MOBILE BANKING

UNIVERSITY OF MUMBAI

PROJECT ON:

MOBILE BANKING

PROJECT BY:

SWAMI BHAVSAR

T.Y.BCOM (BANKING &INSURANCE)

SEMESTER-V

2009-2010

PROJECT GUIDE

PROF.-MUKESH KANOJIYA

M.K.SANGHVI COLLEGE OF COMMERCE &ECONOMICS

VILE PARLE (WEST)

Mumbai 400056

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DECLARATION

I Ms. SWAMI BHAVSAR Student of T.Y.BCom (Banking &

Insurance- Semester V) of Malini Kishor Sanghvi College of Commerce &
Economics, hereby declare that I have completed the project on ‘MOBILE
BANKING’ in the academic year 2009-2010. The information submitted is true
and original to the best of my knowledge.

Date of submission Signature of student

---------------------- --------------------

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CERTIFICATE

This is to certify that SWAMI BHAVSAR of T.Y.B.com (BANKING &

INSURANCE – SEMESTER-V) of Malini Kishor Sanghvi College of Commerce
& Economics has successfully completed the project on “MOBILE BANKING”
in the academic year 2009-2010. The information is true & original to the best of
our knowledge.

Signature of Principal Signature of Project Guide

(Dr. (Mrs) Krushna Gandhi) (Mr.Mukesh kanojya)

Signature of Co-ordinator

(Purvi Dholakia)

College seal Signature of External Examiner

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ACKNOWLEDGEMENT

Any accomplishment requires efforts of many people & this work is no different. I
am grateful to the UNIVERSITY OF MUMBAI to have introduced this final
project of our curriculum.

With a deep sense of gratitude, I wish to express my sincere thanks to my project

guide Prof. MUKESH KANOJYA for his support in preparation of project report.

I take the opportunity to thank Prof.Purvi Dholakia, T.Y.Bcom (Banking &

Insurance) coordinator for giving me the opportunity to work on this project.

I would also like to express my gratitude towards the library staff of M. K.

SANGHVI COLLEGE, my family & friends without whose support my project
would not have been possible.

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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.

"Just as the iPod changed the music industry and their business models, our
data shows that iPhone users are changing the banking industry by leading
the way in monitoring and managing finances through mobile devices."

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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

MARKETOPPORTUNITY

Mobile banking has struggled in Europe and North America: will this change
in 2009/10?
The difficult economic climate is refocusing the attention of consumers to
their personal finances Mobile banking devices and interfaces have
thankfully improved, thereby enhancing the user experience After multiple
false starts, the mobile banking ecosystem is entering its next phase of
development in 2009 Catering to the unbanked will have a positive influence
on the growth of mobile banking.

Assessing the mobile banking market opportunity in developing regions

Investment programs have been launched to stimulate mobile banking
services in developing countries Charting the emergence of mobile banking
services in developing countries
Other operators are seeking to mirror the success of M-PESA Serving the
unbanked in developed regions is also a natural fit for mobile banking
services Mobile banking services will replace traditional remittance flow
methods Summarizing the market opportunity for mobile banking

IMPACTS ON BANKS

In 2009, mobile banking features in the channel strategy plans of most retail
banks
Mobile banking channel is not a high priority channel for IT investment in
2009
Retail banks must be willing to play the long game in order to achieve decent
revenues
Banks will need to prepare themselves for inevitable operational and

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technological impacts
Banks must ensure they make adequate security provisions for mobile
banking services
Banks will have to share revenues from mobile services with others in the
ecosystem statements, perform transactions like transferring money to other
accounts and pay their bills sitting in the comfort of their homes and offices.

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INDEX

SR NO CONTENT PAGE NO
1. INTRODUCTION TO BANKING. 8-9
2. TYPES OF BANKS. 10-13
3. INTRODUCTION TO MOBILE BANKING. 14-18
4. A MOBILE BANKING CONCEPTUAL MODEL. 19-20

5. TRENDS IN MOBILE BANKING. 21-22

6. MOBILE BANKING SERVICES. 23-25

7. UTILITY OF MOBILE BANKING FROM BANK’S 26-27

PERSPECTIVE.

8. MOBILE BANKING AS DISTRIBUTION 28-31

CHANNEL.

9. TECHNOLOGIES ENABLING MOBILE 32-37

BANKING.
10. ADVANTAGES AND DISADVANTAGES OF 38
MOBILE BANKING.

