunity to penetrate Semi-Urban/ Rural space

 Presently, Airtels main target segment is upper middle class and higher class in urban areas. Airtel should also try to pioneer opportunities in rural areas. Airtel Money can become a mechanism to remit money for the migrant workers

Smartphone app A smartphone app can be another option which can be considered for convenience of the (upper middle class and higher class) customers. G2P, MFIs, Franchising Continue exploring institutional partnerships with banks/government for government to person payments and with MFIs. Its technology, brand and experience in the building a low cost financial infrastructure can be leveraged by franchising it to interested parties Threat

Assisted Transaction vs. Customer initiated Transaction For low income segment : MicroSave researches shows that low income segment or unskilled (mostly in rural areas) customer prefer assisted transactions over assisted transactions. High income groups have other options (like Internet) to use the same services

High influence of airtime business Airtel money is highly influenced by Airtels core business, if the demand of their core business plummets then it will lead to fall in the demand of Airtel money E-governance infrastructure might be a threat for utility payments In many states, government is investing hugely in E-governance infrastructure where utility payments services are free. While, in Airtel money customer have to pay Rs.10 for each transaction. Airtel communication is benchmark for Airtel Money Retailers and distributors compare Airtel money with normal business of Airtel communication. They use it as a benchmark for various purposes like commissions. (Airtel communications offer a commission of 2.75% on each transaction which is very high as compared to 0.5% offered by Airtel money.)

F.2 PEST Analysis:

Political/Legal factors Development of framework as per RBI guidelines All transactions to be done in terms of national currency only Inter-operatability among the vendors

Economic factors Financial inclusion by increasing reach in rural areas Potential to extend micro-credit by making the model inexpensive

Potential to reach economies of scale

Social factors Convenience for the customer as well as banks Demographic challenges can be overcome through customer training

Technology Factors Technology with well defined complex encryption Improved security due to better encryption technologies Protection of sensitive data between bank and the customer

G.

Competition analysis:

H.

Challenges:
Economic Challenges: The population in rural India is spread across 600,000 villages, each having a low transaction value. Feasibility and Profitability can only be achieved by large volumes, requiring significant initiative from financial institutions. Unlike the hugely successful MPESA of South Africa, whose model has been very successful due to the lack of alternative payments in South Africa, India does possess some infrastructure in the forms of postal payments, reasonable transport and local governments. Therefore, any mobile banking must be inexpensive enough to be attractive for the end-customer over existing methods. Regulatory Challenges : Although the RBI is pretty supportive about mobile banking in India, there are many regulations that are being put into place:

i. ii. iii) Existing Account Holders: The RBI guidelines also state that only those people having a valid bank account would be allowed mobile banking. This limits the full potential of mobile banking to extend micro-credit and bring banking to the large number of customers who dont have any account in banks. Demographic Challenges: India has 18 official languages which are spoken across the country. The state governments also are dictated to correspond in their regional language for official purposes. Additionally, 66 % of the population in India is illiterate, creating difficulties in deployment of mobile banking solutions. For a pan-Indian mobile banking solution, this will be very difficult to overcome. Security issues

Encryption process is currently used for secure data transmission between bank and customers but the main problem is that this encryption process is not good enough for the protection of sensitive data between bank and customer. The reason is that security methods require powerful computing and high storage server capacity. If we take internet banking it is realized that there are powerful computer systems and well defined complex encryption process to

ensure the security. Mobile devices have low computational capacity and hence we are unable to apply complex cryptographic system

I.

Ethical Issues:

Exploitation of consumers It is no secret that regulatory frameworks in third world countries do not always have consumers best interests in mind. In the instance of mobile banking, it would be very easy for mobile banking providers to take advantage of its consumers through fine print and hidden fees, which do not initially manifest themselves. Mobile accounts can also be hacked and can be easily exploited for extracting the information to exploit customers.

5.

Actual Scenarios

5.1 Interbank Mobile Banking Service

The Interbank Mobile Payment Service (IMPS), the payment platform by National Payments Council of India (NPCI) was publicly launched in November 2010. IMPS Funds Transfer offers an instant, 24X7, interbank electronic fund transfer service from one account to another account through mobile phones. IMPS Funds Transfer facilitate customers to use mobile instruments as a channel for accessing their bank accounts and put high interbank fund transfers in a secured manner with immediate confirmation features. In June 2012, IMPS had reported 35.51 million unique customers. It had generated 34,084 transactions, up 8% from 31,553 transactions. The key features of IMPS Funds Transfer are as follows: 1. 2. 3. 4. 5. Instant Funds Transfer 24*7*365 availability Credit and debit confirmations to sender and receiver Simple & Easy to use Fast, inexpensive, safe & secure, accessible

