114-068-1

Mobile Banking in India

A Game Changer?
Case Study

This case was written by S. Nithya, Amity Research Centers Headquarter, Bangalore. It is intended to
be used as the basis for class discussion rather than to illustrate either effective or ineffective
handling of a management situation. The case was compiled from published sources.
2014, Amity Research Centers Headquarter, Bangalore.
No part of this publication may be copied, stored, transmitted, reproduced or distributed in any
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114-068-1
Mobile Banking in India: A Game Changer?

Author: S. Nithya

Mobile Banking in India: A Game Changer?

Abstract: The increased penetration of mobile phones in India had attracted several industries to tap
the growth opportunity and achieve widespread reach across the country. The banking sector had
been one amongst these industries which chose mobile phones as one of their service delivery
channels. Mobile banking (m-banking), being one of the most innovative service delivery models was
expected to join the successful trail of the ATMs and internet banking services in the country. But,
m-banking failed to pick up a steady pace as it was not extensively accessed by customers due to
lack of awareness. Experts pointed that the changing technology, security issues related to mobile
phone technology, incompatible handsets and the absence of a comprehensive business model were
the core drawbacks in the m-banking milieu. The complexities involved in these drawbacks further
deepened the gravity of these challenges. How m-banking will rise above and detangle itself from
these challenges remained to be seen.
Pedagogical objectives
The case study helps to understand and analyse:
Innovations in Banking Services
Mobile Banking in India
Future of M-Banking in India.

Case Study
M-banking will be the next big wave for the past 15 years. But I am yet to see a good model to put
money on it.1
Munish Dayal, Partner, Barings Private Equity2
"Though mobile banking channel has the potential to be one of the key tools for achieving financial
inclusion, the growth and acceptance of mobile banking as a channel of accessing banking service
has been below expectations."3
Reserve Bank of India
1

Mohan Raghu, The Mobile Banking Tussle,

th
http://www.businessworld.in/news/finance/banking/the-mobile-banking-tussle/1096687/page-1.htmla, October 6
2013
2
Barings Private Equity provide investment advisory services to Baring Funds, which have cumulative assets under
management of approximately $1 billion, in the IT/ITeS, Life Sciences, Banking, Financial Services & Insurance, Energy &
Infrastructure and Consumer Goods sectors.
3
Growth of mobile banking in India has been below expectations: RBI,
http://gadgets.ndtv.com/mobiles/news/growth-of-mobile-banking-in-india-has-been-below-expectations-rbi-466009,
nd
January 2 2014
2014, Amity Research Centers HQ, Bangalore. All rights reserved.

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Mobile Banking in India: A Game Changer?

BANKS

had a pivotal role in the financial system of a country. In India too, banks had
been a backbone to the economic growth of the country. The Indian banking
sector had overhauled itself over the years, understanding the needs of the customers and
developing efficient methods of banking. The introduction of Automatic Teller Machines (ATMs) and
internet banking were lauded as the most notable innovations in the delivery of banking services.
These services were highly customer friendly and had been the most convenient form of banking for
the customers. India was on the forefront of growth in the telecommunication sector and the mobile
phone penetration has been astounding. Embracing the technological growth, the Indian banking
industry, further chose to offer mobile banking as their next innovative tool for delivery of banking
services.
While m-banking was slowly picking up pace in the country, the desired level of growth had not been
achieved. The absence of a good and sustainable business model, low level of acceptance among
customers, evolving technological changes in the mobile phone arena, regulatory frameworks and
giant retailers joining the bandwagon were the core factors that were hindering the widespread
acceptance of m-banking. With major challenges in its path, the success of m-banking as an
innovative service delivery channel in India remained a question at large.

