PROJECT REPORT ON MOBILE BANKING SUBMITTED IN PARTIAL FULFILMENT OF THE DEGREE OF B.

COM BANKING & INSURANCE AFFILATED TO THE UNIVERSITY OF MUMBAI SUBMITTED BY SHALAKA GODGHATE TYBBI (SEM.V) RESEARCH GUIDE PROF. KOMAL MANSUKHANI

R.K. TALREJA COLLEGE OF ARTS, SCIENCE AND COMMERCE, CENTRE FOR MANAGEMENT COURSES, ULHASNAGAR-421003. 2013~2014

INDEX
SR.NO 1 2 3 4 5 6 7 8 9 10 11 12 13 14 TOPIC INTRODUCTION HISTORY FUNCTION OF MOBILE BANKING OBJECTIVE EVOLUTION OF MOBILE BANKING BENEFITS OF MOBILE BANKING MOBILE BANKING MODELS SERVICES OFFERED UNDER M-BANKING CHALLENGES DEVELOPING M-BANKING CONCEPTS OF M-BANKING RBI GUIDELINES FOR MOBILE BANKING QUESTIONS &ANSWER CONCLUSION BIBLIOGRAPHY PAGE NO.

INTRODUCTION
MOBILE BANKING
Mobile Banking is a kind of financial services where ABC provides customers with information inquiry, transfer and remittance, payment, credit card, roaming remittance, loans to farmer households, time-demand deposits transfer, third-party depository, customized message, account management, personal setting, etc. by making using of wireless networks and mobile phones. ABC launches two versions of Mobile Banking based on different user operation procedures and system interface displays: WAP Smooth Version and 3G Fashion Version. Although financial services provided by the two versions are the same, WAP Smooth Version is designed to enhance access speed, with concise text explanations and links, while 3G Fashion Version aims to boost application experience of users and features vivid pictures and fast dropdown lists and buttons. The strong financial service capacity of ABC Mobile Banking is well illustrated by comprehensive functions and personalized design. The last time that technology had a major impact in helping banks service their customers was with the introduction of the Internet banking. Internet Banking helped give the customer's anytime access to their banks. Customer's could check out their account details, get their bank statements, perform transactions like transferring money to other accounts and pay their bills sitting in the comfort of their homes and offices. However the biggest limitation of Internet banking is the requirement of a PC with an Internet connection, not a big obstacle if we look at the US and the European countries, but definitely a big barrier if we consider most of the developing countries of Asia like China and India. Mobile banking addresses this fundamental limitation of Internet Banking, as it reduces the customer requirement to just a mobile phone. Mobile usage has seen an explosive growth in most of the Asian economies like India, China and Korea. In fact Korea boasts about a 70% mobile penetration rate and with its tech-savvy populace has seen one of the most aggressive rollouts of mobile banking services.

Still, the main reason that Mobile Banking scores over Internet Banking is that it enables Anywhere Banking'. Customers now don't need access to a computer terminal to access their banks, they can now do so on the go when they are waiting for their bus to work, when they are traveling or when they are waiting for their orders to come through in a restaurant. The scale at which Mobile banking has the potential to grow can be gauged by looking at the pace users are getting mobile in these big Asian economies. According to the Cellular Operators' Association of India (COAI) the mobile subscriber base in India hit 40.6 million in the August 2004. In September 2004 it added about 1.85 million more. The explosion as most analysts say, is yet to come as India has about one of the biggest untapped markets. China, which already witnessed the mobile boom, is expected to have about 300 million mobile users by the end of 2004. South Korea is targeted to reach about 42 million mobile users by the end of 2005. All three of these countries have seen gradual roll-out of mobile banking services, the most aggressive being Korea which is now witnessing the roll-out of some of the most advanced services like using mobile phones to pay bills in shops and restaurants. In the world of widespread mobile communications, it's no surprise that mobile phones are increasingly popular with banks as a tool for online risk management, payments, account management, information, marketing and other services. Mobile banking is not just about providing bank customers with real anytime/anywhere banking and substantially decreasing service costs. It makes communication between the bank and its customers truly "point-topoint", paving the way to high service volumes, a multitude of day-to-day mobile banking services, and increasing customer loyalty.