The service only charges a transaction fee of Rs 0.10, per successful transaction from remitter banks. Some issues that the NPCI needs to look into: Lack of awareness about the service : Most Nationalised Banks including The State Bank Of India and private banks such as HDFC Bank, ICICI Bank, Axis Bank and others, offer IMPS based money transfer services. However, they do not widely promote it. Rather, the only modes of transfer most Banks mention on their Netbanking interface, are NEFT and RTGS. Abscence of centralized service: Most participating Banks require customers to download their own mobile banking apps, in order to access IMPS. For example, ICICI Bank customers can only use IMPS through its iMobile app, whereas HDFC Bank customers need the NGPay app to avail the service. The need to remember too many PINs & Passwords: The RBI and banks seem to be so caught up with preventing fraud that theyre losing money putting together services that users will find difficult to use. For banking transactions, customer need to remember an MMID, MPIN, apart from an IPIN for Internet banking, and a PIN number for ATM transactions. So, there needs to be a way of switching over to a single PIN. Integrating IMPS on a single platform: There is immense need to integrate all mobile payment systems under one umbrella. If the payment products are made inter

operable, it could actually lead to more transactions on mobile, and give a boost to mcommerce, as merchant payments can also be integrated.

5.2 M-Pesa
Vodafone Money Transfer, or M-PESA as it is more commonly known, is the worlds most successful money transfer service which started in Kenya in March 2007. It enables millions of people who have access to a mobile phone, but do not have or have only limited access to a bank account, to deposit, withdraw, and transfer money, top-up airtime and make bill payments. Customers can register for the service at an authorised agent, often this is a small mobile phone store or retailer, and then deposit cash in exchange for electronic money which they can send to their family or friends. Once they have registered all transactions are completed securely by entering a PIN number and both parties receive an SMS confirming the amount that has been transferred. The recipient, who does not have to use the same network, receives the electronic money in real-time and then redeems it for cash by visiting another agent.

Opportunity in India
More than half the countrys 1.2bn population does not have a bank account, but it is the worlds second- largest mobile phone market, with more than 900m subscribers. If only a fraction of these customers sign on, India could easily become the worlds mobile money leader. In India there is huge no urban migrant workers who need to send money back to their rural villages, they will be immensely benefited from this service.

Roadblocks
Regulatory Frameworks The Reserve Bank of India has labelled mobile money as a banking solution rather than a telecom product, and therefore strict regulatory framework is needed to be adhered to. Vodafone has collaborated with both HDFC and ICICI to enter this market. If the banks and telcos dont join hands and invest, the service might fail to be attractive to the customers. KYC Documents The customers need to go through a lengthy process of identity verification, which many people in India may struggle to satisfy given the widespread lack of basic documents.

Network of agents This service requires an agent for both, registering the customer and redeeming cash against electronic money. Telecom companies will have to build a network of thousands of such agents right across India to get the service going. This seems to be the biggest challenge in nationwide launch of the service. Complexity in processes Retailers are unable to comprehend the basic processes of deposit, withdrawal, form processing, PIN management, service activation etc. Most are unable to transact and troubleshoot and have not gained enough confidence to sell effectively.

5.3 Money on Mobile

It is an M-wallet service launched by My Mobile Payments Ltd (MMPL) in June 2012. This service, for the Indian market allows mobile phone subscribers to purchase a wide range of goods and services through their phone, instead of paying by cash, cheque, debit or credit cards. Money-onMobile was earlier launched for the B2B market in India in 2010. Then, in the year 2011, the service received RBIs permission to offer the semi-closed m-wallet for the consumer market across India. Now, it has a network of 118,189 retailer touch points across India and a presence in more than 300 cities. The service has about 32.5m subscribers and a business volume of Rs 20 million per day. The service also have 15 mobile operators and 6 satellite television providers on board.

The Money-on-Mobile service operators are independent of the users mobile operator or bank. So, any mobile subscriber can enroll for this service through an SMS or the mobile app-based program. The user can load the device with any amount of money, with a minimum of Rs 20. The virtual money can be used for prepaid mobile recharges and DTH recharge, paying postpaid mobile bills, utility bills, like electricity and gas and also to purchase airline, bus and movie tickets.

RBIs Role
According to RBI guidelines, M-wallet services cannot be permitted to provide a facility to en-cash the balance available in mobile wallets, to the customers as it would amount to bypass banking. Mobile transactions are permitted only if attached to a specific use, such as paying electricity bills or shopping at retail establishments that accept mobile payments. However, encashment is possible if the mobile operators acted as a business correspondent (BC) to a bank.

