UNIVERSITY OF MUMBAI

A PROJECT REPORT SUBMITTED TO THE UNIVERSITY

FOR THE AWARD OF THE DEGREE OF BACHELOR OF
MANAGEMENT STUDIES (V SEMESTER)
ON

M-WALLET

BY

AVINASH .S VERMA
AKBAR PEERBHOY COLLEGE OF
COMMERCE AND ECONOMICS
MUMBAI-400008

2012-2013
UNDER THE GUIDANCE OF

PROF.GANESH ACHWAL

M-wallet

DECLARATION
I MR. AVINASH VERMA student of Akbar Peerbhoy College of
Commerce and Economics studying BMS-Third year (Sem-V)
hereby declares that I have completed this project work on

M-Wallet for the Academic year 2012-2013 under the

guidance of our esteemed faculties.
The information submitted in the project is true to the best of my
knowledge and abilities.

DATE:

__________________

PLACE:

SIGNATURE

M-wallet

BACKGROUND:
Wallet/ wallet /noun 1.a small book like folding case
for carrying papers, paper money etc., in the pocket. 3. A bag
for holding food, clothing, articles, or the like, as for use on
journey.

M-wallet

M-wallet

M-wallet

TABLE OF CONTENT
1. Introduction
1.1. Smart start of M-wallet in India
1.3. Now in India Money on Mobile
2. Revolution of M-wallet
3.
3.1. Entities
3.2. Registration
3.3. Transactions
3.4. Recharge
3.5. Payment
3.6. Redemption
3.7. Miscellaneous features
3.8. Reserve Bank of India Rules and regulations
3.9. Security
4. Advantage of M-wallet
5. Limitations
6. Companies overcome with concept of M-wallet
7. Mobile Money Customer Awareness in Rural area
8. Mobile phones cutting banking costs, hassles in
Rural India
9. Mobile phone penetration in India
10. The challenges for M-wallet in Indian Market
11 .Questionnaire
12. Conclusion

M-wallet

M-wallet

1. INTRODUCTION
M

-wallet, is referred to as mobile money, mobile banking,

mobile money transfer, and mobile wallet generally refer to
payment

services

operated

under financial

regulation and

performed from a mobile device. Mobile payment is an alternative

payment method. Instead of paying with cash, cheque or credit
cards, a consumer can use a mobile phone to pay for a wide range
of services.
Mobile phones can also offer a communications channel for
initiating and executing on-line financial transactions. This channel
may not only reduce the cost of financial transactions for provider
and customer, but also allow new entrants to the financial sector,
and new relationships to be formed for distributing services. These
changes hold the prospect of accelerating access to financial
services on the back of the mobile infrastructure. Electronic
payment systems like credit and debit cards are an attractive
alternative from the perspective of cost and convenience. However,
the security of credit and debit cards depends upon the ability of
the merchant to authenticate the card by comparing signatures and
the ability and honesty of the merchant in protection of the
sensitive information required for carrying out the transaction. The
new trend in electronic payments is mobile payment schemes
M-wallet

those in which at least one part of the transaction is carried out

using a mobile device.
The number of mobile phones in use far exceeds any other
technical devices that could be used to market, sell, produce, or
deliver products and services to consumers.
Mobile commerce especially mobile banking is popular in
countries where most of their population is unbanked. By 2013, it
is estimated that there will be 1.7 billion people with a mobile
phone but not a bank account. Mobile payment is
being adopted all over the world in different ways.
Combined market for all types of mobile payments
is expected to reach more than $600B globally by
2013. Some mobile payment solutions are also
used in developing countries for micro payments.
The current emerging mobile payment services are
Google wallet, Nokias mobile money, Airtel
money and the Interbank Mobile Payment Service
(IMPS) with the latter two prevalent in India.
Google Wallet works via near-field communication
(NFC) which means it requires a NFC-enabled phone in order to
use the service. Nokia India Pvt. Ltd. has launched Mobile Money
service in partnership with Union Bank of India and Yes Bank. But
this service works only on handsets manufactured by Nokia.
M-wallet

Interbank Mobile Payment Service (IMPS) is a pilot service that

allows transfer of money between bank accounts of registered
users in the participating banks. The transactions are carried out
with PIN based security.
M-Wallet provides a mobile payment system that will be available
on all mobile devices that support basic features like text
messaging, yet be secure from spoofing of mobile numbers and
replay attacks. M-Wallet transactions are totally based on text
messages and provide mobile apps only for added convenience. A
user specified PIN allows only authorized access. Mobile number
spoofing and replay attacks is eliminated as each transaction is
protected with a unique one time key sent to the users registered
mobile number. These developments have created a new type of
economy, which many call the digital economy. This fast
emerging economy is bringing with it rapidly changing
Technologies, increasing knowledge intensity in all areas of
business, and creating virtual supply chains and new forms of
businesses and service delivery channels. As a direct consequence
of the emergence of the M-wallet, the balance of power seems to
be shifting to the customers. Customers are increasingly
demanding more value, with goods customized to their exact
needs, at less cost, and as quickly as possible. To meet these
demands, businesses need to develop innovative ways.
M-wallet