Innovations in Banking Services: An Overview

The banking industry had been relentlessly working towards finding innovative ways to serve the
customers and simultaneously achieve lower cost of operations by adopting various technological
trends. One amongst these innovative service channels had been the launch of Automated Teller
Machines (ATMs), which was a self-service delivery channel. The introduction of ATMs had
revolutionised the concept of self-service in the banking industry as it was the first of its kind. The
digital transformation in the banking delivery channels quickly gained importance at par with
traditional branch banking and was expected to attain higher standards based on customer
experiences.
Over a period of time, banks observed that majority of the customers preferred visiting the ATMs
largely for balance inquiry or getting mini statement of transactions. Banks noticed that this usage
pattern in the ATM channel was burdening their financials. The internet banking too had begun
facing troubles mainly due to the rising security threats, forcing customers to use internet banking
within safer premises such as home and offices. With the existing digital banking channels being
beset with such issues, the dawn of a new delivery channel had been the need of the hour.4 The
proliferation of mobile phones amongst the people and its multiplicity of functions had caught the
attention of the banking industry. Subsequently, banks identified mobile phones as the future
banking delivery channel.5
Banking and financial services offered by the banks and availed by the customers through mobile
telecommunication devices, was termed as Mobile Banking (m-banking).6 The first attempt of mbanking dated back to 1998 when mobile payment was experimented in Finland and Sweden; the
mobile phone was used as a channel to pay for a Coca-Cola vending machine and car parking. It was
commercially launched in Norway in 1999. In the same year, the foremost commercial payment
4

Evolution of Mobile Banking,

http://www.infosys.com/finacle/solutions/thought-papers/Documents/evolution-mobile-banking.pdf
5
ibid.
6
VivekSrivastava, et al., Mobile Banking The Future Prospects,
http://www.vsrdjournals.com/MBA/Issue/2012_02_Feb/Web/1_Vivek_Srivastava_551_Review_Article_Feb_2012.pdf,
2012

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system similar to that of banks and credit cards was introduced in the Philippines by mobile
operators Globe and Smart.7 Subsequently, m-banking had advanced over the years, to become an
inclusive banking transaction channel. This growth was driven by the increasing commercial needs
and technological advancements in the mobile phone industry8 (Exhibit I).
Exhibit I
Factors Driving the Demand for M-Banking
Growing Business Needs Progress in Mobile Technology

Source: Evolution of Mobile Banking,

http://www.infosys.com/finacle/solutions/thought-papers/Documents/evolution-mobile-banking.pdf

M-banking services were categorised into SMS Banking, Application (Software) oriented, Browser
(Internet) based model and Mobile Apps. In the process of SMS Banking, banks offered banking
services by sending an SMS to the registered mobile number of the customer. Customers using the
Application or Software oriented service had to download the application developed by the bank in
order to access the mobile banking service. In the Browser based m-banking service, the banks
browser extending banking services was optimised and could be accessed by the customers mobile
phones (equipped with internet). M-banking through Mobile Apps involved the creation of mobile
applications for smartphones, utilising operating systems such as Android, Windows and Java.
Services offered by banks through m-banking varied from one bank to another, yet the services
provided commonly were Mini Statement, Balance Enquiry, Utility Bill Payments and Money
Transfer.9
Africa was identified as the leading innovator in the m-banking realm, with the introduction of MPesa10 in Kenya with Safaricom11.The M-Pesa concept was further extended to other countries in
Africa by the telecom major Vodafone and its partners. As of early 2014, close to 70% of the adult
population in Kenya were found to be using M-Pesa and was also adopted by nine other countries
which included Democratic Republic of the Congo, Mozambique, Egypt (where it is called Vodafone
Cash), South Africa, Tanzania, India, Lesotho, Fiji and Qatar.

Devadevan V., Mobile Banking in India Issues & Challenges,

http://www.ijetae.com/files/Volume3Issue6/IJETAE_0613_90.pdf, June 2013
8
Evolution of Mobile Banking,op.cit.
9
Mobile Banking in India Issues & Challenges, op.cit.
10
M-Pesa is a mobile-phone based money transfer and microfinancing service, launched in 2007 for Safaricom and
Vodacom, the largest mobile network operators in Kenya and Tanzania.
11
Safaricom, Ltd is a leading mobile network operator in Kenya.

