COMB_GRP-4_SEC-Z

M-Banking: Does it have potential?

Presented by:Amrit Kumar (UM14245)Ankit Tripathi (UM14246)Adit Khiroria (UM14303)

Marut Kumar Mishra (UM14325)

Neetesh Singh (UM14326)

Xavier Institute of Management, Bhubaneswar

Group 4: Commercial banking-Section Z

What is M-Banking?

M-Banking is a term used to describe the processes which allow people execute a number of financial transactions through a mobile device like a cell phone or a tablet.

Through M-Banking balance enquiries can be made, money can be sent and/or bills can be paid anytime 24x7 depending

on the banks.

SMS Banking is a part of mobile banking: Special keywords can be sent to bank

defined numbers to do basic transactions like balance enquiry and mini statements

enquiry.

This form of banking is typically possible by using special applications

in Java /Android /iOS /Windows Phone /Blackberry mobile devices with or

without internet connection.

Some Statistics

According to RBI by 10 July, 2015 there are a total of 119 banks (domestic and foreign) permitted to provide Mobile Banking Services in India

According to a TOI September 2014 report, State Bank of India was the market leader with about 50% market share in number of transactions in M-Banking with more than 1.15 crore users.

According to a TOI July 2015 report, HDFC Bank was the leader in terms of value of transactions worth Rs 5686 crore in April 2015.

Mobile Phone Growth - Worldwide

Fixed Line Subscriptio

n1 Bn

Mobile Phone

Subscription

1 Bn

Mobile Phone Subscription

4.1 BNMobile Phone Subscription

6 Bn

2002

2008

2015

Source : UN Report on Global Telecommunication Industry

Fixed Line Subscriptio

n1.16 Bn

Fixed Line Subscriptio

n1.27 Bn

Internet Users in India – All vs Mobile

July 2014

Source : India Stat., InternetLive Stats, IAMAI ; dazeinfo.com

Mobile Activity Report - India

July 2014

Source : India Stat., InternetLive Stats, IAMAI ; dazeinfo.com

RBI Regulations for Mobile Payment Systems (MPS)

Regulatory and Supervisory Issues

• Only such banks which are licensed and supervised in India and have a physical presence in India will be permitted to offer MPS to residents of India

• The services should be restricted to only to bank accounts/credit card accounts in India which are KYC/AML compliant.

• Only Indian Rupee based services should be provided.

• Banks may use the services of Business Correspondents for extending this facility, to their customers.

Transaction Limits in Mobile Banking

• Transactions are allowed within India only.• Per day transaction cap of Rs.50000 has

been removed by RBI, and every bank can change this cap depending upon their risk.

• Transactions without end-to-end encryption is Rs.5000/- (SMS Based).

• In case of cash out, the maximum value of such transfers shall be Rs 10,000/- per transaction. Banks may place suitable cap on the velocity of such transactions, subject to a maximum value of Rs 25,000/- per month, per beneficiary

Source : https://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=8992

Registration of customers for mobile service

• Banks should strive to provide options for easy registration for mobile banking services, minimizing the need for the customer to visit the branch for such services.

• Following Channels can be explored for MPIN registration :• Through the ATM channels• Through an option provided in the USSD

menu for mobile banking• Banks’ own internet banking website, with

necessary safeguards• Use of MPIN mailers (like PIN mailers for

cards)• Common website can also be designed as an

industry initiative

Security and Authentication

• The mPIN or higher standard of mechanism should be used to authenticate the Mobile Banking customer.

• End-to-end secure encryption mechanism should be followed in transactions

• Bank should conduct regular information security audits on the mobile banking systems to ensure complete security

RBI Regulations for Mobile Payment Systems (MPS)

Source : https://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=8992

Mobile Banking in India

• ICICI bank pioneered in mobile banking services in India

• Among public banks, Union Bank of India was the first to introduce mobile banking (2010)

• Today many commercial banks have launched mobile banking using ITC technology

• They can now reach out to customers and provide them with not only general information about its services but also the opportunity of performing interactive retail banking transactions anytime, anywhere.

Mobile Banking initiatives by Indian Banks

In India, traditional branch-based banking remains the most widely adopted method of conducting banking transaction, at the same time commercial banks are undergoing a rapid change majorly driven by the information & telecommunication (ITC) technology.

Mobile Banking in India (Contd.)

Some banks in India have started providing the mobile banking service to their customers that include State Bank of India (SBI), Union Bank of India (UBI), Punjab National Bank (PNB), HDFC, ICICI, Axis Bank, etc.

Mobile banking services offered by some of the banks in IndiaState Bank of India SMS Banking, FreedoM, USSDUnion Bank of India SMS Banking, U-Mobile

Punjab National Bank SMS BankingICICI Bank SMS Banking, i-Mobile ,M-PESA, m-RupeeHDFC Bank SMS Banking, App Based, Browser BasedAxis bank SMS Banking, Phone Banking, Internet Banking on Mobile

Major Services in Mobile Banking

Account Information

Alerts on account activity or passing of set thresholds

Monitoring of term deposits

Access to loan statements

Access to card statements

Mutual funds / equity statements

Insurance policy management

Deposits and Withdrawals

Cash-in, cash-out transactions on an ATM

Deposits and Withdrawals at Banking Agent

Payments and Transfers

Domestic and international fund transfers

Micro-payment handling

Mobile & Direct to Home package recharging

Purchasing tickets for travel and entertainment

Purchasing tickets for travel and entertainment

Bill payment processing

Enabling conditions for M-banking

• Need for ubiquity• Need for availability of high capacity SIM cards

Infrastructure

• Protection from frauds/ secure service• Protection from money laundering/ “Know Your Customer” requirements

Regulation

• With banks and retail store• Microfinance institutions (to offer other value added services)

Partnerships

• Volume is the key

Scalability

Establishing trust/ overcoming ignorance

Trends in Mobile Banking

Advent of Internet

Revolutionized the way the financial services industry conducts business, empowering organizations with new business models and new ways to offer 24 hour accessibility to their customers.

Emergence of new players

The ability to offer financial transactions online has also created new players in the financial services industry, such as online banks, online brokers and wealth managers who offer personalized services

Fast growing mobile & Wireless market

Over the last few years, It has been one of the fastest growing markets over the last few years and it is still growing at a rapid pace. According to the GSM Association and Ovum, the number of mobile subscribers exceeded 1.7 Billion in September 2005, and now exceeds 6 billion (of which more than 4.5 billion are GSM).

Trends in Mobile Banking (Contd.)

Mobile devices: An attractive proposition

Smart phones, are the most promising way to reach the masses and to create “stickiness” among the current customers, due to their ability to provide services anytime, anywhere, high rate of penetration and potential to grow.

Mobile Banking: A new challenge

As the trend is shifting to mobile banking, there is a challenge for CIOs and CTOs of these banks to decide on how to leverage their investment in internet banking and offer mobile banking, in the shortest possible time.

Generation of sophisticated services

The proliferation of 3G and its widespread implementation from 2007– 2013 has generated the development of more sophisticated services such as multimedia and links to m-commerce services.

Mobile Banking: Key decisions• Why are you doing it?

To stay competitive

Customers are asking for it

• What services are you going to provide?

SMS

WAP

Smart App

• Demographic study

% of customers that would use this channel

Current statistics on mobile usage

• Cost for implementing mobile banking

• Evaluate current vendors

Existing core banking vendor

Potential Impact on Economy

Increases circulation of money (e-money)

Growth in formal financial system

An increase of 10 mobile phones per 100 people boosts GDP growth by 0.6

percentage points

Increases effective communications infrastructure

Increases employment

By 2017, 600 million without

traditional bank accounts is expected to

use mobile money

US $7.5 billion annual direct

revenues from fees for financial services

US $4.2 billion annual indirect revenues from voice and SMS

Benefits of Mobile Banking

Easy access from mobile phones at low/ no additional cost

Mobile wallets, capable of being loaded up with and storing money (aka electronic purse)

Money transfer or simply transferring funds between accounts

Electronic bill payments, Becoming a ‘virtual debit card’ Rapid person-to-person payment over distances Notification on account changes and time critical

information Encourages savings Banking on the go/ salaries can be received directly on

the phone

Customers

Banks: Opportunity to serve unbanked

Mobile Bankin

g

New banking channel

Capture new market

segment

Lower cost to serve

Expand reach of offerings

Improve information flow: bank/

client

Security from cash

theft

Overall Impact

Increase people’s

control of their

money

Increase traceabilit

y in the economy

Increase formal

merchants when every

phone is a Point-of-

Sale

Decrease use of cash

which saves

currency costs in an economy

Decrease the cost to serve the un- and under-banked

Increase money in

circulation (e-money)

Service Location Provider Scope Impact

MPESA KenyaSafaricom, a private

company jointly owned by Vodafone

and Kenyan Govt.

12 Million users out of Kenya’s 38 Million

18000 MPESA agents, six times the no. of bank branches

and ATMs

Being used to buy goods and services,

pay bills to insurance brokers, taxi fares,

school fees, microfinance lenders

and utility companies

Bolsa Familia Brazil National Govt.

Mechanism for Govt. social welfare

payments affecting 45 Million people

Reduce program cost and delays in

delivery

Transformative M-Banking Models across the Globe

Service Location Provider Scope Impact

Smart MoneyG-CASH Philippines Smart and Globe

3 Million users currently use the service. There is

potential for a further 4-5 Million growth in

customers if penetration rates could match best

practice operators elsewhere

• Cash Deposit• Cash Withdrawals• Transfer of credit

to the prepaid account

• Inward International remittances

Wizzit South Africa Division of the South Africa Bank of Athens 450,000 people use wizzit

Target of 16 Million people in South Africa who are

unbanked or who have difficulty

accessing formal financial services

Transformative M-Banking Models across the Globe

What the surveys say?

