A PROJECT REPORT ON

"M-Banking and M-Commerce - The Future"

In partial fulfillment of

Master of Management Studies

under

University of Mumbai
2011-2013

Submitted by Rishikesh Patil

Under Guidance of

Prof. Dipes Maitra

MASTER OF MANAGEMENT STUDIES

N. L. Dalmia Institute of Management Studies & Research

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CERTIFICATE
This is to certify that Rishikesh Patil, student of N.L. Dalmia Institute of Management Studies and Research has carried out the project M-Banking and M-Commerce The Future under our supervision and guidance of Prof. Dipes Maitra as partial fulfillment of the requirement of the Masters of Management Studies (Marketing) course, Mumbai University for the Academic Year 2011-13

Prof. Dipes Maitra Project Guide

Prof. Pyarelal Arya Director

Place: Mumbai

Date: 29th March, 2013

N.L Dalmia Institute of Management Studies and Research, Mira Road, Mumbai - 401104 2

ACKNOWLEDGEMENT
Seldom do we have an opportunity as part of an academic project to get a feel and experience first-hand the harsh realities of the market. My project on M-Banking and M-Commerce The Future helped me gain a valuable insight into the market realities and what we think about it while implementing as marketing initiatives. I sincerely thank my guide Prof. Dipes Maitra for being my project guide through the initial stages of project conceptualization and giving me a free hand during the course of the project. I extend my heartfelt gratitude to our venerable Director, Prof. Pyarelal Arya, college administration staff, the institute Library staff and Computer Laboratory Staff whose help was an integral part of this venture. And finally I would like to thank all those who have helped me directly or indirectly in the successful completion of this project. Thank you

Rishikesh Patil MMS (Marketing) NLDIMSR

INDEX
Sr. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Contents Executive Summary Introduction. M-Commerce scenario in India M-Commerce at a glance Application of M-Commerce Primary Research Research results & analysis M-Banking Models for M-Banking business Scope of M-Banking Conclusion Bibliography Page No. 5 7 12 14 22 23 24 30 38 44 53 55

Executive Summary

Mobile Commerce has gained increasing acceptance amongst various sections of the society in previous years. The reasons for its growth can be traced back to technological and demographical developments that have influenced many aspects of the socio-cultural behavior in todays world. The need (and/or wish) for mobility seems to be the driving force behind Mobile Commerce. The launch of UMTS technology has provided Mobile Commerce with the necessary verve. Mobile Financial Services build a cornerstone of Mobile Commerce. They comprise of Mobile Payment and Mobile Banking. Mobile Banking, the primary research object of this project consists of gauging the scope of mobile banking in India and shedding light on Mobile banking and its sub-applications. Recent innovations in telecommunications have enabled the launch of new access methods for banking services; one of these is mobile banking; whereby a customer interacts with a bank via mobile phone. In India 617million mobile subscribers far exceed fixed line subscribers because of better mobile infrastructure (TRAI, 2010). The banks in India are racing to use this latest technology to reduce their operational costs and increase customer base. Mobile Banking refers to provision and availment of banking and financial services with the help of mobile telecommunication devices. The scope of offered services may include facilities to conduct bank transactions, to administer accounts and to access customized information. After the launch of mobile banking in India, mobile banking transactions have seen some growth. What attracts customers to mobile banking is the round the clock availability and ease of transactions. But mobile banking still has a long way to go as majority of customers prefer banking in the traditional ways. Key question is why customers are not adopting mobile banking. Various factors may influence customers adoption. It is argued that adoption will not take place unless customers perceive the service to be useful. Understanding the symptoms of the problem of why there is a low rate of mobile banking usage along with understanding of preferred mobile banking services, could help banks to come up with a right solution to improve their mobile banking service as well as to increase the rate of Mobile banking usage. Mobile Financial Information can be considered as an independent module and offered as a stand-alone application. Each of the first two sub-applications is offered, in contrast, invariably in combination with information services.

b) Mobile Banking and its business models & RBI guidelines for the same. c) Mobile banking insights & consumer perspectives. There is large-scale interest in Mobile Banking. The customer interest and the willingness to pay however vary for individual services. It is therefore necessary to design offers taking cognizance of the needs and wishes of relevant target groups. Mobile Banking presents an opportunity for banks to retain their existing, technology-savvy customer base by offering value-added, innovative services and to attract new customers from corresponding sections of the society. The time seems to be ripe to convert the non-negligible customer interest into business-driving customer demand. A proactive attitude on the part of the banks therefore seems to be recommendable.

INTRODUCTION
Business of Banking Asia Pacifics retail banking consumer drives growth Bank deposits in the Asia Pacific region (Australia, China, India, Japan, South Korea, Taiwan) are projected to be over US$11 trillion by 2010 with over 600 million bankable households. While the vast majority of bank deposits in Asia Pacific will likely still be in Japan by 2010, bank deposits in China and India should grow rapidly. Chinas share of Asia Pacific bank deposits could double from 15 percent of total Asia Pacific bank deposits in 2000 to 29 percent of total Asia Pacific bank deposits in 2010. Even more amazing is the fact that Indias bank deposits, albeit smaller in total than Chinas bank deposits, are projected to grow by over 400 percent during the same period. The number of bankable households is also projected to increase rapidly, from 260 million bankable households in 2000 to 619 million bankable households in 2010. Asia Pacific markets will likely provide the greatest opportunities for financial services companies looking for future growth. Driven by strong consumer demographics, political and market reform, and economies of scale in production, Asia Pacific nations have realized significant growth over the past five years and this trend will likely continue through 2010 and beyond. As is evident in Asia Pacific economies, specifically those of China and India, will continue to be leaders in global growth through 2010. Asia Pacific equity markets, with the exception of Chinas reforming stock markets, have realized high growth over the past three years, reaching, in many cases, multiyear highs. With such promising growth prospects, global financial institutions are focusing their resources on Asia Pacific and investing heavily in the region. From buying stakes in major state-owned Chinese banks to developing branch networks in India, foreign banks continue to place their bets on Asia Pacific. The 2005 financial results of a major financial services group are a case in point: they show modest profit growth of between 10-13 percent in Europe and North America, but in Asia and Latin America, growth rates of 30-50 percent.

As Asia Pacific and global corporations continue to focus investment in the region, the demand for financial services in everything from corporate lending to capital market access will likely grow. In addition, as the success in the Asia Pacific corporate sector trickles down to the consumer, retail banking will likely see a rise in demand from mortgages to credit cards. By 2010, DTTs GFSI group expects the middle classes in both India and China to each be larger than the entire United States population and roughly equivalent to that of Europes population. This consumer segment will likely drive retail banking in the region and present lucrative opportunities for financial services firms.

