Mobile Banking EXECUTIVE SUMMARY The last time that technology had a major impact in helping banks service their customers was with the introduction of the Internet banking. Internet Banking helped to give the customer's anytime access to their banks. Customer's could check out their account details, get their bank mobile phone banking is the domain of a lucky few with constantly changing customer preferences and a greater emphasis placed on mobility, it could soon become a mainstream ability. Mobile-phone owners currently have access to mobile banking but choose not to utilise it. This is predicated to change by 2014, when 45 percent of users will actually use it. Advancing technologies will enable mobile banking to become a convenient and quick way for consumers to check their balance as well as pay for goods. "Mobile banking is quickly moving from infancy to commonplace, which will help separate the winners from losers in banks' ability to attract and keep technology-loving consumers," "Consumers are hungry for the 'always-on' and 'real time' ability to monitor and manage their money, and mobile banking serves that need better than any other." One of the factors driving the mobile banking surge is the increased usage of smart-phones, such as the iPhone, as well as the race between phone companies to develop the basic thin-client capabilities dubbed "wrapper applications" designed to integrate financial services into mobile online sites. 1
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Mobile Banking
EXECUTIVE SUMMARY
The last time that technology had a major impact in helping banks service their customers was
with the introduction of the Internet banking. Internet Banking helped to give the customer's
anytime access to their banks. Customer's could check out their account details, get their bank
mobile phone banking is the domain of a lucky few with constantly changing customer
preferences and a greater emphasis placed on mobility, it could soon become a mainstream
ability. Mobile-phone owners currently have access to mobile banking but choose not to utilise
it. This is predicated to change by 2014, when 45 percent of users will actually use it. Advancing
technologies will enable mobile banking to become a convenient and quick way for consumers to
check their balance as well as pay for goods.
"Mobile banking is quickly moving from infancy to commonplace, which will help separate the
winners from losers in banks' ability to attract and keep technology-loving consumers,"
"Consumers are hungry for the 'always-on' and 'real time' ability to monitor and manage their
money, and mobile banking serves that need better than any other." One of the factors driving
the mobile banking surge is the increased usage of smart-phones, such as the iPhone, as well as
the race between phone companies to develop the basic thin-client capabilities dubbed "wrapper
applications" designed to integrate financial services into mobile online sites.
It will also work in tandem with online banking, with mobile banking being used as a "remote
control" and ''online'' as a detailed form of control panel for more complex transactions.By 2014,
the percentage of people using mobile banking will equate to approximately 99 million US adults
conducting mobile banking transactions at least once per year. 52 percent of these customers are
reckoned to be using smart-phones.
"Mobile banking is quickly becoming an essential consumer capability," said Mark
Schwanhausser, Financial Services Channels Analyst speaking to Cellular News.
Mobile banking is a credible channel, but usage in developed markets will remain low
IT spending on mobile banking is continuing, but it is not the highest priority channel
Mobile banking’s greatest opportunity involves serving the needs of the unbanked
retail banks and technology vendors must be prepared to play the long game
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I N D E X
SL NO CONTENT PAGE NO
1 PREFACE 4
2 ACKNOWLEDGEMENT 5
3 INTRODUCTION 6
4 OBJECTIVE OF THE STUDY 8
5 METHODOLOGY OF THE STUDY 9
6 LIMITATIONS 9
7 INTRODUCTION TO MOBILE BANKING. 10
8 A MOBILE BANKING CONCEPTUAL MODEL. 15
9 CONSIDERATION WHEN IMPLEMENTING MOBILE
BANKING
15
10 FEATURES OF MOBILE BANKING 16
11 TRENDS IN MOBILE BANKING 17
12 MOBILE BANKING BUSINESS MODEL 19
13 MOBILE BANKING SERVICES. 20
14 UTILITY OF MOBILE BANKING FROM BANK’S
PERSPECTIVE.
25
15 MOBILE BANKING DISTRIBUTION CHANNEL 27
16 TECHNOLOGIES ENABLING MOBILE BANKING. 29
17 ADVANTAGES AND DISADVANTAGES OF MOBILE
BANKING.