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M-banking was further projected to be driven by the urban population, particularly the youngsters,
who used their mobile phones for commercial purposes. The Ait Group12 had named these young
tech savvy people as the smartphonatics. According to the group around 36% of Gen Yers13 were
smartphonatics as close to one third of Gen Xers.14The findings from the 2012 Ait survey, stated
that Seventy per cent of smartphonatics have used their mobile device to make a payment and 80
per cent have used their device for banking purposes in the past six months. Smartphonatics were
found keen to swap their payment cards with mobile phones, in order to use the mobile phone as a
channel to make payments.15
The Ait Group also projected that the growing use of smartphones was expected to fuel the
number of consumers using m-banking in the U.S. The number was estimated to touch 96 million by
2016 from 33 million in 2012, at an annual growth rate of 30%. Consequently, it was anticipated that
m-banking would expand its array of banking and related services by offering to manage portfolios,
retirement accounts and similar such services. The developing countries on the other hand were
expected to turn m-banking profitable. Countries such as Kenya proved to be the perfect example
for the success of m-banking in the developing world. Mauro Guillen, Professor, The Wharton School
of the University of Pennsylvania, thus added, Weve gotten to the point where, in some countries,
more people use phones for banking than use banks. Kenya had been one such country where
more than half of the countrys adult population of 22 million accessed banking services through
phone apps to do banking, while only 11 million had a bank account.16
Similar to Kenya, India was also proving to be an upcoming m-banking destination; the country
where hardly land-line telephones existed several years back, had moved ahead to adopt the latest
in mobile technology. This transformation had been pivotal to lead Indias banking sector to leapfrog
ahead from traditional banking to wireless banking.17

Mobile Banking in India: The Next Wave

A successful banking system had always been fundamental for the existence of a strong economy in
India. Banks occupied a predominant position in the financial system of the country. Since the 1990s,
the countrys banking system had received many accolades for its exceptional achievements. One
amongst those had been the widespread reach. Banking services in India was not limited only to the
urban areas but had also been extended to the distant parts of the country.18
The first and foremost bank in India was established in 1786. Since then the banking system in India
had evolved through several stages which had been categorised as the early phase of Indian banks
(1786 to 1969), nationalization of banks and the banking sector reforms (1969 to 1991) and, the new
phase of Indian banking system, with the reforms (post 1991).

12

Aite Group (eye-tay) is a leading independent research and advisory firm focused on business, technology and
regulatory issues and their impact on the financial services industry.
13
Generation Y: The generation of people born during the 1980s and early 1990s
14
The term "Generation X" generally refers to the generation of people born in the 1960s and 1970s.
15
Groenfeldt Tom, Smartphones Boost Mobile Banking,
nd
http://raconteur.net/technology/smartphones-boost-mobile-banking, February 2 2014
16
Mobile Banking: The Next Big Thing Is Finally Here,
th
https://knowledge.wharton.upenn.edu/article/mobile-banking-the-next-big-thing-is-finally-here/, April 25 2013
17
GovindarajanVijay, Developing Countries Are Revolutionizing Mobile Banking,
th
http://blogs.hbr.org/2012/04/innovations-in-mobile-banking/, April 30 2012
18
Khanna Manish and KaushalSaurabh, Growth of Banking Sector in India: A Collective Study of History and
its Operations, http://oaji.net/articles/548-1395218428.pdf

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Banks provided various facilities to the customers, which included protecting customers money,
providing loans and scrutinisation of accounts, issuing money orders and cashier cheques. Banks also
offered insurance and investment products to the customers.19 These services were offered to the
customers through several banking channels. For several years, customers had accessed the banking
services through the traditional Brick and mortar branches which were considered the foundation
of Indias banking system. Since the late 1990s, the launch of ATMs in India had kick started the
trend of self-service and the convenience of accessing money in any location and at any time of the
day. The demand for self-service and the increased internet usage among customers impelled banks
to introduce the concept of anywhere banking. Through the facilitation of 24 hours banking
services, the customers checked their account details, received bank statements, transferred money
to other accounts and also paid pay their bills.20
While banks had been continuing to serve the customers through these channels, a change occurred
with the technological advancements and growing needs of the customers. Both the urban and rural
unbanked customers had been looking for a faster and efficient banking system. Banks too were in a
similar search of a banking solution which would be cheaper and effective. In addition, analysts
opined that serving the unbanked population through the ATMs and the banking correspondent
model had not been successful on a large scale. Moreover, the percentage of the unbanked
population was on the rise. Only 30% of the migrant laborers in India had bank accounts. A large
number of the unbanked low income group had been storing and transferring huge sum of money
through informal networks, which made them vulnerable to robbery and coercion. Close to 40% of
the Indian population did not have access to banking services. Data from the National Sample Survey
revealed that in 2012, 51.4% of 89.3 million families of farmers in India had no access to any form of
credit from banks or non-institutional sources.21
The percentage of the unbanked population had been starkly different from the penetration
percentage of mobile phones. The widespread reach of mobile phones across the country had been
touted as one of the most amazing success stories on the economic and technological front, since
1987.The growth and adoption of the mobile phone technology had played a major role in the
modernization of several other industry sectors as well as the socio-economic development of the
country. Indias extensive network of telecommunication services had led to the expansion of
markets, systematised flow of information and reduced cost of transaction. The increasing number
of mobile phone users and extensive exposure of the mobile phone networks in the country
prompted the banking sector to turn this as a channel for offering banking services. Tapping the
advantages of this technology in order to provide banking services was expected to improve the lives
of several households in India.22 These factors had led to the introduction of m-banking services in
India23 (Exhibit II).
In India, the principal m-banking model had been the bank-led model, in which the banks had been
the central point of transactions. M-banking services are provided to the customers of the specific
bank and all transfers and accounting are done through the bank. A variation of this model had been
the partnership between the banks and telecom operators to provide services. Joint ventures
between Vodafone Essar and ICICI Bank, and Airtel and Axis bank were some of the examples. In
order to facilitate the m-banking operations, the mobile operators provided built-in applications or
customised platforms. The services commonly offered by banks with m-banking options were
19