10

1.1. Smart start of M-wallet in India

M-wallets serve as a handy tool for multiple functions
as bank cards, credit cards, house keys, and swipe
cards to enter premises, electronic cash, train tickets
and much more.
In fact, the Bank of Punjab was one of the earliest to launch an mwallet in 2003. The bank customer could make purchases by
sending messages through the mobile phone. The bank, in turn,
would send a message confirming the purchase, both to the
merchant and to the buyer.
Later, in 2006, the Times Group launched Wallet365.com in
association with Yes Bank. Although this was strictly not an mwallet service, it permitted online money transfer, payments to
businesses and shopping.
Now, the Delhi Metro Rail Corporation has started trials for mtickets using contact-less chips. This is via a tie-up with Citibank,
which has been providing mobile transit solutions for the New
York subway system and Singapore Metro.
In Bangalore, train commuters can buy platform tickets just by
sending an SMS. The subscriber gets a five-digit alphanumeric
M-wallet

11

code as the e-ticket. The charge is the same as a regular platform

ticket and the amount is deducted from the customers monthly bill
or pre-paid account.
1.3. Now in India Money on Mobile

Offer a Simple, Smart and Secure

way to buy products from your
current local retail shops. We know
that your time is precious. We offer
with assurity, a service with which
you can Top Up your Phone, Buy
your next Meal or even conveniently pay your utility
bill all from the palm of your hand. With Money on
Mobile you can avail yourself to this service from
your local retailer friend for payments anytime, from
anywhere to anyone.

M-wallet

12

2. Revolution of M-wallet
Conferencing: Video Conferencing is increasing with companies
cutting down their traveling to reduce costs and also for security
reasons. This trend will not only help reduce costs but also reduce
the Carbon footprint of physical travel.
Even if Mobile advertising in India is still at a nascent stage,
Mobile as a medium has the highest reach in the country and the
potential remains extremely high. 2009 saw a dramatic rise in
Mobile advertising through the two main delivery mechanisms i.e.
Voice and SMS. Mobile SMS Advertising will likely shift from
being a mass advertising medium to selected targeting which will
be based on subscriber profiling.

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13

While Business and Advertising and Infotainment will be the

drivers to Mobile in times to come, but the greatest challenge
would be in terms of making M-wallet mainstream.
Experiences

in

communications

rural

India

technology

show
can

that

information

enhance

poor

and

peoples

opportunities by improving their access to markets, health care and

education.
Education: One such successful example of this is The Stanford
Learning Lab that has created a prototype SMS quiz to aid learning
of new vocabulary. The aim of this project was to provide highly
flexible, mobile learning material that users could access in very
short time-spans ranging from 30 seconds to 10 minutes. The
constraints of the 160 character limit of SMS messages turned out
to be an advantage as it forced the construction of suitably concise
chunks for such short-term learning opportunities.
Healthcare: Apollo Hospital group has set up a 50-bed
telemedicine center at Aragonda village (Andhra Pradesh, South
India). It has also set up freestanding centers at Guwahati and
Kolkata. These centers are equipped with facilities like CT- scan,
X-ray, ECG and integrated laboratory and are linked to Apollos
specialized hospitals at Hyderabad, Chennai, and Delhi for seeking
referral services, second opinion, post-acute care, interpretation
services and health education. The hospital group has also a web
M-wallet

14

portal, Apollo Life that allows patients to interact with doctors via
the web, upload all their diagnostics and reports on the net. Escorts
Heart Institute and Research Centre (EHIRC), Delhi through its
Escorts Heart Alert Service (EHAS), Utilizes telemedicine in
establishing prompt contact with patients in distress. The EHAS
subscribers can record their ECGs at the time of discomfort
through the cardiac beeper provided and transmit them through a
telephone to the heart alert centre. These tele-ECGs can be
monitored 24-hours at the dedicated center and fully equipped
mobile cardiac care units from the centre can be rushed to provide
intensive care to the patients before they brought to the hospital for
medical investigation. India is a vast country and the role of
Telecommunications for realizing tele-diagnosis, tele-consultancy
and tele-education can be a boon to people who still have relatively
low access to medicine and healthcare.
Access to Opportunity: With the advent of 3G, fishermen can
negotiate prices for their catch before heading for shore by sending
in pictures of the type of fish they have on board. Similarly,
farmers and horticulturalists who have perishable produce can take
advantage of 3G services to bargain for the best prices before
harvesting, by bypassing middlemen. Services like Mobile
Banking, Mobile Money Transfers, Utility Bill Payments,

