M Commerce is a by product of convergence process of the telecommunication

technologies (TCT) & Information Technology (IT), which is collectively referred to as

Information and Communication Technologies (ICT). Thus MCommerce may be considered as
an extended arm of Electronic Commerce (E-Commerce) to wireless mediums. This
convergence, however, enables some unique, location based services, which is very difficult to
achieve in E-Commerce. The convergence of TCT & IT has made these innovative services easily
accessible to common people. Today, the scope of M-Commerce encompasses almost every
walk of life. Mobile services have found its utility almost in every field of content, travel,
entertainment, marketing and banking. Mobile revoluation is all set to reach every corner of
India after the internet revolution and fast adoption of its use in Indian village and town.
Because of this Indian business companies have shifted their focus towards the ignored but
potential rural markets. There is a huge opportunity for mobile technologies based business
models to experiment with the rural, and convert it into a business opportunity of 75 million
potential rural customers in the country. Unlike the ecommerce, businesses based on mobile
technology have the advantage of overcoming the barriers of literacy, cost and availability.
Innovations in new mobile devices, in term of features and ease of use, have enabled an
illiterate to understand and operate. It is very difficult to define M-commerce and thus can be
interpreted in a variety of ways because M-commerce is a fairly new phenomenon and several
people define it in several ways. M-commerce can be defined as all activities related to a
(potential) commercial transaction conducted through communication networks that interface
with wireless devices. Another definition of M-commerce could be the use of wireless device
to communicate, transact and interact via high speed communication link through the internet
(Shuster, 2001, p. 2). Angsana (2002) emphasizes on three elements of Mcommerce devices ,
network types and a range of activities and explains M-commerce as all electronic based
transactions (e.g., payment, purchase and communication interaction) that Use data-enabled
wireless device connected to the internet or to a vendors private network


M-commerce in India:

In India the mobile service charges are all time low as compared to the other countries, which
has enabled even the low-income earning groups to own and operate multiple mobile phones.
To utilize the opportunities which mobile based technologies have to offer and a continuous
growth of this sector, a pro- active rather than reactive public policy and regulatory initiatives
are desired from the government of India. In mobile Commerce commercial transactions
between both B2C and B2B entities happens through mobile devices. With a gradual shift
towards modern retailing formats, Indian retail market has experienced high growth over the
last decade. Companies have shifted their focuses to plateforms based on mobile technologies
because of growing numbers of mobile devices and mammoth wireless subscriber base.
Leveraging on enhanced reach like MVAS and diverse features like of e-commerce, m-
commerce is poised for greater adoption across India, in the coming years. Although mobile
commerce market in International Journal of Technical Research(IJTR) Vol 1, Issue 2, Nov-Dec
2012 ISSN 2278-5787 Page 34 India is in nascent stage, but over the last few years m-payment
and m-banking segments have shown significant growth opportunities. The government and
other Banking and non banking financial organizations have taken strong steps to reach the
Indias population which are still deprived of financial facilities which can ensure a tremendous
growth in the latter segments. There are around 89,000 bank branches to serve the 600,000
territories that require banking facilities. This clearly shows a wide gap between what is needed
and what is being provided. As a vast segment of the Indian population who neither had a
landline nor a bank account today have made a generation leap and not only do they own a
mobile handset, but are also slowly attempting to transact on their mobile phone. Keeping this
in mind, the estimated potential market size of the m- commerce in India is pegged to be
somewhere around 400 crore. Also the potential revenue through mobile commerce can go up
to 20 billion in 2015, according to a survey conducted by IAMAI 2011 and this is just the
beginning in India. So, there is hardly any doubt that mobile commerce has emerged as a major
potential growth area for various mobile operators. Although mobile commerce market in India
is in nascent stage, m-payment and m-banking segments have shown significant growth over
the last few years. Initiatives taken by the government and financial organizations to reach
India's unbanked population can ensure tremendous growth in the latter segments. M-
commerce in India is primarily dependent on network operators who can effectively enhance
and advance the usage of its services, which has resulted in collaboration and partnership
models in domains like banks and telecom operators and technology provider. The market
expansion needs to be continuously supported in this domain, which has a huge potential of
offering a wide scope in increasing revenue for m-commerce players and telecom operators.
Although m-commerce market in India is still in its initial phase, but m-commerce has started to
gain importance in the digital marketplace with the growth of Smartphones, tablets, and
mobile devices. Mobile phone penetration in India is estimated to be 90% by 2015 which is
more than 60% as of now. Over the last few years, services like mbanking, m-trading, and m-
shopping segments have shown significant growth. A recent study shows that 45% of smart
phone owners and 53% of tablet owners plan to purchase more products on their handheld
devices in the future, predicting a huge opportunity for the service in the country.



Why M- PESA?

