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authenticated, the Radio Frequency Identification Device (RFID) chip embedded in the card gets charged. This chip communicates with the mobile device, and the necessary transaction forms are made available in the mobile. The BC selects the relevant option and feeds the transaction amount and sends a message to the back-end server. The server authenticates the message, processes the transaction, and sends an update back to the mobile, which in turn writes back to the card. When the card is brought close to the printer, a transaction report is printed. This technology can also be used to conduct other financial activities like fixed deposits, loan disbursement, and insurance. In the non-business correspondent model the business correspondent is excluded from the system and the customer himself is provided with a mobile device. The regulatory policies of India have recently allowed transactions from mobile devices, but with a very small ticket size. The mobile devices are used to store information of the user, conduct transactions, and maintain transaction records. Various models have been proposed to realize mobile based banking. One model is where the mobile devices are equipped with Near Field Communication (NFC) technology and RFID chip, which are then used for user authentication and some transactions. Another model which proposes to leverage the widespread network of retail agents involves both banks and telecom operators where the retailer has an account in the bank and the transactions are carried out in a manner similar to the way customers recharge their phones. The Eight Factor Model The graph below shows a comparison of the BC model and the non-BC model for India and Brazil. The comparison has been done on the basis of eight critical factors for the success of a branchless banking business model. The eight factors identified are: The weighted mean average model was used to compare the two business models. In India, the mobile based model scores over the BC model in most of the parameters that were identified as critical success factors. Thus, the results clearly show that the non-BC model, i.e. a mobile based branchless banking model, will be more successful than a BC model in India. In Brazil, the non-BC model has been a huge success in the past, more because of regulatory relaxations at an early stage. However, our study shows that either model can succeed. This is also strengthened by the increasing telecom penetration worldwide, particularly in Brazil. 3 The Three Fold Challenges The great deal of excitement that started off sometime in early 2006 with RBI permitting the use of Business Correspondents by bank branches has not been instrumental in fetching the Indian banking industry a winning story. The Indian Council for Research on International Economic Relations (ICRIER) released a study recently which ranked India 29th in a list of 55 countries based on the level of financial inclusion, which reflects the unimpressive results despite regulatory relaxations. The three fold challenges for branchless banking in India are: 4 Leveraging Mobile Based Banking: Opportunities and Challenges Ahead Telecommunications has taken the world to a new phase in managing communication and data irrespective of a persons location. The global economy is abuzz with the increasing use of handheld and mobile devices for data transfer, information exchange, and service delivery. The banking and payments industry is witnessing a similar excitement with the analysts predicting that mobile banking is going to be the next big revenue generator. The Indian banking industry looks set to move into a new phase leveraging the mobile industry and its growing outreach, especially among the rural population. It is expected that there would be 200 million rural connections by 2012, up from the current 90 million. Thus, the use of mobile devices for payment and banking services can be the best suited model for branchless banking in India. 5 Conclusion Developing and under-developed economies all over the globe are looking for new modes and means to contain poverty and include their citizens in the financial system. One of the important factors that would help achieve this vision is to ensure total financial inclusion. The regulatory bodies of the country have laid down their priorities and financial inclusion is at the top of their agenda. To set the momentum right, there have been regulatory relaxations and initiatives such as mobile payments and third party business correspondents to realize this
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distant dream. The concept of branchless banking will be instrumental in achieving the mammoth task of gaining 100 percent financial inclusion by 2015 in India. The idea is currently in the inception stage, and will require trials to realize the best frameworks and models suited for this mission. The main focus of the banks in the country has been towards using business correspondents for reaching out to the unbanked population. However, with the increasing penetration of telecommunications in the country and greater reach, mobile based business models (also referred to as M-Banking) will prove to be instrumental in realizing branchless banking and taking it to higher grounds by enabling low cost and real time transactions over secure networks. The mobile market is quite immature in terms of handling such data and providing highly secure transactions, but an increasing focus on reaching remotely situated customers will lead to the emergence of proper solutions to such problems. Our study, weighing the two prominent business models for branchless banking based on eight critical success factors substantiates this view. A recent survey done in the Asia pacific countries shows that 42 percent of the mobile customers use the basic banking services, such as checking the account balance, on their mobile devices. It is also estimated that India will, in future, turn out to be the leader in mobile banking usage in the Asia Pacific region.
Reader's comments(1)
1: Hi,
This is Nanjund and I am working on the field of Financial Inclusion from last 2 years on the field level so well known on the problems of BC`s/BF`s. and I have solutions sort out. Nanjund n.juagli@yahoo.com 09686692433 Posted by: Nanjund G Jugali - Tuesday 05th, October 2010
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