HISTORY
The first mobile banking and payment initiatives was announced during 1999 (the same year that Fundamo deployed their first prototype). The first major deployment was made by a company called Paybox (largely supported financially by Deutsche Bank). The company was founded by two young Germans (Mathias Entemann and Eckart Ortwein) and successfully deployed the solution in Germany, Austria, Sweden, Spain and theUK. At about 2003 more than a million people were registered on Paybox and the company were rated by Gartner as the leader in the field. Unfortunately Deutsche Bank withdraw their financial support and the company had to reorganise quickly. All but the operations in Austria closed down Another early starter and also identified as a leader in the field was a Spanish initiative (backed by BBVA and Telephonica), called Mobi Pago. The name was later changed to Mobi Pay and all banks and mobile operators in Spain were invited to join. The product was launched in 2003 and many retailers were acquired to accept the special USSD payment confirmation. Because of the complex shareholding and the constant political challenges of the different owners, the product never fulfilled the promise that it had. With no marketing support and no compelling reason for adoption, this initiative is floundering at the moment Many other large players announced initiatives and ran pilots with big fanfare, but never showed traction and all initiatives were ultimately discontinued. Some of the early examples are the famous vending machines at the Helsinki airport supported by a system from Nokia. Siemens made announcements in conjunction with listed and high-flying German ecommerce company, Brokat. Brokat also won the lucrative Vodafone contract in 2002, but crashed soon afterwards when it run out of fund Israel (as can be expected) produced a large number of mobile payment startups. Of the many, only one survived Trivnet. Others like Adamtech (with a technically sound solution called Cellpay) and Paytt disappeared after a number of pilots but without any successful production deployments. Initiatives in Norway, Sweden and France never got traction. France Telecom launched an ambitious product based on a special mobile phone with an

integrated card reader. The solution worked well, but never became popularbecause of the unattractive, special phone that participants needed in order to perform these payments. Since 2004, mobile banking and payment industry has come of age. Successful deployments with positive business cases and big strategic impact have been seen recently. Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. History of Banking in India Nationalization of Banks in India Scheduled Commercial Banks in India The first deals with the history part since the dawn of banking system in India.Government took major step in the 1969 to put the banking sector into systems and it nationalized 14 private banks in the mentioned year. This has been elaborated in Nationalization Banks in India. The last but not the least explains about the scheduled and unscheduled banks in India. Section 42 (6a)of RBI Act 1934 lays down the condition of scheduled commercial banks. The description along with a list of scheduled commercial banks is given on this page.

Future functionalities in mobile banking

Based on the 'International Review of Business Research Papers' from World business Institute, Australia, following are the key functional trends possible in world of Mobile Banking. With the advent of technology and increasing use of smartphone and tablet based devices, the use of Mobile Banking functionality would enable customer connect across entire customer life cycle much comprehensively than before. With this scenario, current mobile banking objectives of say building relationships, reducing cost, achieving new revenue stream will transform to enable new objectives targeting higher level goals such as building brand of the banking organization. Emerging technology and functionalities would enable to create new ways of lead generation, prospecting as well as developing deep customer relationship and mobile banking world would achieve superior customer experience with bi-directional communications. Among digital channels, mobile banking is a clear IT investment priority in 2013 as retail banks attempt to capitalise on the features unique to mobile, such as location-based services [7]. Illustration of objective based functionality enrichment In Mobile Banking

Communication enrichment: - Video Interaction with agents, advisors. Pervasive Transactions capabilities: - Comprehensive Mobile wallet Customer Education: - Test drive for demos of banking services Connect with new customer segment: - Connect with Gen Y Gen Z using games and social network ambushed to surrogate banks offerings Content monetization: - Micro level revenue themes such as music, e-book download Vertical positioning: - Positioning offerings over mobile banking specific industries Horizontal positioning: - Positioning offerings over mobile banking across all the industries Personalization of corporate banking services: - Personalization experience for multiple roles and hierarchies in corporate banking as against the vanilla based segment based enhancements in the current context. Build Brand: - Built the banks brand while enhancing the Mobile real estate.

Definition of mobile banking

Mobile banking refers to the use of a smartphone or other cellular device to perform online bankingtasks while away from your home computer, such as monitoring account balances, transferring fundsbetween accounts, bill payment and locating an ATM. Challenges for a mobile banking solution Key challenges in developing a sophisticated mobile banking application are : Handset operability There are a large number of different mobile phone devices and it is a big challenge for banks to offer mobile banking solution on any type of device. Some of these devices support Java ME and others support SIM Application Toolkit, a WAP browser, or only SMS. Initial interoperability issues however have been localized, with countries like India using portals like R-World to enable the limitations of low end java based phones, while focus on areas such as South Africa have defaulted to the USSDas a basis of communication achievable with any phone. The desire for interoperability is largely dependent on the banks themselves, where installed applications(Java based or native) provide better security, are easier to use and allow development of more complex capabilities similar to those of internet banking while SMS can provide the basics but becomes difficult to operate with more complex transactions. There is a myth that there is a challenge of interoperability between mobile banking applications due to perceived lack of common technology standards for mobile banking. In practice it is too early in the service lifecycle for interoperability to be addressed within an individual country, as very few countries have more than one mobile banking service provider. In practice, banking interfaces are well defined and money movements between banks follow the IS0-8583 standard. As mobile banking matures, money movements between service providers will naturally adopt the same standards as in the banking world. Security Security of financial transactions, being executed from some remote location and transmission of financial information over the air, are the most complicated challenges that need to be addressed jointly by mobile

application developers, wireless network service providers and the banks' IT departments. The following aspects need to be addressed to offer a secure infrastructure for financial transaction over wireless network : 1. Physical part of the hand-held device. If the bank is offering smart-card based security, the physical security of the device is more important. 2. Security of any thick-client application running on the device. In case the device is stolen, the hacker should require at least an ID/Password to access the application. 3. Authentication of the device with service provider before initiating a transaction. This would ensure that unauthorized devices are not connected to perform financial transactions. 4. User ID / Password authentication of banks customer. 5. Encryption of the data being transmitted over the air. 6. Encryption of the data that will be stored in device for later / off-line analysis by the customer. One-time password (OTPs) are the latest tool used by financial and banking service providers in the fight against cyber fraud. Instead of relying on traditional memorized passwords, OTPs are requested by consumers each time they want to perform transactions using the online or mobile banking interface. When the request is received the password is sent to the consumers phone via SMS. The password is expired once it has been used or once its scheduled life-cycle has expired. Scalability and reliability Another challenge for the CIOs and CTOs of the banks is to scale-up the mobile banking infrastructure to handle exponential growth of the customer base. With mobile banking, the customer may be sitting in any part of the world (true anytime, anywhere banking) and hence banks need to ensure that the systems are up and running in a true 24 x 7 fashion. As customers will find mobile banking more and more useful, their expectations from the solution will increase. Banks unable to meet the performance and reliability expectations may lose customer confidence. There are systems such as Mobile Transaction Platform which allow quick and secure mobile enabling of various banking services. Recently in India there has been a phenomenal growth in the use of Mobile Banking applications, with leading banks adopting Mobile

Transaction Platform and the Central Bank publishing guidelines for mobile banking operations. Application distribution Due to the nature of the connectivity between bank and its customers, it would be impractical to expect customers to regularly visit banks or connect to a web site for regular upgrade of their mobile banking application. It will be expected that the mobile application itself check the upgrades and updates and download necessary patches (so called "Over The Air" updates). However, there could be many issues to implement this approach such as upgrade / synchronization of other dependent components. Personalization It would be expected from the mobile application to support personalization such as : 1. 2. 3. 4. 5. 6. Preferred Language Date / Time format Amount format Default transactions Standard Beneficiary list Alerts

Mobile banking in the world

Mobile banking is used in many parts of the world with little or no infrastructure, especially remote and rural areas. This aspect of mobile commerce is also popular in countries where most of their population is unbanked. In most of these places, banks can only be found in big cities, and customers have to travel hundreds of miles to the nearest bank. In Iran, banks such as Parsian, Tejarat, Mellat, Saderat, Sepah, Edbi, and Bankmelli offer the service. Banco Industrial provides the service in Guatemala. Citizens of Mexico can access mobile banking with Omnilife, Bancomer and MPower Venture. Kenya's Safaricom (part of the Vodafone Group) has the M-Pesa Service, which is mainly used to transfer limited amounts of money, but increasingly used to pay utility bills as well. In 2009, Zain launched their own mobile money transfer business, known as ZAP, in Kenya and other African countries. In Somalia, the many telecom

companies provide mobile banking, the most prominent being Hormuud Telecom and its ZAAD service. Telenor Pakistan has also launched a mobile banking solution, in coordination with Taameer Bank, under the label Easy Paisa, which was begun in Q4 2009. Eko India Financial Services, the business correspondent of State Bank of India (SBI) and ICICI Bank, provides bank accounts, deposit, withdrawal and remittance services, micro-insurance, and micro-finance facilities to its customers (nearly 80% of whom are migrants or the unbanked section of the population) through mobile banking. In a year of 2010, mobile banking users soared over 100 percent in Kenya, China, Brazil and USA with 200 percent, 150 percent, 110 percent and 100 percent respectively.[11] Dutch Bangla Bank launched the very first mobile banking service in Bangladesh on 31 March 2011. This service is launched with Agent and Network support from mobile operators, Banglalink and Citycell. Sybase 365, a subsidiary of Sybase, Inc. has provided software solution with their local partner Neurosoft Technologies Ltd. There are around 160 million people in Bangladesh, of which, only 13 per cent have bank accounts. With this solution, Dutch-Bangla Bank can now reach out to the rural and unbanked population, of which, 45 per cent are mobile phone users. Under the service, any mobile handset with subscription to any of the six existing mobile operators of Bangladesh would be able to utilize the service. Under the mobile banking services, bank-nominated Agents perform banking activities on behalf of the banks, like opening mobile banking account, providing cash services (receipts and payments) and dealing with small credits. Cash withdrawal from a mobile account can also be done from an ATM validating each transaction by mobile phone & PIN instead of card & PIN. Other services that are being delivered through mobile banking system are person-to-person (e.g. fund transfer), person-to-business (e.g. merchant payment, utility bill payment), business-toperson (e.g. salary/commission disbursement), government-to-person (disbursement of government allowance) transactions. In May 2012, Laxmi Bank Limited launched the very first mobile banking in Nepal with its product Mobile Khata. Mobile Khata runs on a third-party platform called Hello Paisa that is interoperable with all the telecoms in Nepal viz. Nepal Telecom, NCell, Smart Tel and UTL, and is also interoperable with various banks in the country. The initial joining members to the platform after Laxmi Bank Limited were Siddartha Bank, Bank of Kathmandu, Commerz and Trust Bank Nepal and International Leasing and Finance Company.