With rising incomes, growing urban affluence and favorable demographics, the rapid growth of these financial products is not surprising. The demographics of our country will also be a key driver in creating a large retail customer base that banks just cannot afford to ignore with 54% of the Indian population under 25 years of age. As this population enters the 'wage earner' category by the year 2011, the propensity to use multiple financial products will be high. Over 60% of this age group will be under 40 years of age and a prime customer segment for insurance, mutual funds, credit cards etc.

Already, many banks enjoy a higher cross-sell ratio with customers in the 25-35 age group than they do with older customers. The Indian economy is expected to witness the sharpest drop in its dependency ratio from 64 in the year 2000 to 55 in 2010, the economic benefit of which will be huge. As the dependency ratio in the economy falls, India's already high household savings rate of 28% of GDP is likely to rise further. Moreover, within the dependents, the share of young dependents is likely to fall, while the share of old dependents is expected to rise. This will reflect in a shift in household investment patterns towards an increasing share of savings in mutual funds, life insurance and pension schemes.

One of the key reasons for low penetration rates for most financial products has been low affordability. This, however, is expected to change with the Indian economy expected to continue to grow at its current pace with some economists even estimating that India will be a trillion dollar economy by the year 2010. The resultant increase in household income as a result, is growing to throw up that much more opportunity for banks.

With banks gaining prominence as distributors of financial products, the shift in household savings to assets like mutual funds and insurance will increase customer profitability. Profitability of these products is estimated to be nearly five times that of a plain vanilla fixed deposit product of a bank. We are, as a result, increasingly going to see banks in India making significant gains in their fee income. While only three years ago, most banks made the majority of their fee income from corporate banking, many private banks today earn as much as 65% of their fee income from retail banking.

Major Banks In India By Asset Size

5% 7%

45%

23%

10% 10%

Axis Bank Bank of Baroda

HDFC Bank Ltd. Bank of India

ICICI Bank Ltd. State Bank Of India

Source : RBI The Indian banking industry showed great resilience in springing back to shape as also adjusting to the impact of the reforms. From a high overhang of bad debts and large loan delinquency in the early 1990s, Indian banks turned the corner in a decades time with a stronger balance sheet and surging profitability. Not deterred by the burden of bad debts that emerged in the aftermath of banking sector reforms and introduction of prudential norms, the banking industry showed sound growth and expansion in the post reform period. Capital levels have increased, profitability has risen, productivity improved and so has several developments in enhancing the quality of customer service. Integration of banking industry with other major segments of finance, notably the securities markets is also growing. Integration with international markets is also on the rise, where Indian banks are increasing their presence and operations. All these augur well for the prospects of the Indian banking in the future. An important aspect of the Indian economy at present is having a vibrant domestic financial system and a strong external sector. Given the growing pace of globalization of finance, Indian domestic financial system in general and banking industry in particular stand to gain from opportunities arising within the country and outside. RBI announced constitution of an internal working group to examine the report of the High Powered Expert Committee on Making Mumbai as an International Financial Center and implement the recommendations as appropriate. Making

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Mumbai as an international financial center would be of great significance for Indian finance and banking in view of the enormous opportunities such a development could bring in. The stance of the monetary policy to get a hold on rapidly rising asset prices and growing inflationary tendencies in the back of high economic growth, though might appear to impact the business of banks, but could prove helpful in the long run since the prudential measures could ensure appropriate pace of business and better risk management. At the same time there are challenges that may appear daunting. Banks in Asia, particularly in China have phenomenal size as compared to Indian banks. Liberalization is leading to creation of global banks through growth and consolidation. In this background, an important and most urgent challenge for Indian banks is to create a size that would be effective in dealing with the global competition. Indian banking also needs larger amounts of capital to sustain their growth in the future for which they need to step up performance and efficiency that would attract investors. Another equally important challenge would be harnessing the benefits of technology. Though progress is made, technology solutions integrating the banking operations to derive synergies and efficiencies in Public Sector Banks need to move at a much faster pace. Similarly, Public Sector Banks need to step up the use of infrastructure related to Real Time Gross Settlement and Electronic Fund Transfer Systems that could benefit their customers. There is much scope to further increase the share of non-interest income, which will raise profitability and productivity. In the next year (2009) there would be significant changes in the banking landscape as per the road map announced for the presence of Foreign Banks in India. From April 2009 onwards, the limitations on the Wholly Owned Subsidiaries of the Foreign Banks would be removed. Notwithstanding the challenges, the Indian banking industry can look forward to a promising period ahead. High economic growth offers banks a host of opportunities in new businesses and also in expanding the existing ones. Growing international operations of Indian business will provide Indian banks with global opportunities in banking. Rising income levels of people will give scope to design and develop a wide range of personal financial products and fee based services. Focus on infrastructure development and certain key sectors like rural economy, health and education offer exciting business opportunities for the extensive branch network of Public Sector Banks located in the rural and semiurban areas. While opportunities could be numerous, responding to them positively and realizing them to a desired extent would be a great challenge. With right

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strategies in harnessing technology and human resources developing market segments, design of new generation products and services, focus on efficient customer service and pursuing global aspirations can take Indian banks to the next generation banking

Mobile Commerce Scenario In India Mobile payments may not be the most happening thing in the Indian market today, but the situation is certainly ripe for the m-phenomenon. India currently has 100 million mobile subscribers, 45 million credit or debit card holders and over 38 million internet users. These figures are what prompted Coruscant Tec, a mobile solutions company, to launch a spin-off company, PayMate. M-commerce is still at a nascent stage in India. Mobile Payments is available on websites for shopping, job portals, matrimonial; also for purchase of tickets, flowers, dining, hotel bookings, bill payments for various services etc. M-commerce is making its presence felt in India mostly through shopping, utility bill payments, travel and entertainment. However, it is almost always in conjunction with online payment. For instance, Bill Junction offers both online and mobile payment, as does airline Air Deccan and more recently, PVR Cinemas. According to Arvind Rao, CEO and co-founder, OnMobile, a mobile solutions company, Telecom operators, merchants and service providers are beginning to see the need for m-commerce services, by starting to work towards fulfilling their respective roles in the overall chain. However, it will take another four to six years before we see substantial m-commerce usage like in South East Asian countries. In fact, Japan - with the highest number of mobile phone users in the world - is witnessing a trend where electronic and mobile payments are replacing real cash transactions. 43 per cent of Japans internet users make payments through their mobile phones (eMarketer). Telecom operator Airtel launched its mobile wallet facility, mChq, in September 2005, in collaboration with ICICI Bank and Visa. However, a year later, the idea of a mobile wallet still hasnt caught on, and Airtel does not have significant numbers to show otherwise. A company spokes person says, The pilot project covers Mumbai and New Delhi and NCR across 100 retailers. However, we feel that the markets need to mature a little more before we extend the same service across other cities."