2010 2011 2012 2013 2014 2015 (E)

2016 (E)

2017 (E)

0100200300400500600700800

52.9101.1

163.1235.4

325.2431.1

563.4

721.4

Global Mobile Payment Transaction Value (in $Bn)

Checked an account balance or checked recent transactions

Downloaded your bank's mobile banking application

Transferred money between two accounts

Received a text message alert from your bank

Made a bill payment using your bank's website or application

Located the closest in-network ATM for your bank

Deposited a check to your account using your phone's camera

Refused to answer

Managed your investments

Other

0% 20% 40% 60% 80% 100%

90%

48%

42%

33%

26%

21%

11%

3%

2%

1%

 Using your mobile phone, have you done any of the following in the past 12 months

Source : http://www.statista.com/statistics/226530/mobile-payment-transaction-volume-forecast/

Source : http://www.federalreserve.gov/econresdata/mobile-devices/2012-current-use-mobile-banking-payments.htm#Figure3.WhatAreTheMainReasonsYouHav-FDB4E107r

Survey conducted by Federal Reserve (U.S.) on 2000 individuals using mobile phones

The year 2014 saw Global Mobile Payment Transaction volume hit $325.2 Billion. It is

estimated that it will touch a whopping $721.4 Billion by 2017 growing at a CAGR of

45.1% YoY

What the surveys say?

I'm concerned about the security of mobile payments

It's easier to pay with another method like cash or a credit card

I don't trust the technology to properly process my payments

Other

I don't know of any stores that let you pay with your mobile phone

My bank charges a fee for using mobile payments

0% 10% 20% 30% 40% 50%

42%

37%

36%

31%

20%

15%

12%

9%

9%

4%

2%

2%

Reasons for not using Mobile banking

Age categories Yes No Total

18-29 43.5 16.8 22.430-44 35.7 24.7 2745-59 14.7 30.2 26.960+ 6.1 28.4 23.7

Number of respondents

372 1,626 1,998

Use of mobile banking in the past 12 months by age

Nearly 42% of the respondents were afraid of using Mobile Banking due to security concerns, followed by “No additional benefit” and “Ease of use of

Cash”. This shows that with proper information dissemination and increase investment in security measures may increase mobile payments substantially.

Mobile Banking was seen used most by the age group between 18-29 years. This is expected as mobile

banking usage is directly dependent on smartphone usage.

Issues And Challenges In Mobile Banking

The customers who use ATM and internet banking services mostly feel comfortable without mobile banking.

There are chances of misuse in M-Banking in cases of mobile thefts.

Issues The advent of 3G and 4G technology in India is leading the banks to adopt the current technology and causing losses.

Daily transaction limits fixed by banks and limited features also acts as a barrier for customers to adopt mobile banking.

Challenges

Recommended Security Measures

For Banks

• Implement application level encryption over network and transport layer encryption

• Establish proper firewalls, intruder detection systems (IDS), data file and system integrity checking, surveillance and incident response procedures

• Conduct periodic risk management analysis, security vulnerability assessment

• Maintain proper and full documentation of security practices, guidelines, methods and procedures used in mobile banking and payment systems

• Implement appropriate physical security measures to protect the system gateways, network equipment's, servers, host computers, and other hardware/software used from unauthorized access and tampering

For Consumers

• Set strong passwords, install anti-virus software on smart phones

• Know the developer before downloading applications

• How well have they tested the app?

• Is it certified?

• Is the application launched by the Bank or fraudulent sources ?

• Do not store sensitive data on mobile phone

• Receive mobile alerts on potentially fraudulent transactions

Summary of the discussion

• Though M- banking seems to cut across all groups, usage is more pronounced among youngsters.

• With the help of mobile banking users can send money using their phone to any other customer in the country, deposits and withdrawals in less time.

• According to the analysis Mobile banking provides financial services, including solutions facilitating savings and insurance.

• Mobile Banking facilitates payments, giving users a way to pay their bills and to pay for goods at shops that accept Orange Money electronically without cash.

Conclusion

Mobile Banking, as has been demonstrated, has gained non-negligible relevance for banks today. Developments in the banking sector, e.g. increased competition on account of

technological developments coupled with the process of globalization have produced new challenges for banks. Its main contribution, however, can be expected to take place in the

strategic field as it is all set to become an instrument of differentiation

Mobile Banking seems to possess the potential to become one of the widely spread and accepted application in the field of Mobile Commerce, particularly in the backdrop of its high acceptance across commercially important sections of the society. We may expect to see Mobile Banking go

into the footsteps of Online Banking, i.e. to become a standard service offered by every bank worth its name. Hence, the future for banking sector is going to make rapid straights in near

future.

One of the major hindrance in the widespread use of Mobile Banking is that most of the customers feel comfortable without mobile banking. They also feel, there are chances of misuse

in mobile banking due to mobile handset theft.

Thank You !