Currently, the users of Hello Paisa can Buy movie tickets, shop online, buy mobile recharge, pay bills (for services such as ADSL, DTH service, landline phone, postpaid mobile), make merchant payments, transfer money etc. On June 2013, one of the leading money transfer service provider in Nepal, "Prabhu Money Transfer", joined Hello Paisa to offer its Financial Services through Hello Paisa network. Prabhu Money Transfer will add 3500 agents across the nation to the Hello Paisa network. Hello Paisa platform is interoperable between multiple banks and multiple telecoms, and is the first of its kind in the world of Mobile Banking so far. The platform was nominated as one of the top three innovators of the year 2012 by SIDA in IAP program.

Objectives of mobile banking

A Study on Role of Mobile Banking India: an Unexplored Opportunity
Indian Telecom industry has emerged as the fastest growing telecom market in the world. The opening of the telecom sector to the foreign investors has not only led to rapid growth in subscriber base but also helped a great deal towards maximization of consumer benefits, particularly in terms of price discovery following the moderate approach in tariffs. The success of the Indian telecommunications sector has become the cynosure of the world and has made the country a truly attractive investment destination. The growth of cellular mobile services is leading the telecom revolution in India and the other services are following. The service sector has emerged as a prime contributor toward the economys progress.

Consumers Perception on Mobile Banking

The banking section will navigate through all the aspects of the Banking System in India. It will discuss upon the matters with the birth of the banking concept in the country to new players adding their names in the industry in coming few years. The banker of all banks, Reserve Bank of India (RBI), the Indian Banks Association (IBA) and top 20 banks like IDBI, HSBC, ICICI, ABN AMRO, etc. has been well defined under three separate heads with one page dedicated to each bank.

EVOLUTION OF MOBILE BANKING

Why India needs mobile banking & how customers benefit from it
There are more people using a mobile phone than a bank account in India . And setting up bank branches is not only expensive but time consuming. According to some studies it could easily take more than two decades for bank branches to reach the entire 1.2 billion population. The way out is clearly mobile banking - using handsets to enable some of the banking functions like payments, money transfer and so on. ET lists why we need mobile banking, status of mobile banking, problems and the future:

Why:
1) For Financial inclusion. Almost 60% of the population does not have a bank account. 2) Take banking to the masses - there are only 90,000 bank branches in India and covering the whole population with physical bank branches will take more than 20 years. 3) Mobile banking costs make for a compelling business case - according to Citibank the bank branch is 10 times more expensive than doing a transaction on a mobile phone. 4) Large part of the population has a mobile phone, but no bank account making the case of using mobile phones for financial services (like payments) compelling.

Status of Mobile Banking

1) According to HDFC Bank, two years back 40-45% of the banking transactions were happening in the bank branch. This has dropped to 18% now. So, 82% of the banking needs of a HDFC bank customer who has registered for mobile banking are done outside the bank branch. HDFC has 1.2 million mobile banking users. State Bank of India has 5.2 million registered mobile banking users and this is increasing by 2 lakh new mobile banking users per month. Almost 63% of Citibank account holders use the digital medium for banking. 2) Banks have gradually moved from offering non-financial services to financial services on mobile phones - the evolution curve has been: alerts (on ATM withdrawls, credit card purchases etc), cheque book request, payments (of utility bills), debit and credit statements, fund transfer, opening fixed deposits, cash management at low end (up to Rs 50,000 per day) etc. In future more services will be added. 3) The Reserve Bank of India has allowed use of 'semi closed wallet' by mobile companies. Via semi closed wallet accounts, people can send and spend money through the mobile network, but can't withdraw cash. Airtel, Vodafone and Idea are offering such services. 4) To expand mobile banking reach, HDFC Bank has started Hindi mobile banking service and a 'net safe light' virtual card - both were started last month. The latter helps a user to store a limited value on his mobile. Say a credit card limit is Rs 2 lakh but a user want to buy books online worth Rs 2,000. He can create a new limit on his card using net safe light and use the code generated for online shopping. This creates a security layer for the user he uses the card for online payments without worrying about it being misused as the limit is only Rs 2,000.

Limitations and problems of Mobile Banking

1) Despite a high base of mobile phone users, the smart phone penetration is limited, less than 20%. This restricts use of full scale mobile banking; users can't download banking app on basic phones. They have to depend on SMS, which is cumbersome. 2) A user can have up to nine mobile phone numbers (allowed by TRAI) but only one mobile bank account (says RBI). And the limit of transactions for mobile payments is Rs 50,000 per month. 3) The mobile payments model via telcos makes money on scale. According to Airtel it will take two years to be relevant and five years to make money. Mobile payments today are at the same stage as credit cards 20 years back and ATMs 15 years back. 4) Despite being convenient, the cost of Know Your Customer (KYC) for mobile banking or mobile payments is huge - Rs 400 to Rs 500 per person. This is more than the average revenue per subscriber (ARPU) for telcos. 5) Less than 10,000 outlets today accept Airtel Money or any other mobile payment. There's no incentive for merchants to accept mobile payments as they don't get any commission.