11. MARKETING FOR MOBILR BANKING 39

12. CHALLENGES FOR MOBILE BANKING 40-42

13. FEATURES OF MOBILE BANKING 43

14. EMPLOYMENT OF MOBILE TECHNOLOGIES 44-45

IN BANKING SECTOR
15. MOBILE BANKING IN THE WORLD 46

16. CASE ANALYSIS 47-48

17. CONCLUSION 49

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18. WEBLIOGRAPHY 50

19. BIBLIOGRAPHY 51
20. QUESTIONNAIRE 52-57

INTRODUCTION

INRODUCTION TO BANKING

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The Indian banking can be broadly categorized into nationalized

(government owned), private banks and specialized banking
institutions.The Reserve Bank of India acts a centralized body monitoring
any discrepancies and shortcoming in the system. Since the nationalization
of banks in 1969, the public sector banks or the nationalized banks have
acquired a place of prominence and has since then seen tremendous
progress. The need to become highly customer focused has forced the
slow-moving public sector banks to adopt a fast track approach. The
unleashing of products and services through the net has galvanized players
at all levels of the banking and financial institutions market grid to look
anew at their existing portfolio offering. Conservative banking practices
allowed Indian banks to be insulated partially from the Asian currency
crisis.Indian banks are now quoting al higher valuation when compared to
banks in other Asian countries (viz. Hong Kong, Singapore, Philippines etc.)
that have major problems linked to huge Non Performing Assets (NPAs) and
payment defaults. Co-operative banks are nimble footed in approach and
armed with efficient branch networks focus primarily on the ‘high revenue’
niche retail segments.

The Indian banking has finally worked up to the competitive dynamics of

the ‘new’ Indian market and is addressing the relevant issues to take on
the multifarious challenges of globalization. Banks that employ IT solutions
are perceived to be ‘futuristic’ and proactive players capable of meeting
the multifarious requirements of the large customers base. Private banks
have been fast on the uptake and are reorienting their strategies using the
internet as a medium The Internet has emerged as the new and
challenging frontier of marketing with the conventional physical world
tenets being just as applicable like in any other marketing medium.

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The Indian banking has come from a long way from being a sleepy
business institution to a highly proactive and dynamic entity. This
transformation has been largely brought about by the large dose of
liberalization and economic reforms that allowed banks to explore new
business opportunities rather than generating revenues from conventional
streams (i.e. borrowing and lending). The banking in India is highly
fragmented with 30 banking units contributing to almost 50% of deposits
and 60% of advances. Indian nationalized banks (banks owned by the
government) continue to be the major lenders in the economy due to their
sheer size and penetrative networks which assures them high deposit
mobilization.
The Indian banking can be broadly categorized into nationalized, private
banks and specialized banking institutions.

The Reserve Bank of India act as a centralized body monitoring any

discrepancies and shortcoming in the system. It is the foremost monitoring
body in the Indian financial sector. The nationalized banks (i.e.
government-owned banks) continue to dominate the Indian banking arena.
Industry estimates indicate that out of 274 commercial banks operating in
India, 223 banks are in the public sector and 51 are in the private sector.
The private sector bank grid also includes 24 foreign banks that have
started their operations here. Under the ambit of the nationalized banks
come the specialized banking institutions. These co-operatives, rural banks
focus on areas of agriculture, rural development etc.,

unlike commercial banks these co-operative banks do not lend on the basis
of a prime lending rate. They also have various tax sops because of their
holding pattern and lending structure and hence have lower overheads.
This enables them to give a marginally higher percentage on savings
deposits. Many of these cooperative banks diversified into specialized
areas (catering to the vast retail audience) like car finance, housing loans,
truck finance etc. in order to keep pace with their public sector and private
counterparts, the co-operative banks too have invested heavily in
information technology to offer high-end computerized banking services to
its clients.

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TYPES OF BANKS

1998-99

State Bank of India and

08
Associates

Nationalized Banks 19

Domestic Private Sector

25
Banks

New Domestic Private Sector

09
Banks

Foreign Banks 29

Complementing the roles of the nationalized and private banks are the
specialized financial institutions or Non Banking Financial Institutions
(NBFCs). With their focused portfolio of products and services, these Non
Banking Financial Institutions act as an important catalyst in contributing
to the overall growth of the financial services sector. NBFCs offer loans for
working capital requirements, facilitate mergers and acquisitions, IPO
finance, etc. apart from financial consultancy services. Trends are now
changing as banks (both public and private) have now started focussing on
NBFC domains like long and medium-term finance, working cap
requirements. IPO financing to etc. to meet the multifarious needs of the
business community.

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COMMERCIAL FINANCING
The commercial financing model in Indian banking can be broadly
categorized into project finance and working capital finance. These two
segments form the pivot around which banks operate.

PROJECT FINANCE
Banks offer long term and short terms loans to business houses,
corporations to set up their projects. These loans are disbursed after the
approval from the banks’ core credit validating committee. In India, there
are 11 national level land 46 state level financial and investment
institutions that cater to long term funding requirements of the industry.
The project finance segment is highly competitive with various players
offering innovative schemes to entice corporate.

