There are four billion mobile phones in the world today. Three-quarters of these are in the hands of people in the developing world, with half of all new growth expected to come just from China and India alone.
This ubiquitous availability is accelerating phone use not only as a means for sending and receiving money, but also for making payments for day-to-day transactions (bills, shopping, tickets, recharge, etc). And this is boosting local economies in Sub Saharan Africa, Afghanistan, Iraq, Pakistan, Bangladesh, Sri Lanka and Nepal.
Typically the spread of new ideas and technologies follow the logistic curve popularly known as the 'S curve' – defined by a few early adopters, few very late, but the bulk somewhere down the middle. One can't usually predict the timing of the 'bulge', but the trend is inexorable, given what has happened till now.
Where are we on this curve, and what are the prospects for mobile phone-based transactions in India?
Recent initiatives have an element of one step forward, one step back.
Mobile banking guidelines were out in 2008, and over two years later the volume of mobile banking related transactions are to cross a few hundred thousand a month instead of the tens of millions that it ought to be by now. So far, more than 40 banks, including ICICI Bank, State Bank of India, StanChart, Corporation Banks and Cosmos Bank, now offer various mobile banking related services.
The recent account to account fund transfer using mobiles launched by banks and the NPCI with a couple of third party technology vendors and banks (IMPS) has also given the space a boost.
But it falls short of expectations. Over a million unique MMID's have been issued but number of transactions against those is just a few thousand! Clearly we are still looking for the elusive early adopter base.
The resolution of a few simple issues will lead to a dramatic jump. Firstly, the move away from an application on a mobile or 'app' centric 'push' model to a mix of SMS and IVR based 'pull' model.
The 'app' approach lends itself to being an elitist system for those who have the comfort of apps and GPRS (graphical and touch intensive) and who are immune to 'bill shock'.
The proportion of people who can actually access, download, and pay for data charges and then are comfortable using apps on smartphones or featurephones is significantly lower than those already comfortable with voice or sms (fingers and voice). Probably a few million at most instead of the hundreds of millions of lives it actually needs to reach out to.
The latter is a mass phenomenon. And enables rapid electronification of the economy, and onset of the 'bulge' in the adoption curve.
Secondly, regulatory dispensation has to be in essence forward-looking. Today's heresies in new market spaces will become tomorrow's doctrine and accepted practice. There is no evidence of any systemic risk arising from mobile, whether it be app or sms or ivr, any more than other accredited retail instruments in play today.
Or for that matter MFI, kickbacks for loans or wealth management, all of which remain unregulated and can in principle be the black swan event in triggering perception of systemic failure.
Therefore putting in more hoops in terms of concomitant use of PIN, OTP, MMID, etc, are all onerous to the consumer already bombarded by e-marketing messages from their service providers.
Anecdotal evidence amongst friends and families indicate that this is a too complicated. Why is this so? It is because as a default people try and replicate what they hitherto have been doing so far with atm, online, pos, ekiosk, etc with what they also want to do on the mobile, but at the same time leveraging the unique capabilities of the mobile to do so in a more convenient or efficient manner.
Mobile regulatory guidelines have to err on the light touch side, especially when it comes to technology.
Thirdly, network effects have to happen. For a country of 1.2 billion with about 200 million cards, the penetration of the POS is woeful. Typically for a service to be considered mass (20 per cent population) the ratio of cards to pos should be 1:30. So in India we would need a base of about 6 million!
However, for a moment let us just take the credit card base of about 20 million, in which case we should have about 600,000 POS. Currently we have half that number. Ecosystem builders or platform mediators have to aggressively build out the two sided platform - connecting consumers to merchants for the common man to benefit.
Fourthly, communication to the public is critical. Achieving behavioural change whatever the perceived benefits is rarely that straightforward. The Reserve Bank of India has realised the merits of communication and awareness in its own activities and role. Commercial banks have not done much at all for mobile banking.
If one looks at the approximately Rs1,500 crore of advertising by telecom companies annually, most of them have moved from explaining the features of their service to how a mobile changes life. The same goes for the handset device makers, as their communication moves from explaining features to functional benefits.
Airtel has done this well with one set of communication on overall branding, and the other – the famous Madhavan and Vidya Balan ads for mobile payments on how it impacts lives.