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Undoubtedly, mobile users would have their fair share of apprehensions about conducting financial transactions over the mobile spectrum. However, people always have their doubts about using a new technology. This was the case about a decade ago when online payment was still new concept. Cutting to the present, there are about 4.6 million online banking users in India today, with the number expected to quadruple by 2007-08 (IAMAI). Similarly, users can be expected to develop greater faith in their mobile phones in the coming years. Currently, service providers are taking efforts to ensure maximum security in this realm. Adiseshann says, The use of Pay Mate does not require the user to enter any confidential information like credit card number as the payments are linked directly to the bank account. Each customer is given a PIN which is used for conducting transactions. Despite security issues, time-starved consumers are bound to turn to a method of payment that comes with the least hassles. Convenience will be the driving factor for m-commerce. This is the reason why services like m-ticketing, prepaid easy recharge and m-coupons. It is only a matter of time before consumers realize that transacting through this medium is just as secure as it is with any other medium. In fact, it allows extra security processes to be implanted in mobile phones. Slowly but surely, more and more applications are being provided by telecom operators to their bouquet of services. The mobile phone is well on its way to becoming the single device connecting people to the economy. It wont be long before we will be able to order and pay for your Jumbo King VadaPav through your mobile. Till then, its back to the queue.

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Mobile Commerce at a glance

In the following we characterize the concept of Mobile Commerce and Distinguish it from the concept of Mobile Business. We further examine it in the more common contexts of Electronic Commerce and Electronic Business and present an overview establishing a holistic perspective of Mobile Commerce.

Concept
Before defining the mobile aspects of commerce (Mobile Commerce) and distinguishing them from the mobile aspects of business (Mobile Business), it is imperative to establish working definitions of the terms commerce and business, as they seem to have transcended their dictionary meanings and acquired new significance since the advent of the Internet economy. In this section we further differentiate between the terms electronic and mobile, so as to clarify the respective concepts by showing their similarities and highlighting their differences.

Difference between Business and Commerce

The term business, in this study, refers to all activities undertaken by a firm in order to produce and sell goods and services. These activities are, thus, not exclusively of commercial nature but also include other processes such as procurement, production, customer relationship management (CRM) and human resources management (HRM).

The Oxford dictionary [2002] describes commerce as financial transactions and business among others as selling/purchasing of goods. The term commerce, in this work, refers to selling and purchasing of goods and services in both business- and consumer segments and to activities directly related with such transactions. Examples of such activities are marketing measures and aftersales services. The related activities are included so as to take into account that not each and every transfer of ownership or rights to use a good or service must trigger a monetary transaction. The term commerce is, hence, seen as an integral subset of the broader term business. In accordance with this approach Mobile Commerce is regarded as an integral subset of Mobile Business [Buse, 2002, p. 92; UNCTAD, 2004, p. 25]. Electronic Commerce is correspondingly seen as an integral subset of Electronic Business.

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Difference between Electronic and Mobile Aspects

To understand the difference between Electronic- and Mobile Commerce or between Electronic- and Mobile Business it is essential to understand the similarities and differences between the terms electronic and mobile. The adjective electronic, used within the specific contexts of Electronic Business or Electronic Commerce, signifies an anytime access to business processes managed by computer-mediated networks. Furthermore, the access to such networks is, in this case, stationary. The services are, therefore, not available independent of the geographic location. The adjective mobile, used within the specific contexts of Mobile Commerce or Mobile Business, signifies an anytime and anywhere access to business processes managed by computer-mediated networks. The access takes place using mobile communication networks, making the availment of these services independent of the geographic location of the user. Computer-mediated networks are electronically linked devices that communicate interactively over network channels [Mesenbourg, 1999, p. 3]. (Tele-) Communication networks are, in turn, used to provide access to these computer-mediated networks. The conventional access to the Internet using fixed-line communication networks, such as Dial-up connections or Local Area Networks (LAN), is referred to as stationary access. This form of access is also called the stationary or immobile Internet. The Conceptual Background and Perspective At this point it would be useful to differentiate between the terms mobile and wireless. As opposed to the term mobile that signifies an anytime, anywhere access to computer-mediated networks, wireless is just a method of communication between electronic devices, e.g. with the help of infrared interfaces. Whereas a mobile device is per se wireless, not every wireless device may be suitable for feasible mobile applications For example, Wireless Local Area Networks (WLAN) with a limited range of maximum 300 meters cannot support feasible mobile applications.

Defining Electronic Business and Electronic Commerce

In the following we describe the earlier mentioned electronic aspects of the Internet economy, namely Electronic Business and Electronic Commerce. Electronic Business Electronic Business is often referred to as E-Business or eBusiness. This book works with the full form Electronic Business. Other

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forms are however left unaltered if cited from a reference. The prevailing view in the academic literature regarding Electronic Business is reflected in the following definition: E-Business is the integration of systems, processes, organizations, value chains and entire markets using Internet-based and related technologies and concepts. [Stanoevska-Slabeva, 2003, p. 2] The United States (US) Bureau of the Census, the statistical division of the US Department of Commerce, measures Electronic Business as follows: Real time is a form of information processing where output is generated nearly simultaneously with the corresponding input. Used mostly where the results of the computation are used to influence a process while it is occurring. [Globaltec, 2004, p. 1] Electronic Business (e-business) is any process that a business organization conducts over a computer-mediated network. Business organizations include any for-profit, governmental or nonprofit entity. Their processes include production-, customer- and internal or management-focused business processes. [Mesenbourg, 2001, p. 4] According to the United Nations Conference on Trade and Development (UNCTAD) Electronic Business processes include Customer Acquisition and Retention, Electronic Commerce, Order Fulfillment and Tracking, Inbound and Outbound Logistics, Inventory Control, Finance-, Budget- and Account Management, HRM, Product Service and Support, Research and Development as well as Knowledge Management [UNCTAD, 2004, p. 26]. Electronic Commerce Electronic Commerce is often referred to as E-Commerce or eCommerce. This book works with the full form Electronic Commerce. Other forms are however left unaltered if cited from a reference. Electronic Commerce has found much more attention in the literature than Electronic Business, owing to its proximity to the consumer. There are many definitions of Electronic Commerce in circulation, with each one emphasizing some different aspects of Electronic Commerce. A very simple definition is delivered by Kalakota and Robinson: E-Commerce is simply the buying and selling of products and services over the Web. [Kalakota/Robinson, 2002, p. 8] The prevailing definitions may be divided in two primary categories:

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The first category works with a narrow, restrictive definition, requiring the whole transaction to take place in electronic form and having a monetary character. For example, the German Federal Statistical Office reportedly uses the following definition for Electronic Commerce: Transactions are regarded as Electronic Commerce, when the offer for sale as well as the purchase or the actual availment of a product or service is carried out electronically, with the help of a computer-mediated network, against monetary payment.[Fischer, 2003, p. 1] [Abridged translation by authors] This definition seems to be too restrictive as it does not recognize the fact that just some parts of a transaction might also be carried out electronically without having to process all the steps of a value-chain in that form. Further, the emphasis on the monetary character ignores the commercial nature of marketing measures (transactions carried out with the intent to sell a product or service) and after-sales services (transactions carried out in continuation of a preceding monetary transaction), both important features of commercial transactions. The second category works with a broader definition of Electronic Commerce, as can be seen in the definition used by the US Bureau of the Census: Electronic commerce (e-commerce) is any transaction completed over a computer-mediated network that involves the transfer of ownership or rights to use goods or services. [] Completed transactions may have a zero price (e.g., a free software download). [Mesenbourg, 2001, p. 4] Also according to the Organization for Economic Co-operation and Development (OECD) it is the method used to place or receive an order, not the mode of payment or the channel of the delivery that determines whether a transaction is considered as an Electronic Commerce transaction [OECD, 2002, p. 61]. The primary criteria for Electronic Commerce, thus, are the (at least partially) electronic form of a transaction and the transfer of ownership or rights to use a good or service whether against monetary payment or otherwise. This discussion shows that Electronic Commerce Beings as an integral subset of Electronic Business, since all the aspects of Electronic Commerce also take place in Electronic Business but Electronic Business has a larger scope than Electronic Commerce.

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Defining Mobile Business and Mobile Commerce

In the following we describe the earlier mentioned mobile aspects of the Internet-economy, namely Mobile Business and Mobile Commerce. Mobile Business Mobile Business is often referred to as M-Business or mBusiness. In this study we work with the full form Mobile Business. Other forms are however left unaltered if cited from a reference. Mobile Business is often described as an extension of the traditional Electronic Business to wireless devices [Magic, 2000, p. 3] or as an additional channel for it [Stanoevska-Slabeva, 2004, p. 463]. Yet others regard it as the application infrastructure required to maintain business relationships and sell information, services, and commodities by means of the mobile devices. [Kolakata/Robinson, 2002, p. 8]. The UNCTAD defines Mobile Business in the following terms: Mobile Business involves business-related communication among individuals and companies where financial transactions do not necessarily occur. [UNCTAD, 2002, p. 89] Thus, we can regard Mobile Business as an extension of Electronic Business that also provides for some new, unique features, such as location based, context-sensitive services accessible via Mobile Internet and hitherto unknown in Electronic Business. Mobile Business shares, but is not limited to, some common features with Electronic Business that also provides a vast range of services not possible with Mobile Business, as can be seen in figure 1.

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The graphic illustrates the following facts: 1. Electronic Business and Mobile Business offer many similar services in both commercial and non-commercial areas. Respective examples are sale/purchase of goods and services on the one hand and CRM on the other. 2. Electronic Business offers additional services, not feasible with Mobile Business, e.g. coordination of Research & Development activities. 3. Mobile Business, too, offers unique services, not feasible with conventional Electronic Business, e.g. context-sensitive CRM. 4. Electronic Commerce is an integral subset of Electronic Business. 5. Mobile Commerce is an integral subset of Mobile Business. 6. Electronic Commerce and Mobile Commerce offer many similar services, e.g. booking an entrance ticket for a football match. 7. Electronic Commerce offers additional services, not feasible with Mobile Commerce, e.g. selling of high-quality, non-standardized products requires an intensive presentation not feasible on mobile devices. 8. Mobile Commerce, too, offers unique context-sensitive, location-based services, not feasible with Electronic Commerce, e.g. search for the

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nearest ATM specific to a dynamic location. This discussion establishes a Mobile Commerce perspective and distinguishes it from other related terms. The concept of Mobile Commerce is now further characterized.

The Features of Mobile Commerce

Mobile Commerce is characterized by some unique features that equip it with certain advantages against conventional forms of commercial transactions, including Electronic Commerce 1. Ubiquity: Ubiquity means that the user can avail of services and carry out transactions largely independent of his current geographic location (anywhere features). This feature can be useful in many situations, e.g. to cross-check prices while standing in a supermarket. 2. Immediacy: Closely related to the feature of ubiquity is the possibility of real-time availment of services (anytime feature). This feature is particularly attractive for services that are time-critical and demand a fast reaction, e.g. stock market information for a broker. Additionally, the consumer can buy goods and services, as and when he feels the need. The immediacy of transaction helps to capture consumers at the moment of intention so that sales are not lost in the discrepancy between the point of intention and that of the actual purchase. 3. Localization: Positioning technologies, such as the Global Positioning System (GPS), allow companies to offer goods and services to the user specific to his current location. Location based services can be, thus, of fared to meet consumers needs and wishes for localized content and services. 4. Instant connectivity: Ever since the introduction of the General Packet Radio Service (GPRS) 12 mobile devices are constantly online, i.e. in touch with the network (always-on feature). This feature brings convenience to the user, as time-consuming dial-up or boot processes are not necessary. 5. Pro-active functionality: Mobile Commerce opens, by the virtue of its ability to be immediate, local and personal, new avenues for push marketing such as content- and product offers. Services like Opt-in advertising can be offered, so that a user may choose the products, services and companies which he wants to be kept informed about. The Short Message Service (SMS) 14 can be used to send brief text messages to consumers informing them of relevant local 20

offerings that best suit their needs. This feature ensures that the right (relevant) information can be provided to the user at the right place, at the right time. On the other hand, the user does not have to fear missing some potentially crucial information or getting it too late. 6. Simple authentication procedure: Mobile telecommunication devices function with an electronic chip called Subscriber Identity Module (SIM).15 The SIM is registered with the network operator and the owner is thus unambiguously identifiable.

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Application Of Mobile Commerce

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PRIMARY RESEARCH
QUESTIONNAIRE
Income Group: 0-5 lakhs

5-10 lakhs

10 lakhs+

1. Do you have access to internet on your smartphone? Yes No 2. Frequency of using mobile banking? Daily Twice a week 3. You use mobile banking for? Transactions e-statements 4. Why did you enroll for mobile banking? Convenient Cost effective

Rarely

Mobile commerce

Saves time

5. Do you think mobile banking is secure? Yes No 6. Is mobile banking user friendly? Yes No 7. Do you think the charges levied on mobile banking services are reasonable? Yes No

8. You would feel more secure using Internet banking (through your PC/laptop) than using mobile banking (through your mobile/PDA)? Yes No 9. What is your perception about the security level of transactions in mobile banking? Secure Fairly secure Neutral Not secure

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RESULTS AND ANALYSIS: Sample size was 50. The survey was conducted amongst people of various age groups who had access to internet on their mobile phones.