M-wallet

15

Payments for purchase of movie tickets etc are also likely to take
off.
Giving the Indian billion an identity: Identity
authentication at banks, gas connection centres or while providing
rural jobs will just be an SMS away. The Nandan Nilekanis
project will provide a unique identification (UID) number, not a
card and the authentication will be made by using mobile phones.
Once the numbers are issued the authentication will be done
Online. The authorities will send the UID number to the designated
points through mobile phone message. Also, the fingerprint of the
person can be sent to the central database and the authentication
can be received within minutes verifying the identity of the person.
It will help provide portability to our farmers, laborers. When they
move from state to state, this UID will help them get employment
without hassles. Banks, mobile service providers, LPG gas
connection counters and many more partner organizations can use
this UID to verify their customer. With the growing mobile phone
network, this will become an easy process for authorities to verify
people. Nandan Nilkenis team is likely roll out the first batch of
UIDs in 2010. They plan to issue at least 600 million UIDs over
the next 5 years.
Finally, in a country that has been Infrastructure starved for all
times, Indian companies have already laid out a 670,000
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16

kilometers network of optical fibres even in the remotest areas and

the progress on this front still continues. rural network based on the
extensive optical fibre network, using Internet Protocol and
offering a variety of services and the availability of open platforms
for service development, viz. the Next Generation Network,
appears not only to be an attractive proposition but a powerful one
as well. Fibre network can be easily converted to Next Generation
network and then used for delivering multiple services at cheap
cost.
A study earlier had indicated the Telecommunications sector will
increase its contribution to the India GDP from the existing 2% to
14%. That sounds a few degrees steep. But then the power that can
be generated by linked a billion people together is also
incomprehensibly powerful.

M-wallet

17

3. How To Get Start With M-wallet ?

3.1. Entities
An M-Wallet mobile payment involves the participation of a
consumer, merchant and the M-Wallet system. It also includes the
provision of M-Wallet outlet for recharge transactions. In the
payment scenario, the consumer intends to pay the merchant
electronically through the M-Wallet
system. In recharge transactions, the
consumer wishes to add funds to his
M-Wallet account by using the services
of the M-Wallet outlet.
A consumer is a registered user of the
M-Wallet system and intends to use it
to pay for a service or product bought
from

merchant.

merchant,

depending on whether digital content or physical goods and

services being purchased is someone or some organization that
sells products to the consumer and is the intended recipient of the
funds. The M-Wallet system is the entity responsible for the
execution of the payment process. It controls the flow of
transaction between the mobile consumer and the merchant.

M-wallet

18

The M-Wallet outlet is a point wherein a user can add funds to

his/her virtual M-Wallet account by paying the required amount.
To understand the electronic distribution of goods and services, the
work of Rayport and Sviokla (1994; 1995) is a good starting point.
They highlight the differences between the physical market place
and the virtual market place, which they describe as an
information-defined arena. In the context of e-banking, electronic
delivery of services means a customer conducting transactions
using online electronic channels such as the Internet.
Many banks and other organizations are eager to use this channel
to deliver their services because of its relatively lower delivery
cost, higher sales and potential for offering greater convenience for
customers. But this medium offers many more benefits. A large
number of organizations from within and outside the financial
sector are currently offering e-banking which include delivering
services using Wireless Application Protocol (WAP) phones and
Interactive Television (iTV).Many people see the development of
M-wallet as a revolutionary development, but, broadly speaking, ebanking could be seen as another step in banking evolution.

M-wallet

19

3.2. Registration
A user can register for this service by sending
an SMS to the M-Wallet system using his
mobile number which is verified and this
mobile number acts as a unique ID for the user.
A unique PIN is generated and sent to the user
which can be later changed by the user for
additional security. The M-Wallet then creates
a virtual account for the user with zero initial
balance. According to RBI guidelines an open
prepaid

payment

instrument

requires

fulfillment of Know your customer (KYC)

norms. The account is fully activated only
when the KYC documents are submitted at an
M-Wallet outlet. In rural area people dont
have Documents so there finger print will be
used In M-wallet system.

M-wallet

20

3.3. Transactions
The transactions that take place in the MWallet system are recharge, withdrawals,
payments and recurring payments. A recharge
transaction takes place when a user adds funds
into his M-Wallet account through an outlet of
the M-Wallet system or a bank using National
Electronic Funds Transfer (NEFT). A user can
withdraw funds from his M-Wallet account to
his bank by sending a withdrawal request
which is processed by the M-Wallet system
through NEFT. Also withdrawal is available at
M-Wallet outlets for users who cannot avail
banking services. A payment transaction is
consumer initiated. The payment process
verifies the consumer and gathers details of
the payment from the consumer and processes
it accordingly. Recurring payments automate
the process of payment transactions that have
to be executed according to schedule.

M-wallet

21

3.4. Recharge:
The virtual account needs to be recharged
before it can be used for payments. The MWallet system supports two types of recharges.
First one is recharge through participating
outlets which can range from a pharmacy to a
bakery. This is to facilitate consumers who do
not have access to banking services. The outlet
can recharge the accounts through their
registered mobile devices by sending an SMS to
the M-Wallet system containing the details of
the recharge. The other mode is through a bank
transfer which gives added convenience to
those who have NEFT enabled bank accounts.

M-wallet

22

The Procedure For Recharge Your

Account.

Figure 1. Recharge using NEFT.

