Since the Reserve Bank of India's mobile banking guidelines came out in October 2008, more than 32 banks have been given clearance for some form of mobile banking or payment service to be offered to their customers. The annual value of transactions using the mobile banking channel is in the region of Rs150 crore, involving about two to three million transactions. But let us put this in perspective - after all it has taken more than two decades for credit card penetration to reach just about 3 per cent of the population, or about 30 million people!
Since it does take time to go from giving approvals to actually getting the service to the market in any meaningful way, it is clearly still early days for this new alternate channel. But a quick litmus test indicates three things.
Run Rate:
Experience so far within a year or so of the mobile, prepaid and other concomitant directives is that the run rate for our mobile transactions has grown by six times, whilst pure banking customer related transactions in Nepal and India have grown 10 times.
The latter is growing at more than 100 per cent a month! With the further policy fillip being constantly given to financial inclusion, I see a further 100 per cent growth by mid-2010. It must be noted that whilst the base was obviously low (as this is a recent market space), and volumes are still relatively low, the growth factor has been remarkable.
Nonetheless, by the middle of this year the monthly run rate for all our types of mobile related transactions will exceed that of any well-established travel portal in the mature travel market.
As a benchmark we can take the State Bank of India, which has the largest number of active customers in mobile or m-banking, and hopes to hit a million customers shortly. And with about 10,000 transactions a day this is now proving to be an integral part of strategy for any bank to move a large part of their hygiene banking transactions over to alternate channels – all electronic.
Risk:
Clearly at the end of the day any financial product is about three key attributes - trust, faith and benefit - and this is reflected in perceptions and actual riskiness of using this channel.
Clearly our experience indicated that the charge-back rate is zero since February 2009 – which is a far cry from standard norms which apply for credit card transactions.
The repudiation risk on a mobile is one-tenth of what it is on the internet and probably many times lesser than other instruments. So clearly the overall perception of risk of using a mobile is matched by its actual performance.
Reputation:
The fact is that brand perception is important in any financial product or service. For a financial product reputation is key to consumer connect. To facilitate re-use, the brand must leverage the felt benefit, and must have some element of innovation to justify its use and velocity of usage.
This is validated by the fact that in an AC Nielsen study done in 2009, Paymate was a preferred brand with about 40 per cent of market share and ahead of other players in the generic category.
This was done when we had about 12 or 13 banks in our ecosystem and early days of the post-regulation guidelines. Today there are over 30 banks within our ecosystem!
Regulation:
Regulation is often seen as a bane for any market space. Regulation tends to follow market creation, and with 20/20 hindsight everyone claims to have got it right! When dealing with innovations around technology - which often create new market spaces, whether they be the world wide web, Google, Twitter, Facebook or the latest eavesdropping gizmos – the law always plays catch up. And even then remains ambiguous.
The advent of mobile payments is no exception. It is not on account of any forward looking framework, but depends on the innovation and risk taking abilities of small firms to spot the opportunity inherent in using mobile for financial services, putting their shoulder to the wheel and money where their mouth is.
What guidelines and directives do is to subsequently attempt to create an enabling environment, not a complicated jump through as many hoops approach. Other than the mobile banking guidelines, there has been the prepaid guidelines and other directives, permissions, etc related to security, definition of BC, cash–out, fund and money transfer, transaction limits, etc. And arguably these have also given the necessary fillip.
Several more dispensations are certainly needed to create the proverbial hockey stick inflexion point (a la mobile recharge) and which I will reserve for another time. But the intuitive appeal, ease of its use and logistical dispensation by telecom companies to allow mobile recharge (top-up) has created the lucrative top-up market, which is more than 80 per cent of all telecom revenues.
In summary, it is clear that the success of this electronic channel will depend on the 4 R's and I expect this channel to exceed the internet banking channel as the preferred option in a period far shorter than penetration time taken for credit card and internet banking.
While e-commerce and payments is limited to PC users with an internet connection and bank account, m-payments can use technologies as simple as SMS and IVR among other things, therefore being available to the entire mobile carrying population.
With mobile penetration at ten times of the PC penetration, and expected to become one billion by 2014, and the overall card market growing at 30 per cent CAGR, it won't be long before India becomes a very large player in the m-commerce space - explaining why many people see m-commerce as e-commerce on steroids!
Source: domain-b.com
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