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Majority of the respondents used M-banking twice or more in a week. This is a positive sign and signals the growing use of m-commerce in India.

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M-commerce is still in a very nascent stage and is yet to pick up. However, transactions are going the online way. Big time.

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As the results show, people are still a bit apprehensive about the security of their transaction via m-banking.

Banks still need to make the user interface a lot more user friendly so that more and more people start using the services.

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Consumers still uncertain about secure transactions over mobile. Since the concept is fairly new in India, it is bound to take time until it finds wide acceptance. However, given the convenience of the transactions, people dont mind using the fairly secure services, as its perceived to be.

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Mobile Commerce & Banking

Finance-related services that are offered by employing telecommunication technologies are generally referred to as Mobile Financial Services. The offered services can be divided into two categories: Mobile Payment & Mobile Banking mobile

The purpose of this chapter is to serve as a literature review on Mobile Banking. It describes, in detail, various services pertaining to Mobile Banking and explains the technical issues specific to this particular application. Even as Mobile Banking is defined and its services explained, we identify issues that potentially possess critical relevance for the future of Mobile Banking and which cannot be answered in a purely theoretic framework. The financial services business comprises of: 1. Deposit business: the acceptance of funds from others as deposits or of other repayable funds from the public unless the claim to repayment is securitized in the form of bearer or order debt certificates, irrespective of whether or not interest is paid; 2. Lending business: the granting of money loans and acceptance of credits; 3. Discount business: the purchase of bills and exchange of chouse; 4. Principal broking services: the purchase and sell of financial instruments in the credit institutions own name for the account of others; 5. Safe custody business: the safe custody and administration of securities for the account of others; 6. Investment fund business: all activities that are permitted to investment companies; 7. Guarantee business: the assumption of guarantees and other warrantees on behalf of others; 8. Giro business: the execution of cashless payment and other clearing operations; 9. Underwriting business: the purchase of financial instruments at credit institutions own risk for placing in the market or the assumption of equivalent guarantees;

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10. E-Money business: the issuance and administration of electronic money; and 11. the incurrence of the obligation to acquire claims in respect of loans prior to their maturity. Scope of Financial Services In addition to banks there are some other institutions that provide a limited range of similar services. Instead of offering classic banking services such as deposit- or giro business they specialize in services relating primarily to stock markets. The scope of financial services, 1. Investment broking: the brokering of business involving the purchase and sell of financial instruments or their documentation; 2. Contract broking: the purchase and sell of financial instruments in the name of and for the account of others; 3. Portfolio management: the administration of individual portfolios of financial instruments for others on a discretionary basis; 4. Own-account trading: the purchase and sell of financial instruments on an own-account basis for others; 5. Money transmission services: the execution of payment orders; 6. Foreign currency dealing: dealing in foreign notes and coins; 7. Credit cards business: the issuance or administration of credit cards and travelers chouse unless the card issuer also provides the service underlying the payment transaction.

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Services Offered in Mobile Banking

Mobile Banking, as defined above, includes a wide range of services. These services may be categorized as following 1. Mobile Accounting 2. Mobile Brokerage 3. Mobile Financial Information60 These sub-applications of Mobile Banking are discussed below in detail. Mobile Accounting Mobile Accounting can be defined as transaction-based banking services that revolve around a standard bank account and are conducted and/or availed by mobile devices. Not all Mobile Accounting services are however necessarily transaction based Mobile Accounting represents basically that part of Mobile Banking which deals with utilizing account-specific banking services of non informational nature via mobile telecommunication devices. Mobile Accounting services may be divided in two categories to differentiate between services that are essential to operate an account and services that is essential to administer an account. Additionally, services are required that inform a customer of transactions and other activities involving his or her account. It is for this reason that Mobile Accounting is offered almost invariably in combination with services from the field of Mobile Financial Information.

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Mobile Brokerage Brokerage, in the context of banking- and financial services, refers to intermediary services related to the stock exchange centre, e.g. sell and purchase of stocks, bonds, funds, derivatives and foreign exchange among others. Mobile Brokerage, thus, refers to mobile financial services of non informational nature revolving around a securities account Mobile Brokerage, too, may be divided in two categories to differentiate between services that are essential to operate a securities account and services that is essential to administer that account. As is the case with Mobile Accounting, Mobile Brokerage requires informational services in order to facilitate brokerage activities. For this reason, Mobile Brokerage is invariably offered in combination with services related to Mobile Financial Information.

Account Operation in Mobile Brokerage Operating a securities account is primarily concerned with selling and purchasing of financial instruments. Mobile Brokerage allows placing and cancellation of orders to sell as well as purchase securities and other financial instruments Mobile Brokerage facilitates full-scale orders with all necessary details such as price limits and the desired stock exchange centre. This section however raises interesting questions about the usefulness of and demand for the offered services. Account Administration in Mobile brokerage The following mobile services can be utilized to administer a securities account. 1. Access administration: As with Mobile Accounting mobile devices may

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be used to administer the access to an account, e.g. to change the individual PIN or to request new TANs. 2. Administer order book: Orders to sell or purchase stocks, which are not yet carried out, can be modified via mobile devices that are allowed to access the customer order book. Additionally, new standing orders may be placed to sell/purchase a particular stock on reaching a predefined threshold value

Mobile Financial Information Mobile Financial Information refers to non-transaction based banking- and financial services of informational nature. This sub-application may be divided into two categories: 1. Account information 2. Market information Information services are an integral part of Mobile Accounting and Mobile Brokerage but can also be offered as an independent module, i.e. Mobile Financial Information can be offered without providing Mobile Accounting or Mobile Brokerage but vice versa is not feasible. Mobile Financial Information services are generally provided by credit institutions and financial services institutions. However, there are other enterprises too that do not belong to either of this category but still provide market information via mobile devices. Mobile Financial Information services include subsets from both banking and financial services and are meant to provide the customer with anytime, anywhere access to information. The information may either concern the bank and securities accounts of the customer or it may be regarding market developments with relevance for that individual customer. The information is customized on the basis of preferences given by the customer and sent with a frequency decided by him. The information should be provided, ideally, on both, pull and push basis.

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Account Information in Mobile Financial Information The term Account Information, as used here, refers to information that is specific to a customer and his bank, even though it does not necessarily involve a monetary transaction. Mobile services that belong to this category are: 1. Balance inquiries: Mobile devices may be employed to check the current financial status of own bank or securities accounts. 2. List of latest transactions: Mobile devices may be used to request a list of latest transactions performed on an account. This service works with a standard, pre-specified number of latest transactions that are reported, as and when demanded. Most of the banks provide a list of up to five latest transactions. 3. Statement requests: A statement request unlike the request for a list of latest transactions generates a list of all transactions in a given period, for instance in a week or in a month. Statements may be requested either manually, as and when needed. Alternatively the bank may be asked to automatically send statements regularly in pre-specified intervals, e.g. weekly. In Mobile Banking the account statements can be requested via and/or delivered on mobile devices.