Growth of Banking Sector in India: A Collective Study of History and its Operations, op.cit.
Sudhir K., et al., Mobile Banking in India: Barriers and Adoption Triggers,
http://som.yale.edu/sites/default/files/files/Mbanking%20report-Final.pdf, 2012
21
ibid.
22
ibid.
23
Mobile Banking in India Issues & Challenges, op.cit.
20

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providing account information, money transfers and payments, investments, support and content
services.24
Exhibit II
The Growth of M-Banking in India

Source: Can you carry your money in your mobile? M-Banking & M-Payments: The Next Frontier,
http://www.deloitte.com/assets/Dcom-China/Local%20Assets/Documents/Industries/
Financial%20services/cn_gfsi_canucarryurmoneyinurmobile_040114.pdf, 2013

The m-banking service had been largely preferred by the customers. Data from the Reserve Bank of
India (RBI) revealed that a total of 37 million mobile transactions had taken place during February
and November 2012; an increase of nearly 1.7 times in volumes was recorded during this 10 month
period. The transactions had witnessed close to a three-fold increase in value during the same
period. While customers chose m-banking over the matter of convenience, the banks looked at mbanking as a low-cost yet effective channel for delivering banking services.25

M-banking in India was at the nascent stages and had been witnessing noticeable growth. According
to the RBI more than 53 million people in the country were using m-banking as on October 2013.
Data from the Boston Consulting Group anticipated that fees derived through m-banking will surpass
$4.5 billion by 2015. In the similar context, a study by Assocham and Deloitte projected that the
annual m-wallet and retail transactions would reach $410 billion; this included a prospective amount
of $8 billion, out of which $5 billion was expected to be in the form of direct fees (individual usage of
mobile to make a purchase or person-to-person payment) and $3 billion through indirect fees
(utilization of network, voice and other services over the mobile). Having observed the growth of mbanking, Raghuram Rajan, Governor, RBI, revealed his keenness over tapping the mobile. We will
set up a technical committee to examine the feasibility of encrypted SMS-based funds transfer using
an application to run on any type of handset, get banks and mobile companies to cooperate.... He
further added, It can be a game changer both in the financial sector as well as to mobile
companies.26

Banking in Finger Tips: A Digital Disruption?

24

Mobile Banking in India: Barriers and Adoption Triggers, op.cit.

KiranNiti, Mobile banking on the rise in India,
th
http://businesstoday.intoday.in/story/mobile-banking-on-the-rise-in-india/1/191851.html, January 25 2013
26
Mobile Banking in India Issues & Challenges, op.cit.
25