Business perspective
The business drivers which contributed to the evolution of mobile banking are: Cost savings. Customers were in the habit of walking into bank branches and ATMs for simple inquiry transactions. This added to the cost of operations of these channel. Customers were also in the habit of using cheques for small value funds transfers, bill payments. All these added to the operational cost and banks began looking for alternative solutions SMS alerts. One of the key concerns banks were facing was that of customers did several inquiry transactions on ATMs and this was adding to the burden on the ATM infrastructure. This traffic was particularly heavy during salary days. Banks adopted a solution of proactively communicating account balances and important transactional activity on accounts to customers through a simple SMS. Customers stopped queuing up in front of ATMs for inquiry transactions. Funds transfer and bill payment. As customers experience from mobile banking improved and the penetration improved, banks began to realize the potential of offering financial transactions through the mobile device. The first set of transactions to be offered were funds transfer between the customers own accounts and payments to pre-designated billers such as utility companies. These facilities vastly reduced the use of cheques, hence contributing to the

The business drivers which contributed to the evolution of mobile banking are: Cost savings. Customers were in the habit of walking into bank branches and ATMs for simple inquiry transactions. This added to the cost of operations of these channel. Customers were also in the habit of using cheques for small value funds transfers, bill payments. All these added to the operational cost and banks began looking for alternative solutions SMS alerts. One of the key concerns banks were facing was that of customers did several inquiry transactions on ATMs and this was adding to the burden on the ATM infrastructure. This traffic was particularly heavy during salary days. Banks adopted a solution of proactively communicating account balances and important transactional activity on accounts to customers through a simple SMS. Customers stopped queuing up in front of ATMs for inquiry transactions. Funds transfer and bill payment. As customers experience from mobile banking improved and the penetration improved, banks began to realize the potential of offering financial transactions through the mobile device. The first set of transactions to be offered were funds transfer between the customers own accounts and payments to pre-designated billers such as utility companies. These facilities vastly reduced the use of cheques, hence contributing to the

cost benefit for banks. Payment services. Mobile phones had caught on much faster than all previous technology delivery channels and banks were being forced to offer new facilities. The mobile phone was unique in that it was a personal device which had computation power, storage ability and occupied a greater mind-share of the customer than the traditional money wallet. This triggered new thoughts among bankers who wanted to leverage these capabilities to offer newer set of transactions on the mobile phone. This came in the form of enabling payment transactions through the mobile phone Loan requests and service requests. As mobile phones evolve into smart phones and the usability is improving, banks are finding it easier to offer more complex services on the mobile phone. The latest trends include offering loans through requests placed from the mobile phone where pre-registered customers can provide details about the loan and avail instant approval of loans. Technology Perspective The progress in mobile banking features was matched by the technology progress on mobile communication platform and mobile devices and this fueled a different kind of evolution in mobile banking. The key technology drivers that contributed to the evolution of mobile banking

are: Security. The mobile banking delivery channel relied on a communication layer provided by the mobile phone. The early forms of mobile banking used SMS as the communication mode which offered minimum protection against hackers and message interceptors. Customer experience. The mobile device technology progressed at a rapid pace and consumer expectations on usability of began to progress. Mobile banking progressed to offer enhanced customer experience and adopt the latest technology trends in communication to offer real time exchange of data. SMS banking. The early generations of mobile banking were powered by SMS communication. Using SMS banking, banks could alert customers about activities on their bank accounts and customers could request for information by sending an SMS to a published number. This mode of banking was quite popular but had the following limitations: - SMS communication was not real time and customer experience started deteriorating - Security issues around SMS transmission was another bugbear.

 USSD. WAP banking, while quite popular, was restricted to a specific set of devices and the use of Unstructured Supplementary Service Data (USSD) came into practice which permitted a real-time interactive access to bank accounts on basic handsets. Mobile web. The mobile communication technology progressed and mobile devices began supporting full-fledged web pages. This vastly enhanced customer experience on smart phones and sophisticated handsets which provided an almost desktop like experience. Mobile banking began progressing in this direction by providing an almost Internet banking kind of experience on the mobile phone. What can be Expected in Future? Mobile banking has an evolutionary path which has been triggered by business needs and subsequent growth has been fueled by a race between business and technology as each battled to keep pace with the other. However, to predict the future it is essential one looks at the present day issues and concerns. The key ones which would determine future trends are:

 Device disparity. The mobile space is filled with a wide variety of devices each offering a different set of capabilities such as SMS, WAP Browser, Mobile web browser, J2ME capabilities, USSD capability, among others. Interoperability among these various devices and a common technology is a clear need. Security. The security issues of mobile banking are multi-fold as it concerns protection of data on the device, authentication of the device, authentication of the customer and security of transmitted information. As mobile banking progresses into mobile payment, the concept of security gains more importance. The time is ripe for emergence a mobile banking model which can be made available on all mobile devices ranging from the simplest device to the most sophisticated device without compromising technology. Application distribution. Today several mobile banking solutions are available as applications installed on mobile device. The distribution of these applications to customers is a cumbersome activity and this is one of the reasons for the lower uptake of mobile banking in many regions. New models of application distribution such as over the air distribution of mobile banking applications, automated upgrade of mobile banking applications will emerge which will take away the application distribution hassles.