5.4 Future scope

India has a great prospect to leverage the potential of Mobile banking and build a cash-light economy. In addition to IT edge and relatively dense population, the Government of India is clearly determined to achieve financial inclusion and is taking aggressive steps to see this happen. Rendering financial services to the under-served or poor through a market-led approach is important for the sustainability of financial inclusion. However the lack of feasible business models has impeded market-led approaches being followed at scale. While this is evident across many countries and so does in India, which has seen many pilot projects that are still not sustainable. There are many reforms and enrolment drives which have been undertaken by the Reserve Bank of India (RBI) and the Government of India over the last five years to give drift to the financial inclusion agenda. It can be safely said that the RBI and government policy initiatives and reforms have considerably helped the development of mobile banking systems. Although, there has been an upsurge in the consumer demand for electronic remittance and Electronic Benefit Transfers (EBT), the absence of compelling value-proposition in basic no-frills saving accounts is keeping the customers, the Business Correspondent Network Managers and the Indian banking system from realizing the full potential of the branchless banking model. Mobile Network Operators and Large Corporate Houses Co-Venture: With the popularity of collaborations between mobile network operators (MNOs) and banks live up to the promise of financial inclusion, the RBI and TRAI (Telecom Regulatory Authority of India) have announced that they will harmonize and coordinate with each other to avoid any form of regularity conflict. The RBI is gradually strengthening and revising regulations based on mobile banking working groups 2008 pragmatic perception and recommendations. Some of these encompass measures and procedures for banks to be hand and glove with telecom providers, fortifying the security framework, suggesting common standards for completing transactions etc. TRAI is focusing on dispute settlements and fixing tariff rates for mobile banking access. In the previous year, many large Indian banks have partnered with large mobile network operators (MNOs) and handset vendors to facilitate their connection through mobile channel by providing access to financial services. Few such deals are: 1. State Bank of India with Airtel. 2. ICICI Bank with Vodafone. 3. HDFC Bank with Vodafone. 4. Axis Bank with Idea Cellular. 5. Union Bank with Nokia Money. These MNOs have a distribution network of around 1.0 to 1.5 million retailers across India. This presents a great opportunity to build a nationwide network of agents something that has so far been a challenge due fragmentation in financial inclusion space. Drivers for Mobile Banking

There are various factors, drivers that will empower Indian electronic and mobile banking to grow exponentially in the coming years. Under-banked and Un-Banked Population Out of 600,000 villages in India only one sixth, have banking services. Almost half of the countrys population is unbanked. The large section of the Indian population not just in rural areas but also in many segments of urban markets, offers a large untapped market with a tremendous business potential. Financial inclusion is slowly but surely being seen not just as a social responsibility, but as a potential business model too. Demographic Factors In India the population of youth (between the age of 14-29) is the largest globally, which is around 27% of the total 1.2 billion. Furthermore, adding the age group of 30-44, it goes up to 47%. Apart from the huge size of this segment, they are among those who are the early adopters of latest technology and new services, which presents a huge opportunity for m-banking service providers. Bank Based Services It has been observed that poor people, whether in urban or rural completely understand the need for formal financial services and are well aware of the fact that they are losing money in the informal sector. Similarly, they are very aware of the drawbacks and costs of informal remittance schemes, and they need to send money to family and friends. For doing one transaction from a bank, a poor has to incur significant direct and opportunity cost. The direct cost associated with travelling to a bank branch is not insignificant. As a result there is growing willingness to conduct transactions through agents and to pay for these services. Majority of villagers are willing to pay for services that will reduce their real and opportunity costs. India continues to be a unique market and regulatory environment with intense involvement of the regulator and the government. Hopefully, the rapid outreach will make the model sustainable for all the players, banks, BCNMs and agents and at the same time offer services really needed by the clients. These two ends are, of course, aligned and mutually beneficial. The gradual regulatory evolution to support BCs and banks in their outreach efforts continues and the results are beginning to emerge.

5.5 Conclusion
The major concern among customers was the safety regarding mobile banking services which forms a real obstacle, followed by network problem and insufficient operating guidance. Most of those who frequently use the Mobile Banking services, usually find the service very useful for information based transactions mainly checking account status. This means that the Mobile banking services is not solving the purpose it was originally made for, which is to provide customer convenience and reduce customer visits to the banks. It is strongly believed that ensuring the security of Mobile banking and familiarizing customers with how to use the service will definitely increase the rate of using Mobile banking services. In line with the network operators move in acquiring the latest advanced technology to stay ahead of competitors, banks throughout the world and India have notably been moving in the same direction. Evidently, Mobile banking is considered a new era in banking, in which banks are spending considerable amount of money to have it available to their customers and to cut their operations costs.

References:

 Mobile Banking in India: Practices, Challenges and Security Issues by Vishal Goyal, Dr. U S Pandey and Sanjay Batra [ International Journal of Advanced Trends in Computer Science and Engineering, Volume 1, No. 2 , May June 2012] http://www.nextbigwhat.com/mobile-banking-in-india-report-297/ [ As accessed on 14th March, 2013 13:50] http://www.thehindubusinessline.com/industry-and-economy/banking/more-customers-aretaking-to-mobile-banking/article4232424.ece [ As accessed on 14 th March , 2013 14:00]

Annexure: