The Hindu Business Line : Money on the move

Older buffs are understandably sceptical. They take a minute to look up from checking stock market fluctuations on their palm-sized machines to say that may take a few years more.

There is no denying that today the mobile is more accessible than portable water or education in many parts of the country. While this is also cause to lament how technology has taken precedence over other essentials in life, one company decided to use it to advantage.

Foreseeing the future for mobile money, Bharti Telesoft came up with the concept of Mobiquity or the `mobile money solution'.

How does Mobiquity work? Sanjiv Mital, CEO, Bharti Telesoft, captures the process for eWorld.

A subscriber (say in Dhaka, Bangladesh) wants to transfer money to his wife staying in a remote village in Bangladesh. He goes to a retailer of the mobile network in Dhaka, gives 100 takas and asks the retailer to open an Mmoney account. Once the account is opened, he uses SMS to alert his wife about the transaction. Now, if she doesn't have a mobile, he sends the money to the local retailer or bank at his wife's end who is part of the mobile network at that end.

When he does a transaction, a PIN is generated. He communicates this PIN to his wife separately. The retailer or bank at the other end then matches the PIN with the PIN he has received and gives 100 takas to the lady.

Mobile money essentially links the user's mobile phone account to a `cash' account, enabling people to manage their financial affairs, independently of place and time.

What inspired Bharti Telesoft to develop mobiquity?

"Low-income segments are using their mobiles to top-up their own prepaid accounts and also those of friends and relatives. This inspired us to develop a solution that will interface with banks and with telecom operators, so that the end offering to the consumer is as functional as possible. We believed we could further enhance the livelihoods of lower-income segments by providing them with access to financial and banking services — and from this was born the mobiquity concept.

Many institutions are now working towards low-cost delivery options such as Internet banking and cashless transactions to help the rural poor.

How is mobiquity an advantage over this?

Mobiquity works with existing infrastructure — as far as the banks, operators and consumers are concerned, the reach of the mobile is much greater than that of the computer and the Internet. Plus, there is no need to be literate to use the mobile phone, as mobiquity can be provided via IVR (Interactive Voice Response) and it can support regional languages. Mobiquity does not require an Internet kiosk. There is more likely to be a mobile network than Internet access in remote locations. The mobile channel can complement the Internet.

With mobile money, an account holder can receive remittances from outside an emerging market, such as India, which is funded by an existing credit card, bank account or another mobile money account. Users can deposit cash at an authorised retail point, which the recipient can redeem at the point closest to the location.

Why was the Mobiquity experiment tried out in Bangladesh and not India, especially since Bharti is an India-based company?

We are always keen to focus on our home market (India) and are making good progress here. We are in talks with some operators and are discussing ways of implementing mobiquity so that it reaches a mass market. In addition, the regulatory structure of the Indian market tends to make `time to market' longer.

In the case of Bangladesh, things were in place following the successful deployment of our prepaid mobile solution — PreTUPS — which allows mobile phone users to refill or top-up their accounts over the phone, reducing operational costs while offering subscribers an easy-to-use and convenient way to recharge their credit. The deployment and widespread uptake of PreTUPS has resulted in a significant improvement in market penetration. Based on PreTUPS, it has been possible to introduce utility bill payments via the mobile, which is a stepping stone to the introduction of mCommerce. We hope to be able to introduce this soon in the Indian market.

What are the other potential financial services operators and banks can provide the mobile community?

The biggest potential is that it can facilitate banking services for un-banked segments. By using the mobile phone as a transaction medium, customers will be able to carry out a wide range of transaction activities. Mobile money can help operators capture a share of the lucrative remittances market. Efficient remittance services, tailored to the demands of migrant workers, enable these workers to remit money home in a safe and timely manner and at a reasonable cost.

Ticketing/utility bill payments

Mobile money can facilitate a wide variety of transactions, including person-to-person, person-to-merchant, merchant-to-merchant and person-to-agency transactions. These merchant outlets within the mobile money network will accept mobile money points as payment for goods and services from mobile money accountholders. The different services provided include remote purchases, bill payments, point-to-point payments, and prepaid top-up.

In extending services to low-income groups, operators and banks face the challenge of providing a flexible, safe, and convenient savings product that can cost-effectively handle uneven income streams. A large segment of downstream customers use a wide range of informal mechanisms to meet savings needs, including moneylenders, savings clubs, and mutual savings societies. The mobile channel extends outreach, enabling banks to mobilise savings from low-income groups and offering flexible savings products in line with the segment's specific needs. This feature allows the user to deposit small amounts into his/her account at one of the designated cash deposit locations. These locations could include a range of operator-accredited retail merchants who have agreed to take deposits. The ability to redeem cash on demand is a necessary condition to secure bearer confidence in electronic money, and to enable e-cash to grow as an effective and trustworthy substitute of coins and banknotes. With cash-out, the customer can withdraw cash from a bank or a cashier or an accredited retailer in exactly the same way as he deposits cash. Using the mobile channel, financial institutions can profitably offer liquid savings products — money issued and redeemed by the originator of value at par and without charge — as well as extend semi-liquid savings accounts and time deposits with a fixed-term to address the needs of various market segments.

Will this concept help the Micro Credit industry?

Institutional supply of micro-credit is a function of transaction and administrative costs, which can be significantly reduced using mobile money. Generally, three types of costs are associated with the lending process: the cost of funds for lending, the cost of risk (loan loss), and administrative costs (identifying and screening clients, processing loan applications, disbursing payments, collecting repayments, and following up on non-repayment). Using the mobile money channel, micro-finance institutions can extend reach, and significantly reduce operational costs incurred on disbursement and loan collection, and transfer benefits in terms of improving loan products, better access to loans, and lower borrowing costs. Micro-finance agencies can leverage the operator's retail ecosystem comprising distributors, retailers, and street resellers, to efficiently streamline micro-finance operations and reduce operational overheads. In short, the speed with which money can be transferred and monitored is much greater than with a cash-based system.

What can banks and telecom companies do to speed up growth in this sphere?

We need to push government bodies to create an environment where mobile commerce can thrive. Currently there are various telecom and banking bodies with remits that have `boundaries'. These boundaries need to be dismantled so that this new area of mobile commerce can grow. With a supportive government/regulatory framework, growth will occur at the bottom of the pyramid, creating overall economic growth.

What are the security concerns in this area and what can banks and telecom companies do to protect themselves?

Security is the single most critical factor to ensure success. The issue is the cost that will be incurred in addressing security concerns and whether it is cost-effective or prohibitive to growth. A transfer of Rs 100 is of relatively low value, so a PIN form of security is sufficient. A transfer of $10,000 may warrant encryption details.

Some of the most important security components regarding the instruments are:

Availability: Operators must provide efficient and timely response and be able to recover quickly from disruptions.

Authenticity and authorisation: The instrument has appropriate means to authenticate identity and authorise customers using the service, and make sure that all transactions are legitimate.

Integrity: It has the appropriate means to protect the integrity of the data in m-payment transactions. This means that m-payment-related information in transit or in storage cannot be altered or deleted without authorisation.

Non-repudiation: Using transaction authentication methods that make repudiation difficult and establish accountability for m-payment transactions. The proof that a message has been sent and received needs to be provided to protect the sender against false denial of receipt by the recipient, and to protect the recipient against a false claim by the sender that the data has or has not been sent.

Confidentiality: The instrument has the appropriate means to preserve the confidentiality of relevant m-payment information. Key information should not be disclosed in such a way that it can be viewed or used by those unauthorised to do so.

paromita@thehindu.co.in

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