 Personalization. Mobile banking is very popular among Generation Y users and the demand for personalized applications is also quite high. The personalization demands could be in the form of language, facilities, color schemes, messages and many more. The need for personalization may be addressed by providing a mobile banking platform on which various mobile banking applications/ features can be developed and customers can choose the features to be installed on their mobile phone

Future of Mobile Banking

1) Mobile banking is the future because of its cost effectiveness and ability to reach out to customers in remote areas. It will take 5-6 years for the model to mature. 2) In US, Europe, phones with NFC (near field communication) have entered the market. NFC is a chip embedded in a phone enabling the phone to interact with a point of sales terminal (with this, phone can act as a virtual credit card). 3) Cheque truncation can be done via mobile phones. In US it is called 'Cheque 21' or 21 stcentury cheque payment. Not yet available in India. 4) Banks will be able to approve and give loans via mobile banking within the next five years. This will further reduce the need to go to a branch.

BENEFITS OF MOBILE BANKING

1.Reduces overall cost of operations 2.Enables automation 3.Enables centralization of data 4.Better coordination between departments 5.Location independent 6.Device independent 7.Customizable 8.Easily provides statistics 9.Searching for information is faster 10. Makes outsourcing easy

MOBILE BANKING-A CASE STUDY

Mobile banking (also known as M-Banking,m banking, SMS Banking)Is a term used for performing balances checks accounts transactions, payments, credit application and other banking transactions through mobile device such as a mobiles phone or Personal Digital Assistant (PDA). The earliest mobiles banking services were offered over SMS. With the introduction of the first primitive smartphone with WAP support enabling the use of the mobile web in 1999, the first European banks started to offer mobile banking on this platform t to their customers. Mobile banking has until recently (2010) most often been performed viaSMS or the mobile web.Apples intial success with I phone and the rapid growth of phones based on Googles Android(operating systems) have led to increasing use of special client programs, called apps, downloaded to the mobile devices. Mobile Banking refers to provision and availment of banking and financial services with the help of mobile telecommunications devices . the scope of offered services may transactions , to adminster accounts and to access customised information. Mobile phone banking may also be help in business situations. Following are mobile banking models:

Mobile Banking Models:

1. Bank focused model. 2. Ban led model 3. Non bank led model.

1. Bank focused model: The bank focused model emerges when a traditionalbank uses non traditional low cost delivery channels to provides banking services to its existing customers. Examples range from use of automatic teller machines (ATMS) to internet banking or mobile phone banking to provide certain limited banking services to banks customer.this model is addicted to nature and may be seen as a modest extention of convientional branch based banking

2.Bank led model: The bank led model offers a distinct alternatives to conventional branch based banking in that customer conducts financial transactions at a whole range of retail agents (or through mobile phone ) instead of at bank branches through bank employees. The bank led model may be implemented by either using correspondent arrangement or by creating a JV between banks and teleco/non bank. This model customer account relationship rests with the bank.

3.Non bank led model : The non bank led model is where a bank has a limited role in the dayto-day account managemeny .typically its role in this model is limited to safekeeping of funds. Accounts management functions are conducted by a non banks (e.g. Telco) who has direct contacts with individuals customers.

SERVICES OFFERED UNDER M-BANKING

Mobile banking can offer services such as the following :

Account information
1. Mini-statement and checking of accounts history 2. Alerts on accounts activity or passing of set thresholds 3. Monitoring of term deposits 4. Access to loans statement 5. Access to card statements 6. Mutual funds/ equity statement 7. Insurance policy management 8. Pension plan management 9. Ordering cheque books 10. Status on cheque, stop payment on cheque 11. Balance checking in the account 12. Recent transactions 13. Due date of payment 14. PIN provision, change of pin and reminder over the internet 15. Blocking of cards(stolen, lost)

Payments, deposits, withdrawals, and transfers

1.Domestic and international fund transfers 2. Micro payment handling 3. Mobile recharging 4.Commercial payment processing 5.Bill payment processing 6.Peer to Peer payments 7.Withdrawal at banking agent 8.Deposits at banking agent

Advantages of mobile banking

It utilizes the mobile connectivity of telecom operators and therefore does not require an internet connection. With mobile banking, users of mobile phones can perform several financial functions conveniently and securely from their mobile. You can check your account balance, review recent transaction, transfer funds, pay bills, locate ATMs, deposit cheques, manage investments, etc. Mobile banking is available round the clock 24/7/365, it is easy and convenient and an ideal choice for accessing financial services for most mobile phone owners in the rural areas. Mobile banking is said to be even more secure than online/internet banking. The advent of banking mobile apps has transformed the face of banking like even internet facilities could not. This is because of the fact that in the case of the latter, having a computer with an internet connection is mandatory. But in the former, just having a smartphone is enough. Connectivity is no longer a problem in an age where Wi-Fi surroundings are available in most areas, even remote localities. The cost is lower in the case of banking with the help of mobile apps; moreover, the system is also portable.