FINANCIAL INCLUSION
A developing country like India faces a huge shortage of physical infrastructure of the
financial institutions that means a large part of Indian population remain deprived of formal
banking system. For an example Kenya has 840 bank branches and around 1500 ATMs which
are not at all sufficient for the entire 38 million people.. M-PESA scheme helps the Micro
Finance Institutions (MFIs) to target even remote areas very quickly and with a reduced cost.
Financial inclusion has a multiplier impact on the lives of people drawn into the formal financial
system which leads to social inclusion. It is a known fact that when the poor people is provided
with financial services, they tend to manage their cash flow in a better way, they do a better
financial planning and their savings are increased. M-PESA has the capability to bring formal
financial system at the door step of people who have never used these services.
ENHANCED ECONOMIC ACTIVITY
It is always a problem from the supply side rather than demand side to provide the cash into
the hands of people who can use it. Its the ability to move money from the sender to the
receiver that is the stumbling block. Since the creation of money, the ability to move it from A
to Bthe so-called velocity of moneyhas been a fundamental cornerstone of economic
activity. But the burning issue is exactly how to facilitate the money transfer in a developing
economy where the infrastructure is poor and where very few people hold bank accounts. Due
to high penetration of mobile phones than the bank account penetration, mobile money
transfer platform can substitute the banking infrastructure in rural areas in most of the
developing countries.
M-PESA could play an instrumental role in driving growth and development. According to the
World Bank estimation a reduction in remittance commission by 2-5% could increase the flow
of formal remittances by 50-70%, which could boost local economy. In Kenya M-PESA has
resulted in higher and better remittance and higher economic activity leading to faster growth.
CGAP in its survey has found that the incomes of rural recipients increased by 5- 30% since they
started using M-PESA.
REDUCED CASH IN THE ECONOMY
In the absence of formal banking system, most of the transactions are cash based giving no
audit trail to the regulators. M-PESA brought in the transparency in the money transactions by
reducing the cash economy and digitizing the transactions. M-PESA is equivalent of credit card
or debit card which allows the regulators to monitor the trail. There is more visibility on the
money flows as the remittances move from informal channels to formal channels.
SECURITY
M-PESA provides unbanked mobile phone users with a secure platform which uses simple,
tailored menus on their phone to send fully encrypted and PIN locked messages to a thoroughly
audited financial accounting system.
It was observed by CGAP that M-PESA not only increased the MFI activity but is also used as a
medium of storage of money. Informal saving channels are much less secure than formal saving
facilities. Those who can afford it least suffer the highest risk. Both the banked as well as
unbanked customers of M-PESA are using it as storage medium as it is easily accessible. There
are many more agents of M-Pesa than bank which means that the customers need not travel
long distances to withdraw cash. With M-PESA, there is no need to carry cash and hence the
risk of the cash getting lost or stolen is not there.
CONVENIENCE
Country in which unemployment is very high people travel far from home in search of work and
they also need to be able to send money back to their families to support them. Money
remittance is very high in majority of the parts of the world which could range from 3 to as high
as 10%. This high remittance cost is one the reason why more and more people depend on
traditional and informal channels (through friends and family) to send money or physically
deliver the money. The issues with this informal channel is that it cost high, risky unregulated
services, unpredictable environment and possibly long expensive trips carrying cash in an
unsafe manner. With the introduction of M-PESA users need not to make frequent trips back
home to deliver money. Another advantage of M-PESA service that it is accessible 24X7 and
money can be sent anytime, anywhere using this service.

Cost Reduction and Efficiency:
By riding on the wave of M-PESA, institutions can achieve cost reductions because most of the
cost is borne by the customer. For example, an MFI that deals in loans through its branches
spends a large sum of money on cash insurance, cash logistics and managing the risk of carrying
cash. Even the disbursement of cheques is also costly as MFIs have current accounts and are
charged for cheque clearing. But now MFI only has to deposit money in M-PESA account and
provide a list of accounts number and the amount to be paid to each. For this service a fee is
charged from the MFI on a per transaction basis, but the charges are lower than what the MFI
would incur for any other traditional mode of disbursement. Accepting cash deposits at a bank
branch is also costly on a per transaction basis to the institution as it invests in branch
infrastructure setup, equipment and security arrangements and manpower. If customers start
depositing or repaying loans through M-PESA, the financial institution will outsource teller
activities to those M-PESA agent.

M-PESA platform allows financial institutions to decongest their offices. Removing a large chunk
of crowd from branch office gives the regular staff more time to focus on customer acquisition ,
product sales, business development and related activities. Branch member can stop worrying
about servicing the products and cash management as repayment and disbursements,
withdrawal and deposit can be done through agents. All these factors increases staff efficiency.

Customer Satisfaction:
Customers do not have to go to the often-distantly located bank branch or deal with
agents/cashiers, nor do they have to stand in a queue and complete lengthy bank forms. There
are too few actual users at this point to judge client satisfaction, but a bank which offers the
convenience of M-PESA could capitalize on positive benefits (security, product offering, and
interest payments) and minimize the inconvenience caused due to branch visit.

Advantages for Customers

The potential benefit to end customers is that they need not waste their time travelling to a
bank branch or an MFIs designated point for transacting into their accounts. They can go to
their nearest M-PESA agent and can deposit money into M-PESA account and can transfer from
M-PESA to their bank account resulting into following benefits:
Money saved on travel expenses, opportunity cost of lost wages and turnover etc.
Ease of transaction wherever/whenever: If a customer is carrying sufficient amount in
his/her M-PESA account then he/she does not even need to go to an agent also M-PESA
agents are ubiquitous.
No hassle and reduced risk of carrying cash. M-PESA agents are closer than the bank
branch.