WORKING CAPITAL
In order to meet the diverse needs and requirements of the business
community, banks offer working capital funds to corporate. Working capital
finance is specialized line of business and is largely dominated by the
commercial banks. The Indian banking saw dramatic changes in the last
decade or so ever since the advent of liberalization and India’s integration
with the world economy. These economic reforms and the entry of private
players saw nationalized banks revamp their service and product portfolio
to incorporate new, innovative customer-centric schemes. The Indian
banking finally woke up to the surging demands of the ever-discerning
Indian consumer. The need to become highly customer focused (generated
by high competitive levels) forced the slow-moving public sector banks to
adopt a fast track approach. Taking a leaf out of the private sector banks,
the public sector banks too went for major image changes (including
corporate brand building exercises) and customer friendly schemes. These
customer friendly programs included revamping of the product and service
portfolio by introducing new product & service schemes (like credit cards,
hassle-free housing loan schemes, educational loans and flexi-deposit

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schemes) integration of the branch network by using advance networking

technology and customer personalization programs (through ATMs and
anytime banking etc.). Many banks have started capitalizing on the recent
stock market surge by adding (Initial Public Offering) IPO financing options
and schemes in their product mix. IPO finance has received a positive
response from the investors and is becoming popular amongst the business
community. The objective of all these strategies was very clear – to bridge
the service & product gap that was inherent in the banking system. To
cater to the increasing customer demands and the surge in business
volumes, many public sector banks have ploughed back funds to invest
heavily in technology upgrades and systems like LANs, WANs, VSATs etc.
Marketing and brand building programs were also given a new thrust in the
new liberalized banking scenario. Promotional budgets were hiked to cater
to the new and large discerning target audience. Banks were now keen on
marketing their products and service though various mediums to reach
their core customers. Direct marketing, Internet marketing, hoarding,
press ads, television sponsorships, image makeovers etc. became an
integral part of a bank’s marketing mix. To meet the personalized needs of
the customer and in order to differentiate its services, banks repositioned
themselves in specialized fields, like housing loans, car finance, educational
loans etc. to optimally service the customer. Permission marketing became
the new strategy that banks began to propound i.e. feeding the customer
(with his or her consent) with product and service information and thereby
enticing him towards the bank’s product – service portfolio.

NEW GENERATION BANKING

He liberalize policy of Government of India permitted entry to private sector

in the banking, the industry has witnessed the entry of nine new generation
private banks. The major differentiating parameter that distinguishes these
banks from all the other banks in the Indian banking is the level of service
that is offered to the customer. Verify the focus has always been centered
around the customer – understanding his needs, preempting him and
consequently delighting him with various configuration of benefits and a
wide portfolio of products and services. These banks have generally been
established by promoters of repute or by ‘high value’ domestic financial
institutions. The popularity of these banks can be gauged by the fact that

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in a short span of time, these banks have gained considerable customer

confidence and consequently have shown impressive growth rates. Today,
the private banks corner almost four per cent share of the total share of
deposits. Most of the banks in this category are concentrated in the high-
growth urban areas in metros (that account for approximately 70% of the
total banking business ). With efficiency being the major focus, these
banks have leveraged on their strengths and competencies viz.
Management, operational efficiency and flexibility, superior product
positioning and higher employee productivity skills.
The private banks with their focused business and service portfolio have a
reputation of being niche players in the industry. A strategy that has
allowed these banks to concentrate on few reliable high net worth
companies and individuals rather than cater to the mass market. These
well-chalked out integrates strategy plans have allowed most of these
banks to deliver superlative levels of personalized services. With the
Reserve Bank of India allowing these banks to operate 70% of their
businesses in urban areas, this statutory requirement has translated into
lower deposit mobilization costs and higher margins relative to public
sector banks.

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INTRODUCTION TO MOBILE BANKING

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 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,
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.

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 China and India. Mobile banking addresses
this fundamental limitation of Internet Banking, as it reduces the customer
requirement to just a mobile phone.

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Mobile usage has seen an explosive growth in most of the Asian economies
like India, China and Korea. 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.

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
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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.

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

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• 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

• 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

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• 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: -

• Revenue through taxation of m-payments

• Standards

There are lots of evidences that not only big cities are using mobile banking,
but even thousands of people from rural areas across 12 states are also
likely to get their social security pension and wages paid under the National
Rural Employment Guarantee Act (NREGA) Scheme with the help of mobiles
over the coming few months. Bharti Airtel, too, is in the process of tying-up
with two leading banks to extend its mobile remittance services to rural
areas, according to its President (Mobile Services), Sanjay Kapoor.

Airtel has already partnered with the Indian Farmers' Fertilizers Cooperative
Limited (IFFCO) to set up IFFCO Kisan Sanchar Limited in Rajasthan. Under
this initiative, the cooperative department will provide mobile hand-sets to
farmers at marginal price through its out-lets in the rural areas. These hand-
sets would be loaded with green SIM cards, which will flash daily updates on
agricultural practices and weather forecasts free of cost.

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
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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.

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 customised 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.

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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.

The lifespan of all good ideas can be broken into five phases: concept,
prototype, pilot, pre-production, commercial deployment. Few ideas ever
reach the stage of commercial deployment, because they are just not viable,
or have been ill conceived or badly deployed. For some or other reason,
mobile banking has been over-saturated with concepts and to some degree
with prototypes. The idea of utilising the phone for financial transactions are
so obvious that every man and his dog have developed a new concept or
have submitted a patent somewhere. Everyone of them believing that they
have stumbled on the ultimate approach.