34
18. MARKETING FOR MOBILE BANKING 35
19. CHALLENGES FOR MOBILE BANKING 36
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Mobile Banking
20 FEATURES OF MOBILE COMMERCE 38
21 EMPLOYMENT OF MOBILE TECHNOLOGIES IN BANKING
SECTOR
40
22 MOBILE BANKING IN BANGLADESH 42
23 MOBILE BANKING IN THE WORLD 42
24 THE FUTURE OF MOBILE BANKING 44
25 RECOMMENDATION 46
26 CONCLUSION 47
27 REFERENCE 48
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P R E F A C E
First of all I would like to be grateful to the Almighty Allah, the merciful and the munificent
who helped me to complete this term paper.
Over the last few years, the mobile and wireless market has been one of the fastest growing
markets in the world and it is still growing at a rapid pace. This opens up huge markets for
financial institutions interested in offering value added services. With mobile technology, bank
scan offer a wide range of services to their customers such as doing funds transfer while
traveling, receiving online updates of stock price or even performing stock trading while being
stuck in traffic. Mobile devices, especially smart-phones, are the most promising way to reach
the masses and to create “stickiness” among current customers, due to their ability to provide
services anytime, anywhere, with high rate of penetration and potential to grow.
In this term paper I tried to explain the basic concepts, services offered, market survey and
technology which enables Mobile Banking.
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ACKNOWLEDGEMENT
I want to take the opportunity to express my gratitude to all those people who have been
instrumental in making this term paper successful.
I would like to express my gratitude to all those who gave me the possibility to complete this
term paper. I would like to thank my honorable chairman Prof. Dr. Shelina Akhter, Department
of Management Studies, University of Chittagong.
I am deeply indebted to my honorable teacher, Mrs. Sharmeen Ahmed, Associate Professor,
Department of Management Studies, University of Chittagong, who gave me the permission,
opportunity and immense support by stimulating suggestions and encouragement that helped me
in all the time of research for and writing of this term paper.
INTRODUCTION
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The kind of banking and financial service that gives a real-time mobile access to customer on the
move is called mobile banking the services being offered through mobile phone. Mobile banking
to the banking activity that is carried out on mobile (cell) phones that is banking is enabled even
while a person is on the move. In modern times, information exchange takes place at great speed.
The dependence of people on computing devices such as computers, cellular phone, pager,
facsimile machine, e-mail and internet is growing at galloping rate. Such growth has made the
real time exchange of information a reality. At the same time it has also thrown challenges to
modern enterprises. Which prompt them to act in a proactive manner so as to stay competitive in
the business world. The constant innovation happening in the realm of electronic banking and
financial services has contributed to a new development called ‘mobile banking’ this may be
attributed to the forth coming demand from the mobile workforce. The increasingly growing
number of mobile workforce has really given a cutting edge to the progress of the electronic
banking. The mobile banking refers to the facility allowed by certain banks in India whereby the
mobile phone holder can undertake certain banking transaction through their mobile phones.
This value added services has very little human interface and private banks have started offering
this service. The customer is required to type a text message on the mobile phone which travel
through the server of the cell phone service provider to bank’s internet service; information is
retrieved and routed back the same way in 15-30 second. To avail the service, the client has to
fill up form at any of bank’s branches and bank informs the cellular service provider to activate
the module instantly. The information which includes checking of account balance, request for a
Cheque book, stop payment instruction, changing primary operation account, request for current
periods’ account statement to the mailed and access summaries of last three transactions
performed on the account.
The number of people using mobile banking services has increased. While the trend is growing,
lack of awareness of services, apart from perceived security issues are inhibiting faster takeoff. “-
Dataquest. It was clear at the start itself that this would be a battle focused not on technology,
but on the mindset of the target audience. Over two years after the launch of mobile banking
services in the country, that bridge has been reached and many are beginning to walk those
cautious steps across it. Yes, the usage of mobile banking services is increasing, and fast against
dataquest’s estimated user base of under 10,000 for mobile banking services in 2000, there are
over 120,000 today who SMS from their banking. Even our survey despite targeting a respondent
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profile that would bring in more positive answers than negative (see methodology), threw up
very low usage numbers. Also, e-commerce as a medium of purchasing and transacting has not
really caught on, and the basket of mobile banking offerings is, in itself, very limited. The good
news the technology backbone is in place, and getting better. There’s CDMA, there’s GSM.
