Mobile Banking – A tool for Financial Inclusion.

In the recent past, there have been demands to introduce Funds Transfer’s through Mobiles, outside the Banking Network, in India.

Proponents of this Proposal are of the view that such a product will aid in

01) Faster payment delivery channel.

02)                     Cheaper payment delivery channel

03)                      Efficient payment delivery channel.

They opine that the existing Bank led Model, is too restrictive/costly/not efficient.

In my opinion, a Bank Led model is more valid for our country, for the following reasons.

A non-bank led model is riskier from the Security Angel, as the transactions can be a front for illegal transactions. As the originator/receiver are mostly anonymous, it becomes difficult to trace the chain of funds, in case of any investigation.

Little drops become a Ocean. Single transfer of say Rs.1000/- day, translates into a transfer of Rs.30,000/- per month. And, Rs.30,000/- is a substantial sum.

 With concerns of Money Laundering and financial terrorism on the increase, a Bank led Model, is more attractive for Payment Delivery Systems than a Non-Bank led one.

As it is even without the Non-Bank Mobile Payment Delivery System, Money laundering prevails. Let us not provide Money Laundering, yet another Payment Delivery System!

I feel, Banks and Telecom companies and other stake-holders need to come together and develop innovate ideas to boost alternate delivery systems. This would be better, that exploring the options for a Non-Bank Payment Delivery System. A Non-Bank model too needs investment in terms of money, Software Development, Hardware Rollout.

Some Banks in India, are offering pure Internet Banking Accounts. Once the customer’s KYC norms are satisfied, a   Customer Master Number is created and provided to the customer. Basing on Customer Master Number, a customer can open accounts On Net Banking site of the respective bank.

The best example is ICICI ‘s Bank’s Branchless Banking.

This model can be accepted as a Base for true Mobile Banking, with suitable modifications. 

In fact, this model is also a can be adopted to enhance Financial Inclusion.

For No-Frills Account, this Model, will be a win-win situation for all the Stake Holders

01)                      For Bankers – They can open new accounts, without the need for physical branches.

02)                     For Customers – They have access to basic banking, which in turn will motivate them to experience the benefits of full banking services.

03)                     For Mobile Companies – This service might encourage customers to stay with a single mobile provider instead of jumping to their competitor.

The next obvious question is who will bear the costs. Of course, nothing in this world is free. The costs can be shared between the Banks and the Customers, with the Mobile Companies too underwriting a part of it.

Innovation in delivery models is the key to enhance Financial Inclusion.

Ideally, all Funds Transfer should be within the ambit of Banking Channels only.