Disadvantages of mobile banking

Mobile banking users are at risk of receiving fake SMS messages and scams. The loss of a persons mobile device often means that criminals can gain access to your mobile banking PIN and other sensitive information. Modern mobile devices like Smartphone and tablets are better suited for mobile banking than old models of mobile phones and devices. Regular users of mobile banking over time can accumulate significant charges from their banks.

MOBILE BANKING IS STILL ON FANCY.

Still in its infancy, the mobile banking segment has enormous room for growth since only 12% of the population has access to formal financial services while the number of mobile accounts is also very low. Although mobile banking kicked off in Pakistan in 2009 with the launch of easypaisa a mobile banking solution from Telenor and Tameer Microfinance Bank it was only during last nine months or so that most telecom operators and banks entered this growing segment, an indication that the number of mobile accounts is likely to increase manifold in the next few years. According to a recent study by the Boston Consulting Group, 35% of Pakistans adult population will be using mobile financial services by 2020, Monet a mobile financial services company told The Express Tribune in an email. While banks and telecom operators consider it an additional but important revenue source, the central bank wants to use mobile banking as a tool to reduce cash from money supply and document the economy. Growth of branchless banking will help reduce currency circulation, document the economy and even create employment, Muhammad Akhtar

Javed, Additional Director at State Bank of Pakistans Banking Policy and Regulations Department told journalists at a workshop earlier this year. Branchless banking is a regional phenomenon, it is growing in Bangladesh and India as well, according to Muhammad Raza, a research analyst at Elixir Securities. Even if transaction amount is small, the market size is huge, he said. Despite impressive growth numbers, the analyst said, this market is still in its infancy. The peak would be when you are able to avail a variety of services that a conventional bank offers but this will be done with time. Given the SBPs ultimate goal is to move towards mobile wallets where people would like to make purchases through their mobile phones, mobile banking is likely to see further growth. It is the positive outlook for the mobile banking market that global payments technology companies like Visa Inc are expanding their footprints in the country. Visas subsidiary Fundamo is in the process of launching its own mobile financial services platform in Pakistan. Only 12% of the population has access to formal financial services today against a mobile penetration nearing 70%, Fundamos CEO Hannes van Rensburg told this correspondent. This means that there is still enormous scope for growth in the market.

RBI Guidelines on Mobile Banking

1. Introduction
1.1 With the rapid growth in the number of mobile phone subscribers in India (about 261 million as at the end of March 2008 and growing at about 8 million a month), banks have been exploring the feasibility of using mobile phones as an alternative channel of delivery of banking services. A few banks have started offering information based services like balance enquiry, stop payment instruction of cheques, record of last five transactions, location of nearest ATM/branch etc. Acceptance of transfer of funds instruction for credit to beneficiaries of same/or another bank in favor of pre-registered beneficiaries have also commenced in a few banks. Considering that the technology is relatively new and due care needs to be taken on security of financial transactions, there has been an urgent need for a set of operating guidelines that can be adopted by banks. 1.2 For the purpose of these Guidelines, mobile payments is defined as information exchange between a bank and its customers for financial transactions through the use of mobile phones. Mobile payment involves debit/credit to a customers accounts on the basis of funds transfer instruction received over the mobile phones. 1.3 Providing the framework for enabling mobile payments services to banking customers would generally involve the collaboration of banks, mobile payments service providers and mobile network operators (MNOs). The service can also be provided as a proximity payment system, where the transactions are independent of the MNOs. In mobile payment systems, the banks provide the basic service framework, ensure compliance to KYC/AML norms, creates a risk management and mitigation framework, and ensures settlement of funds. The mobile payments service providers are intermediaries for providing the technology framework for the implementation of the mobile payments services. The mobile network operators provide the telecom infrastructure and connectivity to the customers. Their role is limited to providing the SMS/WAP/GPRS/USSD/NFC GSM or CDMA voice and data services connectivity and in hosting the certain technology solutions like USSD. In a Non-MNO based systems, proximity or

contactless channels like IRDA, RFID, Optical, NFC, etc. are used for communication between POS and the mobile phone of the customer. 1.4 As a first step towards building a mobile payment framework in India, these guidelines are meant only for banking customers within the same bank and across the banks. It would be the responsibility of the banks offering mobile payment service to ensure compliance to these guidelines. 1.5 A brief description of the regulatory framework for mobile payments in a few countries

2. Regulatory & Supervisory Issues

2.1 Only such banks which are licensed and supervised in India and have a physical presence in India will be permitted to offer mobile payment services to residents of India. 2.2 The services should be restricted to only to bank accounts/ credit card accounts in India which are KYC/AML compliant. 2.3 Only Indian Rupee based services should be provided. 2.4 Banks may use the services of Business Correspondents for extending this facility, to their customers. The guidelines with regard to use of business correspondent would be as per the RBI circular on Business correspondents issued from time to time. 2.5 The guidelines issued by RBI on Risks and Controls in Computers and Telecommunications vide circular DBS.CO.ITC.BC. 10/ 31.09.001/ 97-98 dated 4th February 1998 will equally apply to Mobile payments, since Mobile devices used for this purpose have embedded computing and communication capabilities. 2.6 The RBI guidelines on Know Your Customer (KYC) and Anti Money Laundering (AML) as prescribed by RBI from time to time would be would be applicable to customers opting for mobile based banking service.