The reality is that very few of these ever progress past the rudimentary
prototype stage. And it is actually quite easy to demonstrate simple mobile
banking functionality in a prototype environment. Some of the challenges
that often have not even been identified and hence solved are issues related
to integration, regulatory/legal and usability. These are sometimes
addressed in the few prototypes that migrate to pilot.

A pilot usually consists of a few hundred, maybe thousands of subscribers

performing transactions in a controlled environment with limited
functionality. Even if pilots work, they often don't address important aspects
like scalability and system responses to unpredicted actions or break-downs.
What happens in the case of transactions that have been lost and how does
the system respond to situations where a component is not available.
Important legal aspects are also often not addressed yet at this stage. Pilots
seldom uncovers the real system challenges and at best highlights key
elements regarding user experience.

During the pre-production stage business processes and system reliability

and robustness should be attended to. Many different business processes are
required if a system is to be deployed in a production environment. This
should include registration, dispute resolutions, service activation to name
only a few. In examples that we have seen in the market some deployments
have neglected key processes leading to very difficult deployments and
disillusioned clients. What looked easy during pilot now turns out to be a
nightmare of realities.

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It is only when a solution is deployed commercially that they most important

element of any idea is tested: Can it make money? Mobile banking solutions
that are not profitable will fail ultimately. An this is where we at Fundamo
can really contribute to making a difference in deploying successful mobile
payment/banking solutions. We have seen what works and what does not.
We have built powerful business modeling tools and have helped many
customers to culminate with commercially successful deployments of novel
ideas. We have seen many competing products fail because they were not
commercially viable

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.

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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 call volume is projected to come
from mobile phones. Mobile banking will eventually allow users to make
payments at the physical point of sale. "Mobile contactless payments”
will make up 10% of the contactless market by 2010.

Many believe that mobile users have just started to fully utilize the data
capabilities in their mobile phones. In Asian countries like India, China,
Bangladesh, Indonesia and Philippines, where mobile infrastructure is
comparatively better than the fixed-line infrastructure, and in European
countries, where mobile phone penetration is very high (at least 80% of
consumers use a mobile phone), mobile banking is likely to appeal even
more.

This opens up huge markets for financial institutions interested in offering

value added services. With mobile technology, banks can offer a wide range
of services to their customers such as doing funds transfer while travelling,
receiving online updates of stock price or even performing stock trading
while being stuck in traffic. According to the German mobile operator
Mobilcom, mobile banking will be the "killer application" for the next
generation of mobile technology.

Mobile devices, especially smartphones, 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, high rate of
penetration and potential to grow. According to Gartner, shipment of

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MOBILE BANKING

smartphones is growing fast, and should top 20 million units (of over 800
million sold) in 2006 alone.

In the last 4 years, banks across the globe have invested billions of dollars to
build sophisticated internet banking capabilities. 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.

The proliferation of the 3G (third generation of wireless) and widespread

implementation expected for 2003–2007 will generate the development of
more sophisticated services such as multimedia and links to m-commerce
services.

MOBILE BANKING SERVICES

Mobile banking can offer services such as the following:

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MOBILE BANKING

Account Information
1. Mini-statements and checking of account history
2. Alerts on account activity or passing of set thresholds
3. Monitoring of term deposits
4. Access to loan statements
5. Access to card statements
6. Mutual funds / equity statements
7. Insurance policy management
8. Pension plan management
9. Status on cheque, stop payment on cheque
10. Ordering check books
11. Balance checking in the account
12. Recent transactions
13. Due date of payment (functionality for stop, change and deleting
of payments)
14. PIN provision, Change of PIN and reminder over the Internet
15. Blocking of (lost, stolen) cards

Payments, Deposits, Withdrawals, and Transfers

1. Domestic and international fund transfers
2. Micro-payment handling
3. Mobile recharging
4. Commercial payment processing
5. Bill payment processing
6. Peer to Peer payments
7. Withdrawal at banking agent
8. Deposit at banking agent

Especially for clients in remote locations, it will be important to help them

deposit and withdraw funds at banking agents, i.e., retail and postal outlets
that turn cash into electronic funds and vice versa. The feasibility of such
banking agents depends on local regulation which enables retail outlets to
take deposits or not.

A specific sequence of SMS messages will enable the system to verify if the
client has sufficient funds in his or her wallet and authorize a deposit or

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MOBILE BANKING

withdrawal transaction at the agent. When depositing money, the merchant

receives cash and the system credits the client's bank account or mobile
wallet. In the same way the client can also withdraw money at the merchant:
through exchanging sms to provide authorization, the merchant hands the
client cash and debits the client's account.

Investments
1. Portfolio management services
2. Real-time stock quotes
3. Personalized alerts and notifications on security prices

Support
1. Status of requests for credit, including mortgage approval, and
insurance coverage
2. Check (cheque) book and card requests
3. Exchange of data messages and email, including complaint submission
and tracking
4. ATM Location

Content Services
1. General information such as weather updates, news
2. Loyalty-related offers
3. Location-based services

Based on a survey conducted by Forrester, mobile banking will be attractive

mainly to the younger, more "tech-savvy" customer segment. A third of
mobile phone users say that they may consider performing some kind of
financial transaction through their mobile phone. But most of the users are
interested in performing basic transactions such as querying for account
balance and making bill payment.

