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Mobility, where are you headed?

Mobility, as a concept, has captured the collective imagination of the tech savvy populace.  CEOs and CTOs wax eloquent on their grandiose plans in this domain. A lot has been written about NFC device use, smart kiosks, mobile banking etc., projecting these as the next big thing in mobile and banking technology.  However, I feel the ground reality is far removed from this.  Every time I glance around in stores and malls, I notice that very few people use mobile banking.  I initially wondered if this was unique to India, as we are not a very tech savvy people.  On probing further, I have come to believe that it is a worldwide phenomenon, with even advanced countries yet to warm up to mobility.  Africa, however, is an exception, where SMS-based mobile payment and money transfer is quite popular.

In India, branch transactions have decreased by 45% over the past 15 years, thanks to ATMs, Internet banking and mobile banking, and my guess is that a miniscule 5% of these are via mobile devices – including tablets.  Current data also indicates that the average transaction value is less than Rs. 1,000 and also, at 5 million transactions per month, mobile banking constitutes less than 3% of the total electronic and clearing transactions through the Indian Payment System.  (The RBI report on Payment Systems reports 2,558 million transactions a year, at a monthly average of 213 million transactions).

Mobile banking first appeared on the banking scene 5 to 7 years ago but is still considered the ‘new kid on the block.’ After the initial wave of enthusiasm, the concept has not quite clicked.  I would attribute this to the following:

Security Concerns:  Despite technological advancements, popular perception is that mobile transactions are not secure; hence people prefer PCs/laptops to mobile devices, especially for conducting higher value transactions, a sentiment which reflects in the average mobile transaction value. A cultural peculiarity in the Indian context is that financial transactions are taken very “seriously”, almost revered, and therefore not to be trifled with on mobile!

Need for Huge Investment:  Significant investments made by Visa and MasterCard, popularized card payments even in developing countries. Similar investments can give impetus to mobile and contactless payments, which are already quite popular in a country like Singapore.  Mobile payments using the Visa or MasterCard networks are a possibility, and merging these networks can further reduce transaction costs.  Mobile instruments equipped with new generation NFC capability must be complemented at the merchant end as well for mobile payments to gain wider acceptance.  Research indicates that various collaborative projects in this realm, involving banking and technology bigwigs are underway, which could yield positive results in the coming years.

Cultural Aspects:  A vast majority of the developing world still perceives money as paper on hand and cannot relate to its virtual or electronic form. This is especially true of the unbanked population. A significant change in this mindset is required if mobile banking has to gain credence in these emerging economies.  Low literacy levels also contribute to this traditional outlook, and we still see people in rural and semi-urban areas hesitant and even unable to use ATMs.

Mobile banking has huge untapped potential, and as per a BCG report, can generate a whopping fee income of $4.5 billion in India alone by 2015.  However, a multi-pronged approach is required in order for mobile banking to reach the masses, cutting through socioeconomic barriers. Apart from addressing core issues in mobile banking, promotional strategies involving mobile applications integrated with banking and payment applications can go a long way in popularizing it.



Comments: (4)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 11 December, 2012, 15:28Be the first to give this comment the thumbs up 0 likes

Maybe I've misunderstood it but much of this article seems to be about mobile payments, not mobile banking. I was recently talking to a customer living in Santa Clara and working in Mountain View, the absolute technology Meccas of the world. In the last 2 years, he says he hasn't seen even 10 instances of the use of mobile payments in supermarkets. So, the poor uptake of mobile payments is not restricted to India.

Talking of mobile banking, most offerings currently view it as a mobile variant of Internet Banking. People don't do banking so often that they really need a mobile appendage for it. More than anything else, this explains the low adoption of mobile banking. I expect mobile banking adoption to soar if it exploits camera, microphone, GPS, accelerometer and other powerful features of a smartphone to deliver use cases that are not possible on PC-based Internet Banking e.g. Mobile RDC.

A Finextra member
A Finextra member 12 December, 2012, 02:55Be the first to give this comment the thumbs up 0 likes

Hi KS, thanks for reading through and commenting on the same. I was stating India as an example, and my generic statement which I made is that mobile payments has not taken off in the way which was projected it would do, reasons being various.

Secondly, even in internet banking there are 2 main functionalities which a person does (in common internet banking applications) Inquiries and payments (through the bank's portal). Offcourse another is paying outside the portal in B2C transactions. I am talking about both as a part of mobile banking in my blog, as the line is thin - because in B2C payments, many a time the user logs finally into the bank's portal through a payment gateway to make the payment.

Any way which ever way we look at it, the expectation has not being realized in either banking or payments transactions using mobile devices.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 12 December, 2012, 06:30Be the first to give this comment the thumbs up 0 likes

If, by B2C payments, you're referring to consumer to business payments in the biller-direct model, only if the consumer chooses "NetBanking Transfer" as the method of payment does the bank's portal enter the picture. Many people - including me - choose card payment and never log on to the bank's portal. While there's no universally-agreed rigorous definition of mobile payment v. mobile banking, I don't think C2B Card or NetBanking transactions of the above nature would qualify as either mobile payment or mobile banking. On the other hand, if a consumer accesses a bank via mobile web or native mobile app and makes a P2P or bill payment, that could qualify as both mobile payment and mobile banking.

Judging success of a service like mobile banking also requires certain realistic baselines: 15 years after Amazon pioneered ecommerce, online sales only accounts for 5-7% of retail sales in the USA. While this is a tiny %, people still think ecommerce is successful.

The real debate arises when the digerati claim death of the store or bank branch when moden digital channels, while quite successful by themselves, are nowhere near uprooting the traditional physical channel.

A Finextra member
A Finextra member 12 December, 2012, 06:37Be the first to give this comment the thumbs up 0 likes

Hi KS, thanks again. Valid observations. Specially agree branches would always be there, but what they do would become a little different as channels starts doing some of the things which they do now. This has happened over the last 15 years, and will continue to do so. As you rightly said mobile banking/ payments would become THE THING as and when the actual convergence happens across technologies and apps, and we get that we can do more with a mobile than with a PC. Thanks again for the insights provided by you.