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4. Transaction thresholds: The bank may be instructed to automatically alert the customer via SMS whenever transactions (credits as well as debits) exceeding a certain amount are performed on the account. 5. Balance thresholds: A similar threshold alert may be activated for the balance status of the account. The customer may be informed via SMS whenever the balance falls below a certain predefined level. This service may be useful to help the customer avoid unpleasant situations of not being able to honor his commitments. 6. Threshold alerts for stock prices: The bank may be instructed to send an alert on mobile devices, via SMS, when prices of some particular stocks fall or jump to a predefined threshold value and ask for further instructions. 7. Returned chouse/cheque status: The customer may be informed without time-delay if one of his deposited chouse has not been honored and corrective steps are required. 8. Credit cards information: The customer may check anytime and anywhere the current status of his credit cards and the amount that he may utilize at that given point of time. 9. Branch and ATM locations: Mobile devices may help finding the nearest branch or ATM affiliated to a bank. The current location of the customer may be determined by positioning the mobile device. This service may be particularly useful while traveling. 10. Helpline and emergency contact: Mobile devices may be provided with content that is required in emergency situations, for instance to block a lost credit card. The information may be either embedded in the telephone menu, e.g. in cooperation with a network carrier or the information may be provided on a WAP page analogue to a web page. 11. Information on the completion status of an order: The bank may use push services to inform the customer via his mobile device regarding whether or not his orders could be carried out. This ensures that urgent information can be provided to the customer while on the move. 12. Product information and offers: The bank can provide information about its products and new offers to a customer on the move. A customer

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can pull the information that he wishes to access. On the other hand the bank can push the information/offers that the customer has identified as interesting and is willing to receive.

Market Information in Mobile financial services The term Market Information as opposed to Account Information refers to information with a macro-scope. This information is not directly related to the customer account. It is generated either externally, e.g. exchange rates or central banks interest rates, or internally by the individual bank, e.g. bank-specific interest rates. The individual bank-customer does not play a direct role in this process. The information may be later sorted out to cater to the individual needs and preferences of a particular customer, if so desired by him, 63 and subsequently delivered on a mobile device of his choice, e.g. a mobile phone or a PDA. Information in this category generally concerns: 1. Foreign exchange rates 2. Interest rates 3. Stock market news and reports 4. Commodity prices (e.g. gold and raw materials)

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Models For Mobile Banking Business

A wide spectrum of Mobile/branchless banking models is evolving. These models differ primarily on the question that who will establish the relationship (account opening, deposit taking, lending etc.) to the end customer, the Bank or the Non-Bank/Telecommunication Company (Telco). Another difference lies in the nature of agency agreement between bank and the Non-Bank. Models of branchless banking can be classified into three broad categories - Bank Focused, Bank-Led and Nonbank-Led

The bank-focused Model The bank-focused model emerges when a traditional bank uses non-traditional low-cost delivery channels to provide banking services to its existing customers. Examples range from use of automatic teller machines (ATMs) to internet banking or mobile phone banking to provide certain limited banking services to banks customers. This model is additive in nature and may be seen as a modest extension of conventional branch-based banking

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The bank-led model The bank-led model offers a distinct alternative to conventional branch-based banking in that customer conducts financial transactions at a whole range of retail agents (or through mobile phone) instead of at bank branches or through bank employees. This model promises the potential to substantially increase the financial services outreach by using a different delivery channel (retailers/ mobile phones), a different trade partner (telco / chain store) having experience and target market distinct from traditional banks, and may be significantly cheaper than the bank-based alternatives. The bank-led model may be implemented by either using correspondent arrangements or by creating a JV between Bank and Telco/non-bank. In this model customer account relationship rests with the bank The non-bank-led model The non-bank-led model is where a bank does not come into the picture (except possibly as a safe-keeper of surplus funds) and the non-bank (e.g. telco) performs all the functions is where a bank does not come into the picture (except possibly as a safe-keeper of surplus funds) and the non-bank (e.g. telco) performs all the functions Risks Attached To Business Models Agents Related Risks arise from substantial outsourcing of customer contact to retail agents. From a typical banking regulators perspective, entrusting retail customer contact to the types of retail agents used in both the bank-led and nonbank-led models would seem riskier than these same functions in the hands of bank tellers in a conventional bank branch. These retail agents may operate in hard-to reach or dangerous areas & they lack physical security systems and specially trained personnel. The lack of expert training may seem a particular problem if retail agents functions range beyond the cash-in/cash-out transactions of typical bank tellers to include a role in credit decisions. Banking regulation typically recognizes multiple categories of risk that bank regulators and supervisors seek to mitigate. Five of these risk categories credit risk, operational risk, legal risk, liquidity risk, and reputation risk take on special importance when customers use retail agents rather than bank branches to access banking services. The use of retail agents also potentially raises special concerns regarding consumer protection and compliance with rules for combating money laundering and financing of terrorism.

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E-Money Risks relates to acceptance of repayable funds from retail customers by Non-Bank entities that are not subjected to prudential regulation and supervision. Risk is that an unlicensed, unsupervised Non-Bank will collect repayable funds from the public in exchange for e-money and will either steal these funds or will use them imprudently, resulting in insolvency and the inability to honor customers claims

(i) The pioneer phase when a few early entrants launch and test out their products and start to find success; (ii) The breakout phase when the success of the pioneers is noticed, leading to rapid entry of new firms and expansion of the market; (iii) A consolidation phase when a shakeout of firms occurs due to increased competition or external factors such as regulation, although the number of customers continues to grow but at a diminishing rate; (iv) A final maturity phase when the number of firms in the industry and its norms and rules have been settled, and the market grows at a steady, natural rate

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Regulatory Framework suggested for Mobile Payments

Payment Account to be used for Mobile Payments e.g. Credit card account, Savings Bank Account, virtual account, Pre-paid account should be similar existing Credit card, Debit Card / bank account issuance framework.

