Mobile Money

Sir, how would you like to pay – Cash, card or Phone?


Mobile Money can become the preferred payment method   says Probir Roy, Co Founder & Promoter, PayMate

There are four billion mobile phones today in the world. Three quarters lie in the hands of people in the developing world, and half of all additional growth is expected to come from China and India alone!

This ubiquitous availability is accelerating mobile phone use as a means for sending/receiving monies and paying bills, shopping, ticketing, recharge, etc. And in doing so boosting local economies in Sub Saharan Africa, Afghanistan, Iraq, Pakistan, Bangladesh, Sri Lanka and Nepal.

Typically the spread of new ideas and technologies follow a logistic curve. Popularly known as the S curve – defined by few early adopters, some   late, but bulk of users somewhere down the middle.

Invariably one can’t predict timing of that bulge, but for online ecommerce in India an inflexion happened around 2004. When Indian Railways’ IRCTC started their online booking in 2002 – instilling faith among Indians. And then in 2004, when low-fare carriers such as Air Deccan came in and people took another leap of faith and started using their credit cards.

What then about mobile banking & payments? Where are they on the S curve and what are the prospects?

Mobile Banking guidelines have been out since 2008. More than forty banks offer various mobile banking related services. The recent account to account fund transfer using mobile launched under the umbrella of the NPCI has given the space a boost. But both are a tad short on expectations.

The monthly volume of mobile banking related transations is some hundred thousands instead of tens of millions that it ought to be. Over ten million unique ID’s have been issued for fund transfer but number of transactions against those is just a few thousand!

Contrast that with the NEFT system which processes more than 14 million transactions a month!

Clearly we are still looking for that elusive early adopter base.

Resolution of a few simple issues will lead to a jump.

Firstly, regulatory dispensation has to be in essence forward-looking. In new market spaces today’s heresies become tomorrow’s doctrine, and accepted practice.

There is no evidence of any systemic risk arising from mobile, whether it is use of an app or sms or ivr. It is less than any other accredited retail financial instruments in play today!

Therefore putting in more hoops and loops for the consumer in terms of concomitant use of PIN, OTP, MMID, VBV, etc so early in the game are all proving far too onerous to the consumer. There are simpler mechanisms to ensure safety and security.

Secondly,   the move away from an application on a mobile or ‘app’ centric mindset, to encompass aam admi options of SMS and IVR.

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, pay for data charges and then are comfortable using apps using Smartphone’s or feature phones is significantly lower than these already comfortable with voice or sms (fingers and voice) on an entry level phone.

Probably a few million at most instead of the hundreds of millions of lives it actually needs to touch. The latter is a mass phenomenon. And enables rapid electronification of the economy, and early onset of the bulge in the adoption curve.

Thirdly, network effects have to kick in. For a country of 1.17 billion with about 200 million cards – the penetration of the POS is woeful. Typically for a service to be considered mass (20 percent of population) the ratio of cards to pos should be 1:30. So in India we would need a base of about 6 million! Even if one just takes the credit card base of about 20 million, we should have about 600,000 POS. But we have half that number! Platform mediators have to more aggressively build out the two sided platform – connecting consumers to merchants, for aam admi to benefit.

Lastly, communication to public is critical. Achieving behavioral change whatever the perceived benefits is rarely that straightforward.

RBI has realized the merits of communication and awareness in its own activities and role.

Commercial Banks have not done much for mobile banking. If one looks at the approx 1500 crores of advertising by telcos annually, most of them have moved from explaining the features of their service to now how a mobile changes life, same 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 with overarching brand theme across all businesses, and the other on enriching lives –  Madhavan and Vidya Balan ads for mobile payments being an example !

Currently mobile payments are poised to unleash its potential. Proof of stakeholder’s actions will finally determine when the number of transactions using mobile begins to hit the high notes. As the saying goes, you can’t make an omelet, without breaking an egg!