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While industry observers were upbeat over the growth of m-banking in the country, analysts argued
that m-banking has remained unexplored to the complete extent. The National Payments
Corporation27 reported that as on January 2014, only 67 million mobile phones were linked to bank
accounts despite the number of mobile phones in the country being more than 900 million and the
bank accounts being over 450 million. This figure of 67 million according to analysts reflected the
fact that the m-banking had not taken off completely in the country. In this context, Abhay P Hota
(Hota), Managing Director and Chief Executive, National Payments Corporation, opined, "(Number
of) Active mobile users in the country is between 500 and 600 million, while the total connections
are around 900 million. Out of this active users, 90 per cent or around 400 million users have bank
accounts. Of these however, only 67 million mobiles are linked to their bank accounts."28
In the half-yearly financial stability report released by the central bank in December 2013, the RBI
had expressed that m-banking had not achieved the desired growth. The report also put forward the
key reasons for the former experience. The reasons cited were incompatible handsets, low levels of
awareness and acceptance, inability of banks to seed the mobile number with the account number,
absence of collaboration and revenue sharing models between banks and mobile operators, and
absence of unstructured supplementary service data (USSD) channels for mobile banking.29
Analysts highlighted the fact that the swift growth of mobile technology had been a drawback for
the potential expansion of m-banking. The successive upgradation of mobile phone technology such
as 2G, 3G, 4G had been major hurdles for the banks.30 Analysts asserted that the technological
changes were hindering the banks from offering m-banking services to all customers. Furthermore it
was turning the process cumbrous. Commenting on the same, Shyamal Saxena, General Manager,
Retail banking products, Standard Chartered Bank added, It is at a nascent stage and one obvious
reason is the protocols. The services are not seamless across platforms such as ordinary phones or
smartphones.31 Possessing mobile phones of different technological levels, led to variations in the
services demanded by customers. On this note Ritika Basu, Director, Programme Management,
SapientNitro32, pointed out, The tech-savvy urban dweller would look for functionality beyond
simple remittances. The unbanked will look for ease of transacting over simpler ways (like SMS).
Putting forward his view over the same Arindam Mukherjee (Mukherjee), Manager, Regional Sales
(BFSI), Cisco (India & Saarc), asserted, You have a sharp divide between what an iPhone and
Android wallet with an e-wad of cards can do in a mall, and what basic phones with prepaid or no
cards at all can offer to the less affluent parts of the world.33
The launch of smartphones had transformed the conventional mobile software into Mobile Apps.
Developing Apps was challenging according to analysts, since it had to be developed specifically for
different mobile operating systems.34 Designing an app for m-banking was expected to be a difficult
task. Highlighting the challenge of designing a banking app, particularly for startup firms, Alok Mittal,
MD, Canaan Partners India, stated, It involves a lot of integration of software and hardware, large
27

National Payments Corporation of India (NPCI) was established in India in 2009 with a mission to build state of the art
world class customer friendly electronic retail payment available and affordable to all round the clock.
28
Only 67 million mobile phones linked to bank accounts: NPCI, http://articles.economictimes.indiatimes.com/2014th
01-26/news/46636535_1_bank-accounts-ussd-mobile-banking, January 26 2014
29
Growth of mobile banking in India has been below expectations: RBI, op.cit.
30
The Mobile Banking Tussle, op.cit.
31
Kumar Saurabh, Whats holding us back from using mobile banking?,
http://www.livemint.com/Money/x3UqDvjzgX4mcr0nNnK8RK/Whats-holding-us-back-from-using-mobileth
banking.html, February 12 2013
32
SapientNitro is an interactive marketing, creative design, & technology services agency that helps companies solve
challenges to make brands more successful.
33
The Mobile Banking Tussle, op.cit.
34
Mobile Banking in India Issues & Challenges, op.cit.