While we can use innovative mechanisms to enable payments through mobile phones, following should be taken into considerations RBIs Guidelines and policies on KYC RBIs Guidelines and policies on AML Financial settlement between the various entities should be undertaken as per the existing Guidelines and processes. The messaging system between Application and Bank needs to be regulated and standardized to ensure standard transaction processes and settlement systems. Guidelines need to be evolved to ensure complete interoperability of between all the stakeholders of mobile payments. This will lead to the growth of ecosystem and will benefit all the stakeholders. Guidelines need to be evolved for allowing domestic money remittances by Cash In and Cash Out at Telco Outlets including usage of Telcos KYC and adherence of AML guidelines. Telcos role should include providing platform to initiate transactions and carry the messages to the banks systems

Regulatory policies and standards

Service providers, Telcos should have the independence to develop and launch customized applications targeted towards their customer base however messaging system between application and Banks needs to be regulated. This will lead to standardization of the transaction processes and settlement systems. These should include Instruction formats for all mobile initiated payments, remittances and banking

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Security standards for instructions, interfaces, data storage and transactions Technology standards and guidelines for various modes of data transfer like SMS, GPRS etc. Anti Money Laundering control for Telcos especially for proposed services like deposits being accepted and held by Telcos for Funds Transfer and remittances. While Telcos provide an opportunity to reach out to the unbanked and underbanked population of the country, proper regulatory control should be established to ensure conformation to KYC and AML guidelines. The Telcos offering these services should follow bank-approved processes that fulfill the regulatory requirements while performing such transactions. The Bank may appoint payout agents such as the Post Office, other FIs, selective merchants etc Sign up for service: Existing or new customer: Bank controlled through regulated KYC

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Scope Of Mobile Banking

Capgemini Analysis Of Activeness Of Retail Banking Products & Services

The world bank report on retail banking sported a research by Cap Gemini of various banks which were asked to rate the most active retail banking services and it was found that ATM, Online Banking & Direct debit were most active of them all indicating the exciting trend of customers willingness to use new age banking services.

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What Consumes Think? Atom Technologies, a leading company specializing in mobile commerce in India carried out a research on consumer patterns vis--vis payments & willingness towards use of mobile phones involving over 750 respondents. Some Of the Statistics Are As Follows: 1: Preferred Mode Of Payment

PREFERED MODE OF PAYMENT

400 350 356 264 200 156

People (Numbers)

300 250 200 150 100 50 0 cash

24 debit card online transaction credit card prepaid cards

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2: Consumers Use of Internet & Mobile Banking Services

INTERNET & MOBILE BANKING USERS

700 600 661

People (Numbers)

500 400 300 200 200 100 0 Internet Banking Mobile Banking

3: Preferred mode of spending given a chance to use mobile phones for the same.

PREFERENCE OF SPENDING USING MOBILE PHONE

People (Numbers)

500 400 300 200 100 0

Bi lls ity

441 323 210 232 56 74 231 127 222

Places to Spend

Fl ow Ho er m s e De liv M er ob y ile To pu p O th er s

ta ur an ts Ss ho pp in g Ti ck et s

Ut il

Re s

ift s

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4: Willingness to Carry out Transactions using Mobile Phones

PREFERENCE OF MAKING ATM TRANSACTION THROUGH MOBILE
800 700

695

People (Numbers)

600 500 400 300 200 100 0 Yes No 305

Some Major Findings Of Research Report Were: a) Most of the respondents who are fascinated by this new technology and are ready to use it are ICICI bank customers. b) 722 respondents keep plastic cards irrespective of whether it is debit card or credit card and irrespective of whether they use it or no. This shows that we have huge market of Card holders, so our service will be definitely used by these respondents. c) A common observation among those who use GPRS,MMS enabled handsets has been that they would like to spend using mobile phones for purposes such as eating out & entertainment. d) Even though maximum numbers of people keep plastic cards, they still would prefer to go for cash/cheque transactions. This shows that, people carry Credit/ Debit card but they are still not welcomed fully by Indian People. Hence people still have not come out of the age of cash transaction because they find it is a secure method wherein they know that there is no loss of data or such. e) Internet Banking is becoming a common factor, but still mobile banking is not touched upon, people are not aware of mobile banking.

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f) Majority of the plastic card users who are seen to be conservative in the sense that they prefer spending using the plastic cards on a monthly basis, prefer spending using cash/cheque as the preferred option g) Necessity influences most of the plastic card users to make transactions i.e. majority of the plastic card users use their cards only in case of emergency.

h) A huge number of respondents who seem to be fascinated with Payments by Mobile are in the age group of 18-35

Adapting to Requirements of Core Target Groups Banks, today, are increasingly confronted with technology-savvy customers who are often on the move. Todays customers want to organize banking transactions while on the move, irrespective of opening hours [Postbank, 2004, p. 1]. Banks are responding to this change by introducing mobile services. Core target groups of Mobile Banking can be divided in three categories 1. The Youngsters: The segment of 1418 years old youth has acquired an important role in the growth of mobile telecommunications and related services. This group is reported to be technology-savvy and willing to experiment with innovative products and services. The youngsters, often on the move, demand ubiquitous, anytime service. Though the youngsters as a group are hardly relevant for banks from a financial perspective, they represent the prospective clientele of tomorrow and need to be cultivated in the middle to long-term marketing strategy of the banks. An example for tapping into the potentials of this customer group was set by Dexia Bank of Belgium. Dexia decided to concentrate on very young segments in the field of Mobile Banking and introduced in cooperation with the Belgian network carrier Mobistar a new brand called Axion. This brand was sold as Tempo After School package to school-going children, who received favorable conditions for their mobile phone connections along with a bank account to manage their pocket money. This offer seems to have played a key-role in increasing the number of Mobile Banking customers of Dexia to well over one million.

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2. The Young Adults: This segment is thought to be technology- and innovation friendly. Though this group is financially not very strong either, many members of this group are known to be involved in stock market activities and are increasingly attractive for banks. Further, this group can be expected to enter in short to middle-run a professional carrier so that it needs to be cultivated in order to retain customers of this age-group once they enter professional lives.

3. The Business People: This group of customers, generally in the age group of 2536 years, is thought to be the most important one for Mobile Banking. Members of this group are generally well educated and economically well-off. They need to be often on the move for professional reasons. Therefore, they carry mobile devices to ensure accessibility. For this reason they are ideal candidates to use services offered via mobile devices. From the banks perspective this group is particularly attractive on account of its relative economic prosperity and the need for financial services, e.g. home loans for young families. Such a group of customers is generally looking forward to do business with known and trusted brands that simultaneously offer individual advisory services In order to cater to requirements of these above-mentioned customer groups banks tend to look at Mobile Banking as a promising option. However, these services apart from being an add-on feature for the targeted customer groups also have their own utility for the banks.