Forget their battles on the mobile telephony front from the consumer’s point of view; he never
had it so good.
The recent price cuts are also likely to help, “say banking experts, adding that this will lead to
“increasing willingness to move on to mobile, and therefore, to the value-added services that
most operators offer today”
The Internet is revolutionizing the way the financial industry conducts business, empowering
organization with new business model and new ways to interact with customers. The ability to
perform banking transactions online banks and brokers who offer personalized services through
their web portals. This increased competition is driving traditional financial institutions to find
new ways to add value to their product and services, gain competitive advantage and increase
customer loyalty while also attracting new, high-value client.
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OBJECTIVE OF THE STUDY
Mobile and wireless technology, combined with the wide variety of portable devices available
today, enable new revenue opportunities for financial services organizations. This provides a
new channel that can be used to refresh and expand the customer base, attract prime customers
and enhance loyalty. With mobile and wireless technology, banks can offer a wide possibility of
services to their customers, from the freedom of paying bills while stuck in traffic, to receiving
notification of a change in stock price while having lunch, the challenge, then is how to turn
these possibilities into a reality for the customers.
METHODS OF THE STUDY
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Following methods have been used to accomplish this proposed solution:
Basic principles of existing banking system (Bangladesh)
Study the major drawbacks of existing system by interviewing the current employees of
different banks. Interviews are mostly taken through emails and in some cases through
telephone and Internet chat.
Study the existing IT infrastructure of Bangladesh in context of Bank by interviewing the
developer of different banking software vendors
Study the Online Banking system from different resources that are available in different
websites, books and online journals
Some of the what-if analysis has been used to measure performance of the proposed
solution.
Design proposed solution.
LIMITATIONS
Mobile Banking is a very much new concept in our country. Only two banks and three mobile
phone operators are trying to implement this. The process is still in a tender age. That’s why a
real impact of mobile banking Bangladesh can’t be picked up by this study. As there are only
two banks implementing it, most of the time I had to rely on web based data for the study.
INTRODUCTION TO MOBILE BANKING
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Mobile Banking (also known as M-Banking, m-banking, SMS Banking, etc.) is a term used for
performing balance checks, account transactions, payments, etc., via a mobile device such as a
mobile phone. It was Internet Banking, which ushered in a new era in banking convenience by
bringing the entire operations to the computer, and now mobile banking promises to take it to the
next level.
Internet Banking helped give the customers anytime access to their banks. Customers could
check out their account details, perform transactions like transferring money to other accounts,
and pay their bills, sitting in the comfort of their homes and offices. However, the biggest
limitation of Internet Banking is the requirement of a PC with an Internet connection, not a big
obstacle if we look at the US and the European countries, but definitely a big barrier if we
consider most of the developing countries of Asia like Bangladesh, India and China.
Mobile Banking addresses this fundamental limitation of Internet Banking, as it reduces the
customer requirement to just a mobile phone. Mobile usage has seen an explosive growth in most
of the Asian economies like India, Bangladesh, China and Korea. The main reason that Mobile
Banking scores over Internet Banking is that it enables 'Anywhere Anytime Banking'.
The last time that technology had a major impact in helping banks service their customers was
with the introduction of the Internet banking. Internet Banking helped to give the customer's
anytime access to their banks. Customer's could check out their account details, get their bank
statements, perform transactions like transferring money to other accounts and pay their bills
sitting in the comfort of their homes and offices.
In fact Korea boasts about a 70% mobile penetration rate and with its tech-savvy populace has
seen one of the most aggressive rollouts of mobile banking services.
Still, the main reason that Mobile Banking scores over Internet Banking is that it enables
‘Anywhere Banking'. Customers now don't need access to a computer terminal to access their
banks, they can now do so on the go – when they are waiting for their bus to work, when they are
traveling or when they are waiting for their orders to come through in a restaurant.
