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Friday, March 4, 2011

Shopping via Mobile Phones in INDIA

Soon bank account holders can make retail purchases by transferring funds from their account to the merchant's using a basic mobile phone. Reserve Bank of India's arm National Payments Corporation of India is putting in place a payment interface between consumers and merchants.

"Thirteen banks are part of the Interbank Mobile Payment System (IMPS) and 6.6 million customers have already been issued mobile money id (MMID)" said A P Hota, MD and CEO, NPCI. He said these customers could presently transfer money to any other bank account holder who has MMID. "At present, only peer-to-peer transfers can take place. We are now working at creating a system for payments to merchants," said Hota.

The banks which are part of IMPS include most of the large private banks and several public sector banks. "Transactions up to Rs 1,000 can be done through SMS, which means that any mobile phone is IMPS-enabled," he said. But for higher-value transactions, the mobile phone has to be GPRS-enabled and should facilitate end-to-end encryption.

Earlier, speaking on financial inclusion at the annual banking technology conference organized by the Indian Banks Association, Hota said that NPCI was pushing banks to extend mobile payments service to 'no-frills' customers. No frills accounts are a facility for the underprivileged customers to allow them retain a bank account without any minimum balance requirements. These customers can however enjoy only limited features of banking as against regular customers who get full service subject to maintenance of a minimum balance.

At the seminar it became evident that there was a high dependency on mobile telephony services for extension of banking services to the unbanked. Firstly, banks are keen to use the reach of mobile service providers who already have 750m customers on whom they have already performed a `know your customer' due diligence. Lenders are also trying to replicate the success of mobile companies in profitably selling talktime in scratch cards of Rs 10 denomination. Banks also want to use the mobile services to achieve the last mile connectivity through business correspondents.

Citing a Boston Consultancy Group study, Selvam Veeraraghavan, GM, Indian Bank said "As against a branch transaction which costs Rs 40 to Rs 60, an ATM transaction takes place at Rs 13 to Rs 17. But an online transaction through a business correspondent is the cheapes at Rs 4 to Rs 6 per transaction".

According to Mr Veeraraghavan, mobile technology was suited for financial inclusion because of the level of penetration and the fact that even those who are not able to read or write are able to use mobile phones. source

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