M-wallet

23

3.5. Payment:

Figure 3.Payment process

After the consumer has recharged his virtual account he can use the
funds in the account to make payment for various transactions. The
payment process depicted in Fig. 2 is initialized by sending an
SMS to the M-Wallet system with the PIN for the authentication.
The M-Wallet system generates a one-time random key for the
next transaction with a timeout and sends it to the consumer. The
consumer has to reply within the timeout with the key, payment
M-wallet

24

details like the mobile number of the

merchant, the amount to be paid to the
merchant and an optional reference text that
can be used by the merchant to identify the
transaction. If successful, the consumers
M-Wallet

account

gets

debited

and

merchants M-Wallet account is credited

with

the

specified

amount

and

confirmations along with reference text are

sent to both the consumer and the merchant.
The merchant is charged a percentage of the
transaction amount as service fee which the
merchant may pass on to the customer or
bear it himself.
The merchant in payment transaction need
not be an M-Wallet user. A temporary MWallet account is created for the merchant if he is not an M-Wallet
user and this account is maintained till the user registers for MWallet or decides to withdraw the funds in the temporary account.
The account needs to verified by using the mobile number as
unique identity to withdraw the funds.

M-wallet

25

3.6. Redemption:
The funds in the virtual account can be
redeemed for money by direct bank transfer or
redemption at an M-Wallet outlet. The user
can request a bank withdrawal by sending a
SMS to the system. The request will be
processed and payment will be made to the
bank account specified. The user can also use
outlet redemption to redeem funds up to a
certain maximum limit. A request needs to be
made for outlet redemption in advance.

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26

3.7. Miscellaneous features

Thick, Bulky, Unmanageable physical wallet.
Finding particular items is time consuming.
Evocating a lost wallet is extremely hard
managing

multiple

monetary

and

identification implement is not easy. Monetary

implements include cash, debit and credit
cards, and stored value cards while identification includes national
or state identification cards and drivers licenses. M-wallet
reducing the chance of theft by having only one item to manage.

What services can I avail through Mwallet?

Banking You can withdraw money, make remittance, and
transfer money to other bank accounts all with the help of a simple
device known as mobile phone.

M-wallet

27

Electronic wallet Shop at malls and retail

stores with your mobile money. This is really
cool. I can now shop my grocery even if I
forget my wallet back home.
E-commerce and e-trading Access and
buy from e-commerce websites just using
your mobile phone. Trading can also be done
on the move through your phone. Buying and
selling of shares can be done anytime you
want, even when in a bus/train.
Used as a membership ID/ID Card Now gyms, clubs, and
libraries will start using your mobile phones for activating
membership and your phone will be used as verification ID for
office employees and students.
The M-Wallet system gives the user the facility of check his
account balance by sending a SMS. Also the user can get details of
all payments made and recurring payments scheduled over SMS.
Flexibility in registration is provided to M-Wallet consumers
where-in the consumer can update the existing M-Wallet account
to the new SIM number by registering the new number using the
SIM of the old number and the PIN. If at any point an M-Wallet
consumer believes that his account has been compromised, he can

M-wallet

28

freeze his respective account via customer

service or the M-Wallet web portal or
sending an SMS.

3.8. Reserve Bank of India Rules and

regulations:
M-Wallet falls into the category of Open System Prepaid Payment
Instruments in Reserve Bank of Indias (RBI) draft for Draft
Guidelines for issuance and operation of Prepaid Payment
Instruments in India. These payment instruments can be used for
purchase of goods and services and also permit cash withdrawal.
According to the guidelines a mobile prepaid system like M-Wallet
can be implemented by any bank which has which have been
permitted to provide Mobile Banking Transactions by the Reserve
Bank of India. The guidelines on Know Your Customer/AntiMoney Laundering/Combating Financing of Terrorism guidelines
M-wallet

29

issued by the Reserve Bank of India to

banks, from time to time also apply to
prepaid payment instruments. Hence MWallet requires fulfillment of Know Your
Customer norms. It also states that all
prepaid payment instruments issuers shall
disclose all important terms and conditions in clear and simple
language. The outstanding balances of M-Wallet shall be part of
the net demand and time liabilities of the bank for the purpose of
maintenance of reserve requirements. This position will be
computed on the basis of the balances appearing in the books of
the bank as on the date of reporting.

3.9. Security
The popular standard used for mobile communication is Global
System for Mobile communications (GSM. M-wallet rides on the
underlying infrastructure of GSM which is insecure as it does not
have a provision for mutual authentication) which make way for
attacks like man-in-the-middle-attack and replay attacks. The
default data format for SMS messages is plaintext. The only
encryption involved during transmission is the encryption between
the base transceiver station and the mobile station. End-to-end
encryption is currently not available. The encryption algorithm
used is A5 which is proven to be vulnerable. Therefore a more
M-wallet

30

secure algorithm is needed. The SMS security mechanism relies on

GSM/UMTS signaling plane security mechanism. SMS may be
eavesdropped by the man-in-the-middle attack as no encryption is
applied to SMS message transmission.
The first step of a payment transaction in M-Wallet is
authentication by sending a PIN by SMS. The PIN is sent in
plaintext and also saved in users sent items. This poses a security
risk and hence the M-Wallet system provides an optional J2ME
application that will encrypt the PIN before sending it to the
M-Wallet system. The default java.util.Random has some
weakness and hence cannot be used for generating encryption
keys. Secure Random is required for generating random keys. The
IEEE paper on SSMS - A secure SMS messaging protocol for the
M-wallet systems provides an elliptic curve-based public key
solution that uses public keys for the secret key establishment of a
symmetric encryption. It also provides the attributes of public
verification and forward secrecy. It efficiently makes the SMS
messaging suitable for the M-wallet applications where the
security is of great concern. However J2ME may not be available
on all devices and hence text SMS can also be used wherein the
user is responsible for deleting his sent items. In this case the GSM
layer provides confidentiality.