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The scale at which Mobile banking has the potential to grow can be gauged by looking at the
pace users are getting mobile in these big Asian economies. According to the Cellular Operators'
Association of India (COAI) the mobile subscriber base in India hit 40.6 million in the August
2004. In September 2004 it added about 1.85 million more. The explosion as most analysts say,
is yet to come as India has about one of the biggest untapped markets. China, which already
witnessed the mobile boom, is expected to have about 300 million mobile users by the end of
2004. South Korea is targeted to reach about 42 million mobile users by the end of 2005. All
three of these countries have seen gradual roll-out of mobile banking services, the most
aggressive being Korea which is now witnessing the roll-out of some of the most advanced
services like using mobile phones to pay bills in shops and restaurants.
Mobile banking has been at the threshold of a revolution for some time. While many operators,
as well as banks, had introduced mobile banking applications, it never became popular due to
security concerns. The number of people using mobile banking services has jumped from under
10,000 to 120,000 in two years. While the trend is growing, lack of awareness of services, apart
from perceived security issues, are inhibiting faster take-off.
There is yet another reason why the service will not spread like wild fire - the credit
environment. RBI has been tightening the banks, which have been offering unsecured and
secured loans with minimal or no customer verification. With RBI tightening liquidity, personal
loan defaults have reached 9% and banks will be very wary of giving you a credit card on the
mobile.
Though RBI has specified norms for the banks to provide secure technology and ensure
'confidentiality, integrity, authenticity and non-reputability', security remains a major concern as
well as a hurdle. However, with a few precautions and safety measures, users can have a safer m-
banking experience. The m-PIN, which is issued by the bank, should be memorized and the PIN-
mailer destroyed immediately. Change your m-PIN regularly and do not share it with anyone.
The PIN is valid only for the corresponding phone number, which means users cannot access
their accounts using other hand-sets. Thus, in case of a loss/theft of mobile phone, inform the
mobile phone operator as well as the bank to block the banking application. Similarly, you
should also inform the bank, if you change your hand-set or SIM card.
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Reserve Bank of India has set-up the Mobile Payments Forum of India (MPFI), a 'Working
Group on Mobile Banking' to examine different aspects of Mobile Banking (M-banking). The
Group had focused on three major areas of M-banking, i.e.,
(i) Technology and security issues,
(ii) Business issues, and
(iii) Regulatory and supervisory issues.
Each stake-holder group has the following expectations: -
a) To meet the following expectations of Consumer: -
Personalized service
Minimal learning curve
Trust, privacy and security
Ubiquitous - anywhere, anytime and any currency
Low or zero cost of usage
Interoperability between different network operators, banks and devices
Anonymity of payments like cash
Person to person transfers
b) To meet the following expectations of Merchant: -
Faster transaction time
Low or zero cost in using the system
Integration with existing payment systems
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High security
Being able to customize the service
Real time status of the mobile payment service
Minimum settlement and payment time
c) To meet the following expectations of Telecom Network Providers: -
Generating new income by increase in traffic
Increased Average Revenue Per User (ARPU) and reduced churn (increased loyalty)
Become an attractive partner to content providers
d) To meet the following expectations of Mobile Device Manufacturers: -
Large market adoption with embedded mobile payment application
Low time to market
Increase in Average Revenue Per User (ARPU)
e) To meet the following expectations of Banks: -
Network operator independent solutions
Payment applications designed by the bank
Exceptional branding opportunities for banks
Better volumes in banking - more card payments and less cash transactions
Customer loyalty
f) To meet the following expectations of Software & Technology Providers:
Large markets
g) To meet the following expectations of Government: -
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Revenue through taxation of m-payments
Standards
Enthusiasm for mobile banking services
66% of respondents in the survey considered that mobile banking provides an excellent
opportunity to enhance existing customer service.
International factors
European and Asia-Pacific regions are considerably ahead of the US in terms of mobile banking
provision – only 10% of US banking organizations taking part in the study currently offer mobile
banking against 57% in Europe.
Expected growth
With 34% of banks (globally) currently offering mobile services to customers, an additional 32%
of respondents plan to offer mobile services in the next 12-24 months.