Ultimately, the proof of key stakeholders' actions will be clear when the number of transactions using mobile begins to hit the high points.
This ubiquitous availability is accelerating phone use not only as a means for sending and receiving money, but also for making payments for day-to-day transactions (bills, shopping, tickets, recharge, etc). And this is boosting local economies in Sub Saharan Africa, Afghanistan, Iraq, Pakistan, Bangladesh, Sri Lanka and Nepal.
Typically the spread of new ideas and technologies follow the logistic curve popularly known as the 'S curve' – defined by a few early adopters, few very late, but the bulk somewhere down the middle. One can't usually predict the timing of the 'bulge', but the trend is inexorable, given what has happened till now.
Where are we on this curve, and what are the prospects for mobile phone-based transactions in India?
Recent initiatives have an element of one step forward, one step back.
Mobile banking guidelines were out in 2008, and over two years later the volume of mobile banking related transactions are to cross a few hundred thousand a month instead of the tens of millions that it ought to be by now. So far, more than 40 banks, including ICICI Bank, State Bank of India, StanChart, Corporation Banks and Cosmos Bank, now offer various mobile banking related services.
The recent account to account fund transfer using mobiles launched by banks and the NPCI with a couple of third party technology vendors and banks (IMPS) has also given the space a boost.
But it falls short of expectations. Over a million unique MMID's have been issued but number of transactions against those is just a few thousand! Clearly we are still looking for the elusive early adopter base.
The resolution of a few simple issues will lead to a dramatic jump. Firstly, the move away from an application on a mobile or 'app' centric 'push' model to a mix of SMS and IVR based 'pull' model.
The 'app' approach lends itself to being an elitist system for those who have the comfort of apps and GPRS (graphical and touch intensive) and who are immune to 'bill shock'.
The proportion of people who can actually access, download, and pay for data charges and then are comfortable using apps on smartphones or featurephones is significantly lower than those already comfortable with voice or sms (fingers and voice). Probably a few million at most instead of the hundreds of millions of lives it actually needs to reach out to.
The latter is a mass phenomenon. And enables rapid electronification of the economy, and onset of the 'bulge' in the adoption curve.
Secondly, regulatory dispensation has to be in essence forward-looking. Today's heresies in new market spaces will become tomorrow's doctrine and accepted practice. There is no evidence of any systemic risk arising from mobile, whether it be app or sms or ivr, any more than other accredited retail instruments in play today.
Or for that matter MFI, kickbacks for loans or wealth management, all of which remain unregulated and can in principle be the black swan event in triggering perception of systemic failure.
Therefore putting in more hoops in terms of concomitant use of PIN, OTP, MMID, etc, are all onerous to the consumer already bombarded by e-marketing messages from their service providers.
Anecdotal evidence amongst friends and families indicate that this is a too complicated. Why is this so? It is because as a default people try and replicate what they hitherto have been doing so far with atm, online, pos, ekiosk, etc with what they also want to do on the mobile, but at the same time leveraging the unique capabilities of the mobile to do so in a more convenient or efficient manner.
Mobile regulatory guidelines have to err on the light touch side, especially when it comes to technology.
Thirdly, network effects have to happen. For a country of 1.2 billion with about 200 million cards, the penetration of the POS is woeful. Typically for a service to be considered mass (20 per cent population) the ratio of cards to pos should be 1:30. So in India we would need a base of about 6 million!
However, for a moment let us just take the credit card base of about 20 million, in which case we should have about 600,000 POS. Currently we have half that number. Ecosystem builders or platform mediators have to aggressively build out the two sided platform - connecting consumers to merchants for the common man to benefit.
Fourthly, communication to the public is critical. Achieving behavioural change whatever the perceived benefits is rarely that straightforward. The Reserve Bank of India has realised the merits of communication and awareness in its own activities and role. Commercial banks have not done much at all for mobile banking.
If one looks at the approximately Rs1,500 crore of advertising by telecom companies annually, most of them have moved from explaining the features of their service to how a mobile changes life. The same goes for the handset device makers, as their communication moves from explaining features to functional benefits.
Airtel has done this well with one set of communication on overall branding, and the other – the famous Madhavan and Vidya Balan ads for mobile payments on how it impacts lives.
Ultimately, the proof of key stakeholders' actions will be clear when the number of transactions using mobile begins to hit the high points.