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31

The mobile number of the sender can also be spoofed if a direct

connection to the short message service center (SMSC) can be
made. In order to eliminate this, the user is required to reply within
a specified timeout period with a onetime random key. This one
time random key is sent to the user via SMS and hence will be
received only by the authorized user on his mobile number.
A digital wallet has software and information component. The
software provides security and encryption for the personal
information and for the actual transaction. Normally, digital wallets
are stored on the client side and are easily self-maintained and
fully compatible with most e-commerce Web sites.
A server side digital wallet, also known as a thin wallet, is one that
an organization creates for and about you and maintains on its
servers. Server-side digital wallets are gaining popularity among
major retailers due to the security, efficiency, and added utility it
provides to the end-user, which increases their enjoyment of their
overall purchase. The information component is basically a
database of user-inputted information.

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32

4. Advantage of M-wallet
M-wallet service operators are independent of the
users mobile operator or bank. So, any mobile
subscriber can enroll for the service through an SMS.
The user can load the device with any amount of
money, but the minimum should be 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.M-wallet name as
Money-on-Mobile was earlier launched for the B2B
market in India in 2010.

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33

A very effective way of improving customer service could be to

inform customers better. Credit card fraud is one such area. A bank
could, through the use of mobile technology, inform owners each
time purchases above a certain value have been made on their card.
This way the owner is always informed when their card is used,
And how much money was taken for each transaction. Similarly,
the bank could remind customers of outstanding loan repayment
dates, dates for the payment of monthly installments or simply tell
them that a bill has been presented and is up for payment. The
customers can then check their balance on the phone and authorize
the required amounts for payment. The customers can also request
for additional information. They can automatically view deposits
and withdrawals as they occur and also pre- schedule payments to
be made or cheques to be issued. Similarly, one could also request
for services like stop cheque or issue of a cheque book over ones
mobile phone. There are number of reasons that should persuade
banks in favor of mobile phones. They are set to become a crucial
part of the total banking services experience for the customers.
Also, they have the potential to bring down costs for the bank
itself. Through mobile messaging and other such interfaces, banks
provide value added services to the customer at marginal costs.
Such messages also bear the virtue of being targeted and personal
making the services offered more effective. They will also carry
M-wallet

34

better results on account of better

customer profiling. Yet another benefit is
the anywhere/anytime characteristics of
mobile services. A mobile is almost
always with the customer. As such it can
be used over a vast geographical area.
The customer does not have to visit the
bank ATM or a branch to avail of the
banks services. Research indicates that
the number of footfalls at a banks
branch has fallen down drastically after
the installation of ATMs. As such with
mobile services, a bank will need to hire
even less employees as people will no
longer need to visit bank branches apart
from certain occasions. With Indian
telecom operators working on offering
services like money transaction over a
mobile, it may soon be possible 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
M-wallet

35

proposition for both the banks and the banks customers. The
banks add to this personalized communication through the process
of automation. For instance, if the customer asks for his account or
card balance after conducting a transaction, the installed software
can send him an automated reply informing of the same. These
automated replies thus save the bank the need to hire additional
employees for servicing customer needs.

Relevance of Mobile Money to India: Given

below is a representation of the World Economic Pyramid and
financial service access across the three tiers of global markets.

India is a typical case of co-existence of all three markets and if at

all, the disparities are likely to be bigger and more stark compared
to any other geography in the global context. One common reason
M-wallet

36

for lack of access and reach across geographies in India is the cost
of last mile connectivity which is significantly higher than
revenue/margins accrued. That is where Mobile Money Services
can be very effective. For a banking perspective, Mobile money
services can reduce cost of transaction 500 times.

While Mobile Money/Mobile financial services pan across

different segments of usage such as Payments, Microfinance and
Mobile Banking, the real potential of financial services through
mobile is accrued when an amalgamation of services such as
Healthcare, Insurance, Access to Credit services drives efficiencies
in Survival markets.

M-wallet

37

Easy and Cost effective access to Healthcare through a

combination of Mobile Financial services and 3G services can be
very instrumental in taking Healthcare services into rural
Hinterlands. Inspite of the best efforts by Government of India,
Healthcare services is unable to surmount the last mile given
deficiency of doctors and trained staff available for Rural
Healthcare services

M-wallet

38

5. Limitations
SMS delays and loss
The M-Wallet system is vulnerable to SMS delays and loss. Loss
of message will lead to a transaction failure while a delayed SMS
may increase the time required for the transaction to complete.
However, it is expected that this vulnerability will affect only a
small number of transactions as studies indicate only 0.4% of the
SMS deliveries fail due to lack of resources. Also the use of
delivery reports will help track the delayed and lost messages.
Surcharges
There can be different types of surcharges like the flat fee for a
type of industry, or for a type of transaction. It can also be on the
total volume of the transactions, but for a flat fee.
Critical Issues to be addressed
The sense of security to the owner is an important part. TRAI
rules on the cap of the transactions and the RBI guidelines will
form a well-defined schema for the mobile users.
Enabling third party intermediate Devices
For paying the bills for the retailers, there should be an
intermediate third party device which will store the e-money from
the carriers. At the end of the stipulated period, the mobile carriers
disburse the amount from its shell to the corresponding retailers via
this machine.
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39

