Mobility

September 29, 2006
Pay Your Bills at the Click of a Button

Geetanjali Babbar

Tired of standing in a long queue to get your passbook updated? Want to make a demand draft? Take a breath ... Mobile banking is making inroads in to the Indian market. Mobile banking will enable users to complete transactions at the click of a button! Visiting the banks will soon become a thing of the past. Though still in a nascent stage in India, mobile banking has a long way to go. We are trying to figure out what this service has in kitty for an average customer.

NEW DELHI -- Over the last decade, banking has evolved from being a brick and mortar entity to allowing customers to transact over the net or over their mobile phone offering them the convenience of banking wherever they are, and irrespective of whether the bank has a branch in that place or not and well after banking hours.

Mobile banking is a service that allows the users to do banking transactions through their mobile phone without making a call, using the SMS/WAP facility. Mobile banking solutions provide users with a service that enables them to transact their financial business irrespective of time and where they are. Customers can check their balance, stop a cheque payment, or even pay their utility bills and make banking transactions wherever they are. Mobile banking service gives them account information and real-time transaction capabilities from the mobile phones anywhere, anytime.

Mobile banking helps banks provide their customers with 24x7 accessibility. For traditional brick-and-mortar banks, the goal of a mobile channel is principally customer retention; although reduced transaction costs, increased goodwill, and customer demand are also key to driving banks' mobile strategies.

'Pull 'vs 'Push'

The mobile banking channel was used by progressive banks for transmitting account information to customers through the simple but effective SMS. Typically, the customer sends a SMS by typing the predefined code-name for accessing the specified account information along with the password to the number published by the bank. The reply is received from the bank's system as SMS. There is an inherent limitation for the length of the SMS message as the number of characters shall not exceed 160. However, this is hardly a barrier to communicate most of the information required by the customers.

The drawback of this system is that the customer has to 'pull' the information from the bank's system by themselves. Moreover, he is in dark about happenings on his bank account on a real-time basis. For instance, the customer can act immediately if he gets the information on say, insufficient balance in his account for clearing a cheque issued.

The 'push' technology now enables banks to automatically send such alerts to the customer's mobile phone as an when it happens. The convenience and value addition provided to the customers by the real-time mobile alerts is enormous. Once registered for receiving the alerts, the SMS alert is automatically generated by the bank's system and sent to the customers' handsets regardless of their mobile service provider, anywhere in the world. The mobile alerts are extremely popular now among the customers. As the information is sent on realtime, the banks which are providing 'pull' services are upgrading their systems to 'push' mode.

Mobile users have just started to fully utilise the data capabilities in their mobile phones. In Asian countries like India, China, Indonesia and Philippines, where mobile infrastructure is comparatively better than the fixed-line infrastructure and in European countries where mobile phone penetration is very high (80 percent of consumers use a mobile phone), mobile phone banking appeals even more.

In the last couple of years, banks across the globe have invested billions of dollars to build sophisticated Internet banking capabilities. As the trend is shifting to mobile banking, there is a challenge for CIOs and CTOs of these banks to decide on how to leverage their investment in the Internet banking and offer mobile banking, in the shortest possible time.

M-commerce to Hit the Roof

Electronics commerce conducted via mobile devices such as phones and PDAs will take off over the next few years to become a US $25 billion market worldwide by 2006, according to a study released by Frost & Sullivan. By that time, m-commerce will account for 15 percent of the world's online commerce.0

According to Frost & Sullivan, several different market sectors will make up m-commerce, including: automated point-of-sale payments such as vending machines, parking meters and ticket machines; attended point-of-sale payments including shop counters, and taxis; mobile-accessed Internet payments such as merchant WAP sites; mobile-assisted Internet payments, for instance fixed Internet sites using phone instead of credit card; and peer-to-peer payments between individuals. Of these, mobile-assisted Internet payments will account for 39 percent of m-commerce spending and peer-to-peer payments between individuals will account for 34 percent.

The benefits of m-commerce to consumers include convenience for booking and paying for tickets, and managing stock trading or financial transactions. Benefits for merchants and banks include reducing fraud and cash-handling costs, and an estimated 20 percent increase in sales caused by customers being able to make payments more easily and conveniently.

Security: Prime Concern

Security of financial transaction, being executed from some remote location and transmission of financial information over the air, are the most complicated challenges. Security works at different levels , at very high level this can be classified at two levels-- network level and application level security.

According to industry experts, fraud and hacking are the two security issues enveloping mobile banking currently. Some other aspects of security include, physical security of the handheld device, security of the client application running on the device, system should be able to authenticate the user’s identity with service provider before initiating a transaction to prevent hacking, and data protection through encryption.

The privacy of information and the integrity of data transmitted are the primary concerns for banks and customers in the mobile channel. However, with the immense growth of technology, encryption technology has matured to address these issues effectively now.

Though no specific regulations are made for the mobile banking channel, all the regulations on customer data privacy and security have to be followed by the banks.

Still in Infancy in India

Countries like India, China and Phillipines offer huge potential for mobile banking as the mobile infrastructure in these countries is much better than fixed line infrastructure and to that extent that much more evolved. Further, these countries are also witnessing exponential growth in the growth of the mobile industry. This growth can be understood by a fact that India adds, on an average, five million new mobile users every month.

In Asia Pacific, Koreans, known to be tech savvy, and use mobile banking in a big way. Some of them already avail of double-slot mobiles that have two SIM cards -- a regular one and another that's a credit/debit card SIM. About 3.3 million transactions were reported by Bank of Korea in 2004 itself. However, currently, in India it is estimated to be at a a nascent stage.

Commenting on the mobile payments trends in the Asia Pacific region, KNC Nair, heading the banking, financial services and insurance division for Enzen Global Solutions, said: "Banks are enabling financial transactions like payment of utility bills, payment against e-shopping, opening of new deposit accounts, funds transfer between various accounts, etc. also through the mobile through banking medium. As customer confidence increases over the security, it is expected that the mobile phones will be the most preferred and convenient device for conducting banking transactions."

Implementation Issues for Banks

There are no common standards for mobile banking. Many protocols are being used for mobile banking – HTML, WAP, SOAP, XML, etc. Further, there are a large number of different mobile phone devices and it is a big challenge for banks to offer mobile banking solution on any type of device. Some of these devices support J2ME and others support WAP browser or only SMS.

Security of data is one of the largest problems faced in mobile banking. This has to be addressed jointly by mobile application developers, wireless network service providers and the bank’s IT department. Scaling up mobile banking infrastructure to handle growth of customer base is another challenge for the CIOs and CTOs of the banks.

Kapil Sood, director, telecom, Sun Microsystems India, added: "Since mobile banking allows the customer to access his account from anywhere in the world and at any time banks need to ensure that the systems are up and running in a true 24x7 fashion. Sun’s mobile banking solutions address each of the above concerns effectively."

"Creating a eco-system is biggest challenge. Operational challenges and security issues are some of the primary considerations for mobile banking," Prashant Rao, manager, services products, Motorola.

"Banks have to interface their back end systems with multiple mobile service providers having different platforms, which is a technical challenge. However, system integrators are available who will handle this task with suitable service level agreements (SLAs) on accuracy and uptime," noted KNC Nair.