53% of US banks expect to be offering mobile services in the next 12-24 months, giving
potential parity to mobile service provision across the globe by 2010 (see Figure 1)
The suggestion of considerable momentum for mobile banking over the next two years should be
received warmly by mobile providers and bankers alike. The ratio of mobile banking users, i.e.
customers adopting mobile services remains modest, but is predicted to grow over the next two
years with 58% of banks currently offering mobile banking expecting that at least 1 in 10
customers will be using mobile banking by 2010. However this growth will not come without
modification of existing processes.
Our challenges are all based on standardization measures with regard to browsers, security
demands and operator tariff systems.
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A MOBILE BANKING CONCEPTUAL MODEL
Mobile banking is defined as:
"Mobile Banking refers to provision and availment of banking- and financial services with the
help of mobile telecommunication devices. The scope of offered services may include facilities
to conduct bank and stock market transactions, to administer accounts and to access customized
information."
According to this model Mobile Banking can be said to consist of three inter-related concepts:
Mobile Accounting
Mobile Brokerage
Mobile Financial Information Services
Most services in the categories designated Accounting and Brokerage are transaction-based. The
non-transaction-based services of an informational nature are however essential for conducting
transactions - for instance, balance inquiries might be needed before committing a money
remittance. The accounting and brokerage services are therefore offered invariably in
combination with information services. Information services, on the other hand, may be offered
as an independent module. Mobile phone banking may also be used to help in business
situations.
CONSIDERATION WHEN IMPLEMENTING MOBILE BANKING
The creation of mobile services is more efficient and effective when financial institution enters in
alliance with mobile operators. The appropriate choice for each player depends on their
combined customer base and the share of market each one brings to the alliance.
The choices are then if one bank should establish alliance with one or many mobile operator. The
theories on the evolution of these types of alliances show that the most usual beginning is from
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one to one. However, the dominant strategy will converge in the long term to a many to many
alliance model.
For large bank the most convenient strategy is to begin with a closed system; an alliance with
one telecommunication company and initially closed to user outside the combined customer
base. This will allow the alliance to lock in big customers before other players begin to enter the
market. At least one or two condition is needed to maintain the closed system working: a critical
mass of customers, or strategic adventure in the operating area.
Banks with not so large customer base or that do not want to risk being the first movers in a
closed system, would prefer to implement open system alliance and try to capture a larger market
share.
The decision about the most appropriate alliance to chose will depend on the particular of the
bank implementing the mobile services and the availability of appropriate partners for
telecommunication operation.
In the same way when choosing wireless platform the critical consideration are the connectivity
with the back –end system and the market several solutions in a short period of time. There are
currently in the market several solution based upon different technology and budget
requirements.
FEARURES OF MOBILE BANKING
Mobile Customers: - those who use ‘mobile telephony’ use mobile banking service.
Mobile telephony is used through mobile phones.
M – Commerce: - mobile banking is a part of m – Commerce whereby business and
trade takes place through mobile on-line. Those mobile users who became on line internet
users do M – Commerce.
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Technology based: - Mobile banking are based on technology of development. Mobile
banking makes use of internet for transmission, transaction & delivery of banking
services. The network provider the required software support.
Services: - Mobile banking offers the entire internet-based banking services such as on-
line account opening, account verification, funds transfer etc.
Eligibility: - At present, mobile banking is extended only to individual customer having
account with any branch of a particular bank that offers internet banking facility. Further,
it is also required that the customer is registered as on internet banking customer.
Application: - In order to avail the facility of mobile banking, an application duly filled
is to be submitted to the bank. The application is invariably made available in the official
website of the bank.
TRENDS IN MOBILE BANKING
The advent of the Internet has revolutionized the way the financial services industry conducts
business, empowering organizations with new business models and new ways to offer 24x7
accessibility to their customers.
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, although such players still account for a tiny percentage of the industry.
Over the last few years, the mobile and wireless market has been one of the fastest growing
markets in the world and it is still growing at a rapid pace. According to the GSM Association
and Ovum, the number of mobile subscribers exceeded 2 billion in September 2005, and now
exceeds 2.5 billion (of which more than 2 billion are GSM).
According to a study by financial consultancy Celent, 35% of online banking households will
be using mobile banking by 2010, up from less than 1% today. Upwards of 70% of bank center