Risks and Mitigation Strategy

Hacking is an important factor. It can be mitigated through proper
security testing. A competition for the hackers might be a good
way to the stabilization of the product. Security enabling biometrics or master recognition software should be used.
Success Factors
The success factors depend on the words of the masses. A pilot
project can be used to devise new methods and methodologies for
the correction of errors in the process. India can be able to embrace
it fully within 10 years time.

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40

6. COMPANIES OVERCOME WITH CONCEPT

OF
M-WALLET

Safaricom, the leading mobile operator in Kenya, launched one of

the most successful implementations of a mobile money transfer
service, M-PESA. M-PESA is a SMS-based system that enables
users to deposit, send, and withdraw funds using their mobile
phone. Safaricom accepts deposits of cash from customers with a
Safaricom cell phone SIM card and who have registered as M
PESA users. Formally, in exchange for cash deposits, Safaricom
issues a commodity known as e-float, measured in the same
units as money, which is held in an account under the users name.
This account is operated and managed by M-PESA, and records
the quantity of e-float owned by a customer at a given time.
The choice of bearer channel used to deliver mobile money
transaction receipts in an important decision in the launch of the
service since it impacts usability and security. Safaricom chose to
use the SIM Toolkit (STK) with SMS delivery. With STK the user
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41

has an application on the SIM card which is accessed from the

phones menu. This offers very high levels of security and
usability. However M-PESA is dependent on the Safaricom
network and requires a SIM change as the M-PESA application is
programmed using the STK.

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Airtel has been one of the pioneers of m-wallets in India & has
worked relentlessly since its pilot launch in Delhi & NCR last year.
Airtel Money claims to be an easiest to operate Mobile Payments
system that enables payments across a wide range of services like
Utility bills, mobile & DTH recharges etc. Airtel Money works on
the simple mechanism of Load & Use. Airtel subscribers who wish
to avail the service have to fist open an Account by either selfM-wallet

43

registering through the mobile or visiting Airtel Galleries or even

online at AirtelMoney.in. Once that is done successfully, user
need to load the m-wallet with money from either online Bank
Transaction or visiting Airtel galleries.
While this appears to be a great initiative with ability to pay at over
7000 merchant outlets & cashless transactions and all, we wonder
how effective is the method in todays world where Debit Cards &
Credit Cards are so very commonly accessible.
We had predicted a revival of payments through mobiles, but the
field has yet to see wide adoption. Once this method receives a
thumbs-up from the common man, the services should see an
upswing in regular use. Speaking of adoption, even Vodafone has
yet to release an update on it m-paisa.
The government too seems supportive of this method, having lifted
the Rs. 50,000 cap as a New Years gift! For Airtel users, presently
there are two options; Express account or Power account. The
Express accounts has a daily spending limit of Rs.10, 000 and is
applicable to utility and recharge bills, while Power account has
daily spending limit of Rs. 50,000 and can be used for utility and
recharge bills and also merchant outlets, online shops and transfers.

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44

Obopay marked its India foray by launching instant money transfer

services in Indiathrough a partnership between its subsidiary
Obopay India and Yes bank.
The deal will enable Yes Bank customers to transfer money to and
from any mobile phone number with Obopays mobile application,
text message or mobile web. Also the customers can withdraw cash
received by using their Yes Bank debit card.
Obopay and Yes Bank give Indian mobile consumer power over
their money. This service is built for todays mobile lifestyle,
making funds available to consumers anytime, anywher.
The customers of Yes Bank can sign up for Obiopay through forms
available at the banks branches and ATMs in Mumbai and the
National Capital Region.

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7. Mobile Money Customer Awareness in

Rural area
As aforesaid, mobile money is at its nascent stage and so is the
awareness of mobile money. It is being accepted in urban cities,
but may still be a matter of concern for mini metros and rural
areas. Several people are hesitant about
payments made via other modes not involving
cards or cash; it's time we gotten over our
reservations of making online transactions,
but the concern still bothers many. We asked
the major mobile money companies what kind
of response they have received so far. Users
are concerned about security and the mobile
money transfers come with security pins and also demand KYC
documents. Technologies have touched India and made it possible
for the country to think of becoming a world power. But the same
technology has been inaccessible to the rural India since its advent.
Here, what we need to look at is that, it is only 30% of Indias
population which is reaping benefits from such technologies. The
rest 70% live in oblivion. This amounts to a huge difference in the
rural India; economically as well as socially.

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This difference seemed to be leveled down a bit after the

introduction of M-wallet in villages.