3. Registration of customers for mobile service

3.1 Banks should offer mobile based banking service only to their own customers. 3.2 Banks should have a system of registration before commencing mobile based payment service to a customer. 3.3 There can be two levels of mobile based banking service - the first or basic level in the nature of information like balance enquiry, SMS alert for credit or debit, status of last five transactions, and many other information providing services and the second or standard level in the nature of financial transactions such as payments, transfers and stop payments. The risk associated with the basic level of information services is much less compared to the standard level of actual payment services. Prior registration of the customers would be necessary irrespective of the type of service requested. For the standard level service one time registration should be done through a signed document. 4. Technology and Security Standards 4.1 The technology used for mobile payments must be secure and should ensure confidentiality, integrity, authenticity and non-repudiability. An illustrative, but not exhaustive framework 4.2 The Information Security Policy of the banks may be suitably updated and enforced to take care of the security controls required specially for mobile phone based delivery channel. 5. Inter-operability 5.1 When a bank offers mobile payments service, it may be ensured that customers having mobile phones of any network operator should be in a position to request for service. Restriction, if any, to the customers of particular mobile operator(s) may be only during the pilot phase. 5.2 To ensure inter-operability between banks and between their mobile payments service providers, it is recommended that banks may adopt the message formats being developed by Mobile Payments Forum of India (MPFI). Message formats such as ISO 8583 , which is already being used by banks for

switching of ATM transactions , may be suitably adapted for communication between switches where the source and destination are credit card/ debit cards/pre-paid cards. 5.3 The long term goal of mobile payment 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 mobile network a customer has subscribed to. This would require inter-operability between mobile payments service providers and banks and development of a host of message formats. Banks may keep this objective while developing solution or entering into arrangements with mobile payments solution providers. 6. Clearing and Settlement for inter-bank funds transfer transactions 6.1 For inter-bank funds transfer transactions, banks can either have bilateral or multilateral arrangements. 6.2 To meet the long term objective of a nation-wide mobile payment framework in India as indicated at para 5.3 above, a robust clearing and settlement infrastructure operating on a 24x7 basis would be necessary. Pending creation of such an infrastructure on a national basis, banks may enter in to multilateral arrangement and create Mobile Switches / Inter-bank Payment Gateways with expressed permission from RBI. 7. Customer Mechanism Complaints and Grievance Redressal

7.1 The customer /consumer protection issues assume a special significance in view of the fact that the delivery of banking services through mobile phones is relatively new. Some of the key issues in this regard and the legal aspects pertaining to them

8. Need for Board level approval 8.1 Banks should get the Mobile payments scheme approved by their respective boards / Local board (for foreign banks) before offering it to their customers. The Board approval must document the extent of Operational and Fraud risk assumed by the bank and the banks processes and policies designed to mitigate such risk. 8.2 banks who have already started offering mobile payment service may review the position and comply to these guidelines within a period of three months from issuance of these guidelines.

Conclusion
. Before I conclude, let me reiterate that the mobile phone is a potent tool to facilitate financial services and thus financial inclusion. It has the potential but the security and cost aspects have to be addressed. The medium of mobile has to sub-serve smaller transactions and must become cheaper. The Reserve Bank has for well considered reasons opted for a bank-led model as it is a complete model for delivery of a wide range of services. Just as you cannot have tele-medicine without a doctor, you cannot have mobile banking without a bank! The BC model would help to complement mobile banking, as customers need to approach BCs/ATMs only for hard currency requirements and conduct other banking transactions from anywhere from their mobile phones, provided of course, there are no tele-connectivity issues! As mentioned earlier, it is the social responsibility of everyone, who has the resources and the power, to contribute to the success of financial inclusion. While we have the guidelines to M-power financial services, it is necessary for us, the RBI, banks and the MSPs in particular, to take this forward in the 4th gear by convincing the common man not only on the power of the mobile phone for doing financial transactions but also the safety and security aspects of mobile banking, to provide a level of comfort. I believe there are success stories of mobile banking in states like Bihar, thanks to the initiatives of the certain NGOs and banks, which has enabled not only financial inclusion but made less literate people mobile banking-savvy. This needs to be emulated through adequate publicity and education to achieve M-powerment in a significant way. I thank you all for giving me this opportunity to address this august gathering. I hope some of the issues that I have raised will be discussed in this Summit and some solutions found. I wish you all the best.