Mobile money: The next e-revolution for masses

Priyanka Joshi / Mumbai July 26, 2010, 0:12 IST

From small kiranas to banks to potentially entire FMCG chains — all have a digital date
with money transfers on cellphones.

As in any other popular kirana store, customers at Sachin Chandak’s grocery shop in
Pune queue up at the cash counter to pay their bills. But there’s a difference in the way
they settle the bill amounts — the money is not handed to Chandak over the counter but,
rather, directly into his account over cellphones!

While Chandak’s store was pretty hard to miss on Laxmi Road, he knew he had to give
something extra to his customers if he wanted to thwart the influence of supermarkets in
his area. So, he volunteered to be part of a pilot project that advocated the use of what
was known as a mobile money service, offered by YES Bank in association with Nokia
and Obopay (which offers technology back-up to YES Bank).

With Reserve Bank of India (RBI) permitting YES Bank to provide mobile money
services, Obopay and Nokia have been running pilots of this in Pune and Chandigarh.
Under this service, mobile phone users can pay utility bills, or even send and receive
money — all over text messages.

Banking on the unbanked

According to estimates by research and advisory firm, TowerGroup, mobile banking
usage in India will grow from

10 million active users in 2009 to over 53 million active users in 2013, representing a
compounded annual growth rate of 51.8 per cent.

ICICI Bank Non-Executive Chairman K V Kamath says: “The challenge is in banking

the 600 million people in 600,000 villages in close to 600 districts. Mobile phones have
the potential to enable banking — starting from customer acquisition to transaction
authorisation, and execution to stored wallet.” He firmly believes, in the next three years,
“we can aim to virtually bank the unbanked”.

It’s no wonder then that Gaurav Narula, who owns Narula General Stores in Chandigarh,
sensed a business opportunity in becoming a mobile money agent. After all, just about
every tradesman, shopkeeper and farmer in his city has a phone — or at least access to
one. “Now, customers come to my shop, pay me via SMSes, while crediting their mobile
accounts with cash,” says Narula, who is happy with the system.

The fact that this mobile payment service is an extremely user-friendly application that
can be accessed by the masses is drawing customers all the more. “The application uses
secure SMSes, rather than requiring the user to have a mobile data plan,” adds a very
informed Narula.

Arvind Garg, another shop owner in Chandigarh, has seen more than 25 customers sign
up for the mobile money service within 15 days. Garg’s store — Excellent Stationers,
Fast Food & Apparels — has seen transaction amounts reaching up to Rs 1,000, with the
average amount easily being Rs 500. “Once the service is launched across the nation, I
know people will begin to use it to transfer cash to one another instantly. YES Bank also
gives ATM cards to registered users. This way, one can withdraw cash from their mobile
account any time,” he informs.

Big bucks from young ones

Back in Pune, the fact that the city is populated by outstation students and young
professionals is not lost on the grocery shop owner Chandak. “Most of my younger
customers do not carry much cash. So, they prefer to have Rs 200-500 credited to their
mobile accounts, which enables instant phone recharges and even helps friends recharge
phone accounts,” he says.

Chandigarh-based Narula also plans to roll out the service in his second store. He adds:
“Customers are very smart, particularly the younger ones. They are happy to use mobile
accounts for cashless transactions across merchants, since they usually do not own credit
or debit cards.”

YES Bank Group President (Transaction Banking Group) Suresh Sethi points out that
younger users of the service in Chandigarh have been using a lot of Person2Person (P2P)
mobile transfers, which only affirms that this service has found its calling among the
youth.

Coming soon: FMCG, corporate sectors

Obopay President Deepak Chandnani says mobile money services in India are taking off
slowly, albeit at a steady pace. According to research firm, Palo Wireless Market
Research, the gross transaction value of mobile payments in India will reach $1.28 billion
in 2013. Chandnani explains why Obopay-backed money services will find a strong
footing in India: “Users can use mobile money facilities to meet all of their daily payment
needs, like utility bill payments, top-up minutes, remitting money using P2P and even
pay merchants,” he says.

Nokia further claims the service is the only one of its kind designed to convert physical
cash to e-money, which can be facilitated through Nokia’s retail reach.

Aware of the possible scope for mobile money, RBI had increased P2P transfer limit
from Rs 5,000 to Rs 50,000 some months ago. While the central bank has no objection to
using the mobile channel for providing such basic services as mobile alerts for credit or
debit entry, balance enquiry, etc — which are in the nature of providing information — it
has issued stringent guidelines for banks that want to use mobile phones to initiate
payment instructions.
That’s perhaps one reason why YES Bank decided to launch mobile money services in
Pune and Chandigarh only, for now. But, buoyed by the response in these two cities,
Sethi said the bank planned to introduce the service to companies and SMEs too.

“It would be a great application for FMCG companies to manage their supply chain
transactions and transfer money to dealers. We are talking to businesses and will soon
announce at least one pilot roll-out with a corporate client.”

Mobile Money Services

A real-time SMS-based money transfer service enabled by YES Bank, supported by

Nokia and Obopay

Step 1: Get the money transfer application on your mobile phone from an authorised
money agent (usually retailers or local merchants, etc).

Step 2: Once the application is loaded (irrespective of the handset one uses), the user has
to register with valid identity and address documents to start a mobile account. This
process is integral for the bank to facilitate Know-Your-Customer procedure that will
enable money transfer services from person2person or person2merchant.

Step 3: As soon as the application is activated on a user’s handset, he can use the service
for bill payments or mobile talk-time top-ups. One has to pay cash to any authorised
money agent, who in turn will credit the same amount on to the user’s mobile money
account.

Step 4: Once the KYC is done, the registered user gets a bank ATM card that will allow
him to cash out from any ATM, if need be. Also, the user can now transfer money from
his mobile money account to another registered mobile money account owner, over text
messages.