One way to classify these services depending on the originator of a service

session is the ‘Push/Pull' nature. ‘Push' is when the bank sends out
information based upon an agreed set of rules, for example your banks
sends out an alert when your account balance goes below a threshold level.

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MOBILE BANKING

‘Pull' is when the customer explicitly requests a service or information from

the bank, so a request for your last five transactions statement is a Pull
based offering. .

The other way to categorize the mobile banking services, by the nature of
the service, gives us two kind of services – Transaction based and Enquiry
Based. So a request for your bank statement is an enquiry based service and
a request for your fund's transfer to some other account is a transaction-
based service. Transaction based services are also differentiated from
enquiry based services in the sense that they require additional security
across the channel from the mobile phone to the banks data servers.

The new generation of mobile phones offers the speedy GPRS, EDGE or 3G
data transmission standards and has large, high-definition colour displays.
Prices are coming down and services and features are now considerably
easier to handle on the mobile. Mobile Banking, in particular, has finally
become a fast, user-friendly and affordable service. India's leading telecom
companies started their services for Mobile Banking, basically they use these
services as a marketing tool to advertise there services on this basis. Here
are few giants of telecom industries in India who are offering Mobile Banking
in various states.

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MOBILE BANKING

Utility of Mobile Banking from Banks’

Perspective
At this stage it would be relevant to understand the usefulness of Mobile
Banking from the banks’perspective. It is therefore imperative to understand
the business environment in which banks operate and to identify customer
groups that the banks may seek to target via Mobile Banking.

Intensified Competition in the Banking Sector:

Bank products are of immaterial nature sold increasingly with the help of
computer networks spanning across the globe.The global networks provide
the customer with world-wide services, for instance the use of credit cards
while abroad. The creation of an EU-wide single domestic market has led to
intensification of competition in the EU in all business fields including in the
banking sector.
The ongoing Globalisation has further intensified the competition. Technical
developments coupled with the process of Globalisation, have made it
possible for banks to offer their services in far-flung areas without investing
money to build branches and hire additional staff.
This opportunity, of course, is a two-way street: On the one hand, a bank
gets access to new markets.
On the other hand it is faced with increased competition on its home turf. To
master this combination of opportunities and challenges banks need – apart
from business consolidation and cooperation – organic growth. It is therefore
necessary to retain the existing customer base while simultaneously
acquiring new, economically prosperous customers. Seen in conjunction with
the price-sensitivity of customers and the resultant low relevance of the
brand-name banks are compelled to introduce innovative services that
potentially attract prospective customers while retaining others. Even though
the brand-name remains a critical factor on account of the need for trust in
banking business, the Globalisation and the technological developments,
however, have reduced entry barriers so that the number of available
reputed brands has increased significantly; thereby intensifying the
competition.

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MOBILE BANKING

Adapting to Requirements of Core Target Groups:

Banks, today, are increasingly confronted with technology-savvy customers

who are often on the move. As Wolfgang Klein, Private Customers Director at
Postbank, a leading German bank, puts it: “Today’s customers want to
organise banking transactions while on the move, irrespective of opening
hours”.Banks are responding to this development by introducing mobile
services. Core target groups of Mobile Banking are often divided in three
categories:

a) The Youngsters: the segment of 14-18 years old youth has acquired an
important role in the
growth of mobile telecommunications and related services. This group is
technology-savvy
and willing to experiment with innovative products and services. The
youngsters, often on the
move, demand ubiquitous, anytime service. Though the youngsters as a
group are hardly
relevant for banks from a financial perspective, they represent the
prospective clientele of
tomorrow and need to be cultivated in the middle to long-term marketing
strategy of the
banks.

b) The Young Adults: Also this segment is thought to be technology- and

innovation friendly.
Though this group too is financially not very strong, many members of this
group are known
to be involved in stock market activities. Further, this group can be expected
to enter in short

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MOBILE BANKING

to medium-run a professional carrier so that it needs to be cultivated in order

to retain
customers of this age-group even after they enter professional lives.

c) The Business People: this group of customers, generally in the age-

group of 26-50 years, is
thought to be the most important one for Mobile Banking. Members of this
group are
generally well educated and economically well-off. They need to be
professionally often on
the move and carry mobile devices to ensure accessibility. For this reason
they are ideal
candidates to use services offered via mobile devices. From the banks’
perspective this group
is particularly attractive on account of its relative economic prosperity and
the need for
financial services, e.g. home loans for young families.
In order to fulfil the requirements of these customer groups banks tend to
look at Mobile Banking as a
promising option. However, these services also have their own utility for the
banks.

Mobile Banking as Distribution Channel

Mobile Banking enhances the number of existing channels of distribution that

a bank employs to offer its services. The efficiency of a distribution channel
can be measured by its fulfilment of three major objectives, which are
closely related to each other.