8. Mobile phones cutting banking costs,

hassles in Rural India
Mobile technology is starting to make an impact on the lives of
people in Indias hinterlands. Not only do these devices eliminate
the need for rural people to walk kilometers to reach public
phones, they are also increasingly being used by these people for
mobile banking. This practice might also save the government and
banks money and reduce.
In India, more and more rural people who did not have access to
home phones, are now getting ownership of the mobile version of
the phone an essential tool for buying and selling goods based on
the latest market data, getting credit from lenders and other
commonplace activities. So far, most of the benefits have come
from one of the phone's simplest features: voice calls.
With more than 250 million mobile users and 6 million new ones
added each month. India now has the "teledensity" to support
more-sophisticated mobile technologies, which could have a big
impact on Indian society and the economy in the next few years.
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47

(An extra 10 mobile phones per 100 people in a typical developing

country leads to an additional 0.59 percentage points of growth in
GDP per person, according to a London Business School study.)
These include "voice broadcast" services that would let a truck
owner inform residents of a village about a scheduled trip to the
city, or doctors announce the availability of polio vaccinations. A
more complex system would allow a small business, say, to keep
track of shipments. What's holding up these services is the lack of
mobile banking.
According to the article in Newsweek.com, several small
companies are at work on mobile banking for small businesses.
New Delhi-based ekgaon technologies has developed a system for
tracking transactions made by so-called Self Help Groups,which
pool members' money and offer small loans to poor people. The
system uses a camera-equipped mobile phone to scan forms and a
voice-recognition system.
A.Little World, a mobile software business in Mumbai, has
developed a microfinance and payment system that lets customers
perform banking transactions through a local agent affiliated with a
bank (a practice allowed for the first time in January 2006).
Customers get a secure electronic identity via phone or smart card;
agents take deposits and dispense cash. Biometric data, such as
fingerprints, make the phones and smart cards more secure than
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48

paper-based banking. Mobile banking services can reduce the

cost of transactions for loans and other servicesthe main obstacle
to providing banking for the poor. Mobile transactions could have
an even broader effect applied to India's social-security payments
and public-distribution system, which sells essential goods to the
poor at subsidized rates. By March 2008, people in 8,000 villages
in Andhra Pradesh will get their benefits zapped via mobile phone
to their smart cards, which they may eventually use instead of cash
to buy goods at the ration shop. A.Little.World, which is building
the system, says a nationwide service could help reduce fraud in
the public-distribution system. It would also mean going from a
bank less world to a cashless one, maybe even faster than America
or Europe.

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9. Mobile phone penetration

in India
A combination of nearly 100% mobile
penetration in India and spiraling mobile
customer base makes mobile phones the
perfect medium to enable non-cash retail
transactions in India.

Critical Success Factors

Any mobile phone solution for non-cash
retail transactions needs to have certain basic
characteristics to succeed, such as:
Mass Reach: The solution must be adopted
by small Traders, delivery agents etc. for whom transaction
Volumes or values are low for supporting credit card and similar
non-cash payment mechanisms
Secure: Must be compliant with RBI guidelines for End-to-end
encryption, fraud protection, etc.

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 Service Provider Agnostic: Solution must not be linked to a

particular service provider
Convenient/Easy: Payment through mobile phones must be
convenient, easy, and faster compared to Cash and other non-cash
payment mechanisms
Low set-up costs & time: Effort required and the cost Of set-up
has to be much lower compared to Traditional PoS
No/little requirement of additional infrastructure:
Ecosystem required should be primarily set-up based on the
existing wireless telecom infrastructure and
Competitive pricing with existing methods: Pricing needs to be
competitive with other non-cash payment mechanisms
Given the specific conditions and critical success factors required
for the success of mobile payments in India,there is a need for a
customized mobile payment solution which does not just ape the
West or is extremely influenced from any other country based on
its intial success outside India.
Multiple models of mobile payments that can be adopted are
prepaid instruments where the balance is credited before the
purchase by a top-up transaction, direct debit where the bank
account is directly debited for the purchase, and the post-paid
wallet where it is either linked to a credit card or a mobile account

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and the cutomer has to pay for the purchase at the time of
settlement with the credit provider.
A comparison of these three mobile payment modes indicates that
the prepaid option is the best suited for Indian conditions.
A solution which meets the above critical success factors has the
potential for succeeding as an effective mobile payment instrument
in India.

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COMPARISON BETWEEN
Parameters

Credit
and
Debit Cards
Online
/
Offline

Airtel
Money
Nokia
Money

Security

CVV and CCV

Relies on USSD
which
may
be
insecure

one
key

Convenienc
e

Requires credit card

terminal

Registration
Required

No registration or
device

Time

less for offline and

more for online

Fast since it uses

USSD

Usually
seconds.
possible
SMS

Verification
process

signature
card

PIN

PIN and one time

key

Bank
account

Required

Not
Required
Required

Dependence
on network
provider/
bank/
mobile
manufactur
er

Independent

Dependent

on

the

M-wallet

M-Wallet
/

time

random

15-20
Delays
due to

Not Required

Independent

53

Ease of Use

Easy / Not Easy

Easy

Easy ,only sending

and receiving of
SMS

Requiremen
t for Payee

Card
terminal
/merchant a/c, SSL

Registration

No requirement

10. The challenges for M-wallet in Indian

Market
In India, the challenge is one of successfully handling large
volumes. "Marketing these services and creating a brand would
need huge investments. Customers have to accept cell phones as a
valid form of payment.
The low average revenue of the Indian cell phone user is another
issue. Today, almost 85% of the mobile services market is pre-paid.
That makes it unviable for high-value transactions. With less than
$7 as the ARPU, it would be impractical to put airline ticketing on
the pre-paid phone account. While post-paid bills are paid at the
end of the month, most of the billers want immediate settlement.
This makes the process unviable.
The fear of misuse is also likely to limit the value of m-wallet
transactions. Typically, these transactions could be limited to onetenth of the credit card limit. Market estimates show that, on
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54