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teams and contracts that last for lengthy periods. In the similar context, Rahul Chandra (Chandra),
Managing Director, Helion Venture Partners stated, There is an ecosystem of firms building apps for
bank customers, but these are early days. According to experts, developing an app for m-banking
involved a two-fold challenge to the banks; the spaghetti-style difficulty of assimilating various apps
over a period of time and consolidating them with its core banking system. Expressing his view over
the gravity of the problem Chandra added, A middleware is important to manage the cost and
complexity of building apps. Strong knowledge of core banking is required to provide rapid
integration without disrupting bank operations. Putting forward his view about app-based financial
inclusion Priyanshu Gupta, Associate Vice-President, Lok Capital, opined, App-based financial
inclusion is under experimentation. But there are many barriers. You have to make the smartphone
easy to use and then there are trust issues.35
The trust issue as pointed out by analysts had been a major hurdle as customers were concerned
over the security of banking through mobile phones. Moreover, the mobile phone being a small and
handy device was prone to theft. Industry experts felt that banks would have to give a serious
concern over this issue and also educate customers over the security mechanisms for m-banking to
be safe and effective.36 Speaking about the security issues, Dominic K. (Dominic), cyber security
expert and founder, Jarviz Mobile Security, asserted, The very portability of mobile phones makes
them easy to steal. A sophisticated attacker with enough time can defeat most security features of
mobile phones and gain access to any information they store. Experts in this field opined that
several software applications or apps which looked genuine, were actually vicious. Anyone can
develop apps for some of the most popular mobile operating systems and mobile service providers
may offer third-party apps with little or no evaluation of their safety, stated Dominic. He further
added, If you back up your phone data to a personal computer, look for an option to encrypt the
back-up.37
A research was conducted amongst customers to understand the factors hindering them from
choosing m-banking. The issues prompted by the customers were assimilated under four broad
categories lack of awareness, security concerns and support issues as other major reasons apart
for not using the mobile phone for banking purposes.38 (Exhibit III).
Apart from issues related to the mobile phones, industry experts cited that the bank-led model was
acting as a major drawback. In this model the service is relayed to the customer through the telecom
networks. For instance, if Axis Bank was tied up with Airtel Money it was an extension of the
channel. Customer can access Airtel Money-Axis Bank outlets, in order to open an Airtel Money
Super Account (a no-frills account) to deposit, withdraw and remit funds to other users. However,
m-wallets could function specifically on a given telecoms network and does not support interoperability. Indicating this factor to be a disadvantage for m-banking, Piyush Singh, Managing
Director, Financial Services, Accenture, stressed If the closed m-wallet is made open, it can give it a
leg up. Expressing a similar viewpoint, Jose Thattil, Head, Sales and Marketing, ElectraCard
Services39, opined, You have to link it to the larger payment ecosystem, retailers and across telcos
to get volumes. Or you will have islands.
In the telco-led model, payment of cash in an outlet by the customers resulted in the generation of
e-credits which would get stored in the mobile. The usage of e-credits was at the choice of the
35

The Mobile Banking Tussle, op.cit.

Mobile Banking in India Issues & Challenges, op.cit.
37
Whats holding us back from using mobile banking?,op.cit.
38
Mobile Banking in India: Barriers and Adoption Triggers, op.cit.
39
ElectraCard Services, a MasterCard company is a leading global provider of software solutions and processing services
for electronic payment and card systems.
36

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customers or they could exchange it for cash at the outlet. Telecom companies alleged that the mbanking license was provided by the RBI and not by the Telecom Regulatory Authority of India.
Moreover they also pointed that they were not keen to perform the role of a bank. M-wallet was
generally funded by cash or by a credit card and in the case of prepaid plastic, funds had been kept
in a banks escrow account (escrow generally refers to money held by a third-party on behalf of
transacting parties).Voicing a similar opinion, Sriram Jagannathan, CEO, Airtel MCommerce, stated,
We cant use it for our treasury business. Theres a misconception that telcos are interested in such
floats.

Exhibit III
Factors Preventing Customers from Adopting M-Banking
Lack of Awareness

Technology Problems

Not many people I

know currently use
m-banking

Mobile phone needs to

be compatible for mbanking operations

I currently dont have

the need

At times there is no
mobile network

Not as popular as net

banking

Data transmission is too

slow on the mobile

Security Concerns
Anyone can misuse my
details incase I lose my
mobile
Possibility of errors in
m-banking higher than in
internet banking
M-banking is not a safe
and secure mode to do
financial transactions

Support Issues
There is no human
interface or service
executive that you can
contact with questions
Lack of
acknowledgement of the
transaction at times

It is expensive to use
mobile for these
activities
Dont know much
about
M-banking services not
versatile enough
M-banking is too
complicated to use
Source: Sudhir K., et al.,Mobile Banking in India: Barriers and Adoption Triggers,
http://som.yale.edu/sites/default/files/files/Mbanking%20report-Final.pdf, 2012

Speaking about the tussle between the banks and the telecom companies, Mukherjee, opined,
Banks worry telcos want to be banks; telcos worry banks want to become telcos. Neither is right.
He further added, The RBI does not have enough regulatory authority over mobile payment firms.
In the similar context, DuvvuriSubbarao, former Governor, RBI, opined, Entry into the banking
space has to be on open, transparent and contestable criteria. It may not be prudent to allow mobile
operators privileged access to banking through the mobile route.40
In order to transcend the struggle of banks trying to tie up with several mobile network operators
(MNOs) and to aid the spread and usage of m-banking through USSD, analysts stressed the need for
a common USSD gateway for m-banking. Experts opined that a common USSD Gateway facilitated
offering m-banking services in a well-planned and cost effective manner for all customers.41
Speaking about the development regarding the USSD Gateway for m-banking, Hota declared, Here
you dial a two digit number prefixed with a star sign and followed by a hash tag. This throws up
various service options. The department of telecommunication has asked all telecom companies to
40

The Mobile Banking Tussle, op.cit.