Increasing Sales Volume

One of the primary tasks of a distribution channel is to increase the volume
of demand for products at profitable prices .This objective is arrived by
increasing operational efficiency so that those losses are minimized that are
caused by delays in catering to customer orders. Further, a

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MOBILE BANKING

favourablereputation of the firm’s logistical capacities may help generate

additional orders.

List of Operators and Circles enabled for the Mobile Banking Service
are as below: -

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MOBILE BANKING

IDBI's CTO, Neeraj Bhai, echoes the sentiment, "Over 12% of our Internet
Banking users use our Mobile Banking services as well."

While ICICI Bank offers its services on GPRS and secure SMS, Barclays Bank's
Hello Money is
based on Unstructured Supplementary Service Data (USSD) platform, which
is independent of GPRS.

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MOBILE BANKING

UK-based Barclays is one of the largest corporate money managers in the

world. The bank launched its consumer banking services in India last year.
And recently, the bank made its mobile banking service available on GSM
hand-sets, on Airtel, Vodafone, and Idea networks in forty cities. Customers
can choose between Hindi and English. Further, Barclays aims to include
more languages and extend it to CDMA hand-sets as well.

ICICI Bank has tied-up with Airtel and m-Chek to load a virtual credit card on
a mobile phone to carry on complete banking transactions as well as for
making payments. "We conducted a pilot in Delhi and received close to a
thousand responses. Mobile phones can be safer as compared to physical
cards as they are pin-protected, thereby minimizing the risk of misuse," said
Mr. Sachin Khandelwal, General Manager, Head-Cards Product Group, ICICI
Bank.

Despite lots of security issues related to mobile banking and lack of

awareness on part of consumers, the technology has taken off on slow pace,
still it will be a big hit in coming years. Due to large number of advantages,
and these advantages have over-powered all the disadvantages of the
technology. All these advantages create a WIN-WIN-WIN situation for the
technology: -

• End-users benefit from greater control of their personal finances, as

well as time saved by not having to access account details via other
channels (Internet, phone, ATM, among others).

• Bankers are of the opinion that mobile banking gives the banks an
opportunity to expand their customer base without incurring additional
infrastructure costs. It would also help in financial inclusion as it would
provide a large number of unbanked people access to banking services

• Banks would save a huge amount of money on card issuance and

merchant acquiring with zero point of sale cost. Mobile banking could
be used to make remittances from person to person, banking purposes
and to make payments for purchases or services provided.

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MOBILE BANKING

• Mobile operators benefit from increased customer stickiness, data

usage and, potentially, customer experimentation with other forms of
mobile content.

Given this win-win-win situation, we expect uptake of mobile banking

services to be robust among mobile subscribers, users and the banks.

Over the next five years, mobile banking deployments will develop
significantly - from "online banking" applications to one with richer interfaces
and multiple mobile payment capabilities. The successful evolution of mobile
banking and payments will be on the basis of the ability of financial
institutions and mobile operators to balance ease of use with security.

TECHNOLOGIES ENABLING MOBILE BANKING

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MOBILE BANKING

Technically speaking most of these services can be deployed using more

than one channel. Presently, Mobile Banking is being deployed using mobile
applications developed on one of the following four channels.

1. IVR (Interactive Voice Response)

2. SMS (Short Messaging Service)
3. WAP (Wireless Access Protocol)
4. Standalone Mobile Application Clients

1.IVR (Interactive Voice Response)

IVR or Interactive Voice Response service operates through pre-specified
numbers that banks advertise to their customers. Customer's make a call at
the IVR number and are usually greeted by a stored electronic message
followed by a menu of different options. Customers can choose options by
pressing the corresponding number in their keypads, and are then read out
the corresponding information, mostly using a text to speech program.

Mobile banking based on IVR has some major limitations that they can be
used only for Enquiry based services. Also, IVR is more expensive as
compared to other channels as it involves making a voice call which is
generally more expensive than sending an SMS or making data transfer (as
in WAP or Standalone clients).

One way to enable IVR is by deploying a PBX system that can host IVR dial
plans. Banks looking to go the low cost way should consider evaluating
Asterisk , which is an open source Linux PBX system

Asterisk, due to its open source nature has caught on in a big way and is
being sold as an PBX solutions by quite a few companies commercially.
However there has been considerable noise on multiple Asterisk related
forums over the stability of Asterisk based systems. Companies planning to
use Asterisk for their IVR solutions should certainly do a rigorous evaluation
of its capabilities before committing their long term future on it.

2.SMS (Short Messaging Service)

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MOBILE BANKING

SMS uses the popular text-messaging standard to enable mobile application

based banking. The way this works is that the customer requests for
information by sending an SMS containing a service command to a pre-
specified number. The bank responds with a reply SMS containing the
specific information.

For example, customers of the HDFC Bank in India can get their account
balance details by sending the keyword ‘HDFCBAL' and receive their balance
information again by SMS. Most of the services rolled out by major banks
using SMS have been limited to the Enquiry based ones.