Mobile Banking as Distribution Channel Mobile Banking enhances the number of existing channels of distribution that a bank employs to offer its services. The term distribution channel hereby signifies a medium of delivery that a vendor employs to deliver his products or services to customers. Other distribution channels in the banking sector include branch offices, Internet Banking and Telephone Banking. Some authors, e.g. Luber [2004], refer to Mobile Banking as a sales channel. This study however works with the term distribution channel; for a distribution channel is used to deliver products or services irrespective of whether the products are bought by the customer against monetary payment or provided free-of-charge by the

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vendor. The efficiency of a distribution channel can be measured by its fulfillment of three major objectives, which are closely related to each other. Increasing Sales Volume One of the primary tasks of a distribution channel is to increase the volume of demand for products at profitable prices. This objective is achieved by increasing operational efficiency so that those losses in the sales are minimised that are caused by delays in catering to customer orders. Further, a favorable reputation of the firms logistical capacities may help generate additional orders. Mobile Banking can contribute to achieve this goal by following means 1. Anytime, anywhere access to banking services; 2. Availability of push services to suggest transactions on an urgent basis, e.g. to sell certain stocks when a crisis erupts; 3. Face-to-face talks with the personal consultant via video telephony. As example, ING Postbank of Netherlands launched an innovative scheme in the year 2001 to boost its sales volume. Every new customer who deposited 450 in a savings account was provided with a mobile telephone worth 150 and capable of accessing Mobile Banking services of the ING Postbank. Within six weeks more than 500,000 new customers and over 225 millions in deposits could be acquired. More importantly, 97% of these new customers became regular users of Mobile Banking Reducing costs of distribution In times of increased competition, a distribution channel must organize business processes efficiently so as to reduce distribution costs. The pressure to optimize business processes and reduce costs can be coped by rationalizing organizational structures and increasing productivity. Mobile Banking can contribute to achieve this goal by following means 1. The manual collection, processing, transmission and archiving of data by bank employees in branch offices is substituted, as in the Internet based banking, by automated processes. 2. As against Internet Banking, Mobile Banking makes it possible to offer ubiquitous, semi-personal consulting services in real time. These services can be centralized to exploit economies of scale and scope as well as regional cost differences.

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3. Diversification of distribution channels helps reduce the business costs that arise in the form of sales lost due to sudden collapse of a channel and to minimize customer dissatisfaction. Increasing customer satisfaction Mobile Banking may help a bank increase the customer satisfaction ratio by adopting the following means 1. Streamlining of business processes to increase efficiency; 2. More attention and better consulting for individual customers due to automation of routine processes; 3. Innovative anywhere, anytime services customized for individual preferences and the current geographic location of the customer provide value-added to the customer;

4. The collected data can be utilized to create customer profiles. Increased customer satisfaction can help reduce the customer attrition rate.

Mobile Banking as Source of Revenue Apart from functioning as an additional distribution channel Mobile Banking can also serve as a source of revenue. Mobile services can be offered on a premium basis. The price, in this case, should be reasonable enough so that customers are willing to pay them but at the same time they should be from a financial point of view higher than the costs incurred by the bank. Additional revenues can be generated in two ways: 1. Offering innovative, premium services to existing customers; 2. Attracting new customers by offering innovative services. New customers contribute to revenue generation not only by utilizing mobile services but also by using other conventional distribution channels. Mobile Banking as Image Product

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Finally, Mobile Banking can be also used as an image product to gain strategic advantages. The bank may hope to win or retain a positive image amongst technology-savvy sections of the society and strengthen the brand reputation of being innovative and visionary [Georgi/Pinkl, 2005, p. 60]. The image of being a technology leader can help the bank win customers who are looking for modern products and services and at the same time help it retain its own existing base of technology-savvy customers, some of whom otherwise might have switched to other banks while looking for such a product. Further, the bank can profit from an early-mover advantage by actively shaping technological standards that are based on ones own strengths. Negative fallout of following already-set standards may be thus avoided. This is, of course, fraught with a substantial risk of incurring financial and image losses if the propagated technology fails to establish. These are the benefits that banks might expect by offering Mobile Banking services. In the following we describe relevant issues that need to be clarified and/or verified in later sections of this study.

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CONCLUSION

In the coming few years the Indian banking sector is expected to grow at a rate over 20% while the telephony sector is expected to grow by over 30%. Over 70% of the retail banking business comes from urban & semi urban areas in India. These statistics portray a very bright future for mobile financial services as majority of the bread earning population would lie in the 25-40yrs age group. Going forward the major challenge for mobile banking service would be to educate the end user to make use of the service in day to day life and this factor will be prominently governed by the ease of use of the service. In India the toughest part will be to extend this service to the rural masses. 65% of fee based income of banks in India comes from retail banking , given this scenario mobile financial services will go a long way forward in cutting operating cost for banks fuelling rapid growth and competition. The banks will have to take an aggressive marketing stance to ensure the success of mobile banking services. Bank will be able to beat off the competition by carrying out proper customer segmentation and ensuring the convergence of various services that the bank has to offer for different customer segments. RBI needs to play the role of an aggressive proactive catalyst to ensure that the regulatory framework is in place to provide clarity and openness in terms of overlapping regulations for the banking and telephony industry so as to ensure an enabling environment for mobile banking services to grow. Certain guiding principles for the same would be:

1. There should be sufficient certainty around electronic contracting 2. Customers should be adequately protected against fraud and abuse 3. Interoperability should be encouraged, through ensuring that providers have access payment platforms and that consumers are able to switch financial providers

4. Account opening CDD procedures should be risk-based, and not unduly prejudice remote account openings by small customers

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5. Adequate provision should be made for the issuance of e-money by appropriately capitalized and supervised entities which are not necessarily banks

If mobile banking is to realize the potential of massively extending access to safe, convenient and affordable financial services to those who today lack it, then a suitable environment is required. In its absence, mobile banking may simply amount to adding another convenient channel for already banked customers. For millions perhaps billions of lower-income people around the world, a mobile phone represents more than just a tool for communication. It can also become a means of extending financial services to people without bank accounts, setting off a virtuous circle of benefits to individuals, families, communities and nations. Only active collaboration between financial and telecom regulators, financial institutions, mobile operators and handset manufacturers will make this possible.

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BIBLIOGRAPHY
Atom Technologies Research on M-Commerce (2007) FinMark Forum, April, available via http://www.finmarktrust.org.za/forums/Presentations/presentations.ht m Hamburg University , Report On Mobile Banking (2004-05) Kruger, G Extending the payments franchise to the mobile phone, presentation (2005) Krueger, M The Future of M-PaymentsBusiness Options and Policy Issues (2001), Lyman, T, G Ivatury and S Staschen The Use of Agents in Branchless Distribution for the Poor, CGAP Occasional Paper, (2006) Millard, S & V. Saporta Central Bank and payment systems: Past, present, future, (2005) Nokia Horizons (2008) RBI (Circular on Mobile Banking guidelines In India; (2006) http://www.rbi.gov.in Schapp, S & R Cornelius U-commerce: leading the new world of payments, VISA, (2002) http://www.corporate.visa.com/md/dl/documents/downloads/u_whit epaper.pdf VISA Payment Solutions for Modernizing Economies, White Paper http://www.corporate.visa.com/md/dl/documents/downloads/mewhite_paper.pdf(2004) UNTAD Report (2004) World Retail Banking Report; Capgemini (2007)

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