India has a great number of mobile users. Mobiles have dramatically changed the way people and businesses communicate with each other. But mobile payments, as a utility, have not gained traction in India.
A recent report by comScore, a global leader in measuring the digital world, revealed that India is the third largest Internet user after China and the US. India now has nearly 74 million Internet users, a 31 per cent increase over March 2012, the report says.
Similarly, a joint study by the Internet and Mobile Association of India (IAMAI) and Indian Market Research Bureau (IMRB) states that India is expected to have 130.6 million mobile internet users by March 2014. In addition, the mobile value-added services (MVAS) market is expected to reach $9.5 billion in 2015, up from $4.9 billion in 2012, reported another research report by the IAMAI. But this is only part of the story.
Globally, however, the mobile handset has revolutionised the banking and the payments industry as it enables banks to provide value-added services to existing customers in developed countries and reach a larger base of population in the developing economies. Going by the current mobile and Internet connectivity scenario in India, mobile banking has immense potential in this untapped market.
Fresh data released by the Telecom Regulatory Authority of India (TRAI) state that the total number of Internet subscribers in India grew to 164.81 million as of March 31, 2013, with as many as seven out of eight net users accessing the services via their mobile phones. But the larger issue remains that close to 40 per cent of Indians as of today do not have access to a bank, and most of these people reside in the remote villages.
Earlier, in 2005, the Reserve Bank of India (RBI) asked the banks to increase access to banking services for citizens living in remote areas by using the mobile payment (m-payment) systems. This is not an impossible task, given that 51 per cent of the Indian population have mobile handsets today.
As a result, companies in India have developed m-payment systems on the lines of M-PESA, a mobile-based financial service, in Kenya, to increase financial inclusion by providing deposit and withdrawal services to customers in remote areas. The success of this concept in Kenya is proof of how a new system, if properly introduced, can change the whole scenario of mobile payment within just a few years.
Safaricom, a leading mobile network operator, launched M-PESA in Kenya in 2007and successfully connected nearly 40 per cent of Kenya’s adult population within the next two years. M-PESA not only allowed easier remittance but also supported business transactions.
The success story of M-PESA inspired the authorities in India to launch similar applications. The Interbank Mobile System (IMPS) was thus launched in India in 2010. Soon after, mobile network companies such as Airtel and banks such as HDFC, ICICI and State Bank of India came forward to launch mobile banking services for its customers.
But the widespread adoption of mobile payment in India has not yet picked up. It has not been able to replicate Kenya’s success story mainly due to rigid policies and a tough regulatory environment. In India, an individual is allowed transact through the mobile only with a registered bank account which automatically excludes a very large part of the rural population. In Kenya, however, regulations permitted Safaricom to provide mobile money services via M-PESA, enabling customers to carry out transactions without any connection with their bank accounts.
A study conducted by Centre for Micro-finance and Institute of Financial Management and Research (CMF-IFMR) showed that the financial inclusion mandate by the RBI does not allow private players to charge fees for zero balance accounts targeted at the low-income groups.
This has further discouraged m-banking service providers from offering a range of financial products to this particular cross-section of society. Apart from the sole aim of achieving maximum financial inclusion, it is also important for the RBI to make it viable for commercial players.
It is imperative for the Government to make mobile transactions an integral part of overall governance and put systems in place to enable transactions between the Government and the public; for example, for tax payments using mobile as the platform.
When the Government enables maximum financial inclusion in tandem with the growing penetration of mobiles and Internet, Indian citizens will become more comfortable with their handsets for financial transactions.
This will subsequently lead to mobiles becoming an important platform for private companies and the Government, paving the way for mobile commerce or buying of goods and services on mobile.
E-commerce in India is expected to increase from $6.3 billion in 2011 to $23 billion by 2016, and this time, the buzz will surely be around mobile transactions.
(The author is Managing Director, Mobile Marketing Association.)