However there have been few instances where even transaction-based

services have been made available to customer using SMS. For instance,
customers of the Bank of Punjab can make fund transfer by sending the SMS
‘ TRN(A/c No)(PIN No)(Amount)'.

One of the major reasons that transaction based services have not taken of
on SMS is because of concerns about security and because SMS doesn't
enable the banks to deliver a custom user interface to make it convenient for
customers to access more complex services such as transactions.

The main advantage of deploying mobile applications over SMS is that

almost all mobile phones, including the low end, cheaper one's, which are
most popular in countries like India and China are SMS enabled.

An SMS based service is hosted on a SMS gateway that further connects to

the Mobile service providers SMS Centre. There are a couple of hosted IP
based SMS gateways available in the market and also some open source
ones like Kannel .

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MOBILE BANKING

MOBILE SERVICE CENTRE

39
MOBILE BANKING

3. WAP (Wireless Access Protocol)

WAP uses a concept similar to that used in Internet banking. Banks maintain
WAP sites which customer's access using a WAP compatible browser on their
mobile phones. WAP sites offer the familiar form based interface and can
also implement security quite effectively.

Bank of America offers a WAP based service channel to its customers in

Hong Kong. The banks customers can now have an anytime, anywhere
access to a secure reliable service that allows them to access all enquiry and
transaction based services and also more complex transaction like trade in
securities through their phone

A WAP based service requires hosting a WAP gateway. Mobile Application

users access the bank's site through the WAP gateway to carry out
transactions, much like internet users access a web portal for accessing the
banks services.

The following figure demonstrates the framework for enabling mobile

applications over WAP. The actualy forms that go into a mobile application
are stored on a WAP server, and served on demand. The WAP Gateway forms
an access point to the internet from the mobile network.

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MOBILE BANKING

4.STANALONE MOBILE APPLICATION CLIENTS

Standalone mobile applications are the ones that hold out the most promise
as they are most suitable to implement complex banking transactions like
trading in securities. They can be easily customized according to the user
interface complexity supported by the mobile. In addition, mobile
applications enable the implementation of a very secure and reliable channel
of communication.

One requirement of mobile applications clients is that they require to be

downloaded on the client device before they can be used, which further
requires the mobile device to support one of the many development
environments like J2ME or Qualcomm's BREW. J2ME is fast becoming an
industry standard to deploy mobile applications and requires the mobile
phone to support Java.

The major disadvantage of mobile application clients is that the applications

needs to be customized to each mobile phone on which it might finally run.
J2ME ties together the API for mobile phones which have the similar
functionality in what it calls 'profiles'. However, the rapid proliferation of
mobile phones which support different functionality has resulted in a huge
number of profiles, which are further significantly driving up development
costs. This scale of this problem can be gauged by the fact that companies
implementing mobile application clients might need to spend as much as
50% of their development time and resources on just customizing their
applications to meet the needs of different mobile profiles.

Out of J2ME and BREW, J2ME seems to have an edge right now as Nokia has
made the development tools open to developers which has further fostered a
huge online community focused in developing applications based on J2ME.
Nokia has gone an additional mile by providing an open online market place
for developers where they can sell their applications to major cellular
operators around the world. BREW on the other hand has seen limited
popularity among the developer community, mostly because of the

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MOBILE BANKING

proprietary nature of its business and because of the steep prices it charges
for its development tools.

Quite a few mobile software product companies have rolled out solutions,
which enable J2ME mobile applications based banking. One such product is
Wireless I-banco . The mobile user downloads and installs the wireless I-
banco application on their J2ME pone. The J2ME client connects to the
wireless I-banco server through the service providers GSM network to enable
users to access information about their accounts and perform transactions.
One of the other big advantages of using a mobile application client is that it
can implement a very secure channel with end-to-end encryption.

However countries like India face a serious obstacle in the proliferation of

such clients as few users have mobiles, which support J2ME or BREW.
However, one of the biggest CDMA players in the Indian telecom industry,
Reliance Infocomm has about 7.01 million users all of which have handsets,
which support J2ME. Reliance has unveiled one of the most ambitious data
services deployment program in the country. On the other hand a country
like South Korea with its tech-savvy population has a widespread adoption of
the higher-end mobiles, which support application development.

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MOBILE BANKING

ADVANTAGES OF MOBILE BANKING

The biggest advantage that mobile banking offers to banks is that it

drastically cuts down the costs of providing service to the customers. For
example an average teller or phone transaction costs about $2.36 each,
whereas an electronic transaction costs only about $0.10 each. Additionally,
this new channel gives the bank ability to cross-sell up-sell their other
complex banking products and services such as vehicle loans, credit cards
etc.

For service providers, Mobile banking offers the next surest way to achieve
growth. Countries like Korea where mobile penetration is nearing saturation,
mobile banking is helping service providers increase revenues from the now
static subscriber base. Also service providers are increasingly using the
complexity of their supported mobile banking services to attract new
customers and retain old ones.

1. user experience of browsing the internet from a mobile device is familiar

and offers a rich UI experience.

2. allows end user to access corporate association.

3. secure connection can be established on most of the mobile browsers.