average, for every one rupee worth of transactions, the

stakeholders get less than 2 paise as revenue. This means either the
volumes should be really huge or customers should start using their
cell phones for high-value deals to make it a profitable venture.
"Any transaction that ranges between Rs 500 and Rs 2,000 is
decent enough to support the entire chain. If we get even 0.1% of
the $28 billion money transfer market, it would be a sizeable
amount.
The concept of paying bills using the m-wallet sounds good, but
the question is whether the newspaper vendor, the paanwala or
milk-man would be ready to accept virtual money instead of cash.
An entire ecosystem that includes these small billers has to be
created before the idea of m-wallets can take off in India.
However, the concept itself holds promise.

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11. CONCLUSION
The world is on its way to 100% mobile
penetration. With the mobile becoming an
important part of their daily lives, consumers are
seeking to do more and more using their handheld
devices, setting a solid foundation for the growth
of mobile commerce.
As the costs of mobile phone technology have
fallen and as the technology have been adapted to
support financial services, mobile banking innovations have begun
to spread across and within poor countries. The low cost and the
widespread unmet demand for financial services as captured by
low rates of bank access means that mobile banking has the
potential to reach remote corners of the socio economic, as well as
geographic spectrum.
This potential can be realized, through M-Wallet, the SMS based
mobile payment system. M Wallet is an innovation that clearly
dominates its money transfer predecessors on virtually all
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dimensions. It is faster, safer and network independent. It has been

designed in adherence to all the guidelines laid down by the RBI.
In developing markets, M-Wallet will allow people to use financial
services in a more efficient way and sometimes the only way - at
more affordable costs, and can greatly improve standards of living.
In developed markets, M-Wallet will be more of an extension of
the existing payment infrastructure that allows people to deal with
their financial needs in a timely and convenient way.

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Questionnaire
1. Age Group:
18-25
26-30
31-45
46 and above

3. Occupation:
Salaried
Self Employed
Student
Homemaker

3. Do you have savings account with Bank?

Yes
No
4. How do you prefer to do banking transactions? Please rank
1
2
3
Over internet
Over mobile internet
Over mobile banking
Visiting bank
5. Have you heard of mobile banking?
Yes

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No

6. Have you used mobile banking in the recent past?

Yes
No

7. How frequently do you use mobile banking for banking

transactions?
Never
Sometimes
Most times
Always

8. Do you feel that doing transactions on mobile banking is

complicated?
You bet, its difficult to understand.
Its not that difficult
It's easy to use
It can't get easier

9. How did you come to know of mobile banking?

Friends
Colleagues at work
Through internet
Bank promotions
Accidentally

10. What do you use the mobile banking for?

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Check Bank Balance

Do Funds Transfer
Bill Payments
Trading
Mobile Recharge
Other

11. Do you use the mobile banking service of:

Public Banks
Private Banks
Public and Private Banks
I do not use mobile banking

REFERENCES
[1] http://en.wikipedia.org / wiki / Mobile commerce
[2] Consultative Group to Assist the Poor. Mobile Banking: at
http://www.cgap.org/p/site/c/template.rc/1.11.14910/.
[3] Wirelessintelligence.com.

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[4] Howard Wilcox. 2008. Press Release: Juniper Research

Forecasts Total Mobile Payments to Grow Nearly Ten Fold by
2013.
[5] Bonsoni.com. Research shows mobile phone payment double
by 2013.
www.bonsoni.com/blog/research-shows-mobile-phone-paymentdouble-by-2013/.
[6] Howard Wilcox. 2008. Press Release: Mobile Payment
Transaction Values for Digital and Physical Goods to Exceed
$300bn Globally Within 5 Years, According to Juniper Research.
[7] National Payments Corporation of India. 2011. Interbank
Mobile Payment Service. [ONLINE] Available at:
http://www.npci.org.in/aboutimps.aspx.
[8] Reserve Bank of India. 2009. Draft Guidelines for issuance
and operation of Prepaid Payment Instruments in India.
http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=1903.
[9] Agarwal S., Khapra M., Menezes B. and Uchat N. (2007),
Security Issues in Mobile Payment Systems.
[10] International Finance Corporation (2009, March). M-Money
Channel Distribution Case Kenya [Online] Available at:
http://www.ifc.org/ifcext/gfm.nsf/AttachmentsByTitle/Tool6.7.Cas

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eStudy-M-PESAKenya+/$FILE/Tool+6.7.+Case+Study+-+MPESA+Kenya+.pdf.

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