RBI panel favours single mobile banking app on all SIMs,
http://www.thehindubusinessline.com/economy/policy/rbi-panel-favours-single-mobile-banking-app-on-allth
sims/article5665059.ece, February 7 2014

41

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reserve *99# for USSD-based financial services. But, industry experts predicted that it would take
time for the USSD-based services to be implemented. Pointing the issue related to USSD, Saxena,
opined, The good thing is that it can be used on any phone, so a standard platform can be there.
But it requires you to remember codes, which may be difficult. The question is who should promote
USSD? All stakeholders will have to find a middle path in terms of revenue sharing for USSD for it to
become operational.42
While the telcos and the banks are busy in a tussle, the mega retailers were quietly working out their
plans. Joining the bandwagon, large retailers had begun tapping this segment. Predictions from the
European Financial Review (March 2013) had projected that by 2015 more than 900 million people
were expected to transact $1 trillion in m-payments. Mega retailers like Best Buy, Walmart and
Target had come together to design their variant of an m-wallet, the Merchant Customer Exchange,
vying to gain control in payments. Similar to these were the Apple Passbook and Google Wallet.
Furthermore, there were Facebook Credits, which was licensed for money transmission in more than
15 states in the U.S. and the Twitter-based fund-raising Twitpay. Consequently, experts feared that
the foray of big retailers into India and the growth of social networking would have an upper hand in
this segment, despite RBI framing the rules over the payments.43
Besides the technical and regulatory challenges, Indias multi-linguistic atmosphere was considered
as major challenge for the proliferation of m-banking. India had 18 official languages; two-thirds of
the population in India was illiterate.44 Providing m-banking services overcoming the language and
literacy barrier would be tough asserted industry analysts. Furthermore, analysts felt that m-banking
would be successful only if operators provide local language options. Pointing out this factor, Hota
stated, "We cannot expect any inclusion without having systems in local languages."45
Post the launch of m-banking in India, m-banking transactions had witnessed growth, yet it had not
gained larger preference among customers who still preferred conventional banking.46 Experts felt
that there were a few factors for m-banking to succeed in India. In this context Ravi Jagannathan
(Jagannathan), Vice-Chairman, eMudhra47 and Director, YPayCash48, stressed, If one were to look at
the US, players from different industry segments have come together to create JVs and consortiums.
ISIS has been formed with banks, card companies and telcos coming together. Besides arriving at
the right m-banking model, experts opined that m-banking must comprehend key factors such as the
effectiveness of the product design, additional value offered to the customers and merchants,
incorporating shopping-related criterions to payment and achieving sustainability by having a
revenue model at a unit level. Commenting on the same, Jagannathan opined, Square, m-pesa and
PayPal attest to the fact that they have had sustainable margins at a unit level along with product
features which have addressed either a customer or merchant need. Highlighting the overall picture
of m-banking, Singh opined that, It is not about technology. Sooner or later, it will get created and
adopted. Just what is the proposition that m-mobile presents to the customer? M-banking is just
another channel. Can you service the customer across channels? That is the point.49
42

Whats holding us back from using mobile banking?, op.cit.

ibid.
44
Goyal Vishal, et al., Mobile Banking in India: Practices, Challenges and Security Issues,
http://warse.org/pdfs/ijatcse03122012.pdf
45
Only 67 million mobile phones linked to bank accounts: NPCI, op.cit.
46
Saini Gurmeet Singh, MOBILE BANKING IN INDIA: ISSUES AND CHALLENGES,
http://www.saiompublications.com/journal/index.php/ISSN-2347-7571/article/view/96/pdf_15, March 2014
47
eMudhra Consumer Services Limited offers various web and mobile based technology solutions to Indian consumers.
48
Y-Cash Software Solutions Pvt. Ltd aims to provide leading edge & maverick solutions and services using mobile
technology.
49
The Mobile Banking Tussle, op.cit.
43

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