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India's mobile banking plans fall flat

04 August 2016  |  9948 views  |  2 India, Bazaar

India's plan to boost financial inclusion through Unstructured Supplementary Service Data (USSD)-based mobile banking services has failed to work, the country's telecoms regulator has admitted.

Seeking to emulate the success of Kenya's M-Pesa and others, India's authorities spent several years planning and building the infrastructure to deliver basic financial services via mobile phones, bringing banks and telco onboard for a USSD-based system, which sees users dial codes to conduct different transactions such as checking balances and subscribing to services.

In August 2014 the services were made available to India's billion-odd mobile phone users, with the expectation they would quickly gain popularity among the underbanked, particularly in rural areas and "soon achieve a critical mass", says the Telecom Regulatory Authority of India (Trai).

Yet, in a new consultation paper, Trai admits that two years on progress has been "below expectations" and that in May 2016 only 3.7 million attempts at USSD-based transactions reached the National Payments Corporation of India (NPCI) platform.

Noting that "clearly something is amiss", Trai is carrying out a review and asking for feedback from stakeholders. The watchdog highlights several potential issues, notably the fact that the cost cap of a USSD session is Rs1.5 - considerably higher than for an SMS or a one minute voice call. This could be reduced to Rs0.5 or the cost could even be shifted from users to banks, says Trai.

Another issue is the number of steps a person is allowed to take during a session, with authorities considering the possibility of increasing this from five to eight to reduce the number of failures. The actual length of session could also be increased.

You can read the full report here (PDF). Interested parties are invited to have their say until the end of August.

Comments: (2)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 04 August, 2016, 09:26

"clearly something is amiss". Clearly. Blaming everything else instead of finding the root cause of the problem is what is amiss, IMO. People who check account balance on mobile are already banked. I never understood how USSD or iOS or any other mobile technology that shows account balance will help convert unbanked population to banked. 

Calling B.S On Banking The Unbanked

But that's only me. This won't stop fintechs from claiming that Financial Inclusion measures will be a big hit if they're carried out on a native app.

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Hitesh Thakkar
Hitesh Thakkar - FIS Payments Software and Services India - India | 04 August, 2016, 13:13

Two missing links I can see:

1. Business case missed by the bankers, MNOs and TRAI. They could have promoted public utility companies (Electric, Gas, Water, Govt taxes) to build such transaction channels.

2. Those who build never did proper Customers Awearness which is another the missing link - I don't see any customer communication using various channels - Print, TV, Branch officers/clerks or ATMs showing any ad campign.

Most banks even do not bother to send single SMS per month or quarter to build communication. 

There is opportunity - Fintech in India can come up with some useful USSD based services and leverage existing one ofcourse E-Commerce companies can also explore it.

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