DISADVANTAGES OF MOBILE BANKING

• Many non-standards variables including handsets,browsers and
operating system.

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MOBILE BANKING

• Inconsistent user experience due to varying connection speed

and different handset.

• User needs to have a data plan,which may be a barrier to

adoption among price sensetive demographics.

• No “offline” (out of the coverage) capability.

MARKETING FOR MOBILE BANKING

Mobile banking is poised to become the big killer mobile application arena.
However, Banks going mobile the first time need to tread the path
cautiously. The biggest decision that Banks need to make is the channel that
they will support their services on.

Mobile banking through an SMS based service would require the lowest
amount of effort, in terms of cost and time, but will not be able to support
the full breath of transaction-based services. However, in markets like India
where a bulk of the mobile population users' phones can only support SMS
based services, this might be the only option left.

On the other hand a market heavily segmented by the type and complexity
of mobile phone usage might be good place to roll of WAP based mobile
applications. A WAP based service can let go of the need to customize
usability to the profile of each mobile phone, the trade-off being that it
cannot take advantage of the full breadth of features that a mobile phone
might offer.

Mobile application standalone clients bring along the burden of supporting

multiple mobile device profiles. According to the Gartner Group, a leading
wireless computing consulting organization, mobile banking services will
have to support a minimum of 50 different device profiles in the near future.
However, currently the best user experience, depending on the capabilities
of a mobile phone, is possible only by using a Standalone client.

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MOBILE BANKING

Mobile banking has the potential to do to the mobile phone what E-mail did
to the Internet. Mobile Application based banking is poised to be a big m-
commerce feature, and if South Korea's foray into mass mobile banking is
any indication, mobile banking could well be the driving factor to increase
sales of high-end mobile phones. Nevertheless, Bank's need to take a hard
and deep look into the mobile usage patterns among their target customers
and enable their mobile services on a technology with reaches out to the
majority of their customers.

CHALLENGES FOR MOBILE BANKING

Key challenges in developing a sophisticated mobile banking application
are :

Handset operability

There are a large number of different mobile phone devices and it is a big
challenge for banks to offer mobile banking solution on any type of device.
Some of these devices support J2ME and others support WAP browser or only
SMS.

Initial interoperability issues however have been localized, with countries like
India using portals like R-World to enable the limitations of low end java
based phones, while focus on areas such as South Africa have defaulted to
the USSD as a basis of communication achievable with any phone.

The desire for interoperability is largely dependent on the banks themselves,

where installed applications(Java based or native) provide better security,
are easier to use and allow development of more complex capabilities similar
to those of internet banking while SMS can provide the basics but becomes
difficult to operate with more complex transactions.

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MOBILE BANKING

There is a myth that there is a challenge of interoperability between mobile

banking applications due to perceived lack of common technology standards
for mobile banking. In practice it is too early in the service lifecycle for
interoperability to be addressed within an individual country, as very few
countries have more than one mobile banking service provider. In practice,
banking interfaces are well defined and money movements between banks
follow the IS0-8583 standard. As mobile banking matures, money
movements between service providers will naturally adopt the same
standards as in the banking world.

Security

Security of financial transactions, being executed from some remote location

and transmission of financial information over the air, are the most
complicated challenges that need to be addressed jointly by mobile
application developers, wireless network service providers and the banks' IT
departments.

The following aspects need to be addressed to offer a secure infrastructure

for financial transaction over wireless network :

1. Physical part of the hand-held device. If the bank is offering smart-card

based security, the physical security of the device is more important.
2. Security of any thick-client application running on the device. In case
the device is stolen, the hacker should require at least an ID/Password
to access the application.

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MOBILE BANKING

3. Authentication of the device with service provider before initiating a

transaction. This would ensure that unauthorized devices are not
connected to perform financial transactions.
4. User ID / Password authentication of bank’s customer.
5. Encryption of the data being transmitted over the air.
6. Encryption of the data that will be stored in device for later / off-line
analysis by the customer.

Scalability & Reliability

Another challenge for the CIOs and CTOs of the banks is to scale-up the
mobile banking infrastructure to handle exponential growth of the customer
base. With mobile banking, the customer may be sitting in any part of the
world (true anytime, anywhere banking) and hence banks need to ensure
that the systems are up and running in a true 24 x 7 fashion. As customers
will find mobile banking more and more useful, their expectations from the
solution will increase. Banks unable to meet the performance and reliability
expectations may lose customer confidence. There are systems such as
Mobile Transaction Platform which allow quick and secure mobile
enabling of various banking services. Recently in India there has been a
phenomenal growth in the use of Mobile Banking applications, with leading
banks adopting Mobile Transaction Platform and the Central Bank
publishing guidelines for mobile banking operations.

Application distribution

Due to the nature of the connectivity between bank and its customers, it
would be impractical to expect customers to regularly visit banks or connect
to a web site for regular upgrade of their mobile banking application. It will
be expected that the mobile application itself check the upgrades and
updates and download necessary patches (so called "Over The Air" updates).
However, there could be many issues to implement this approach such as
upgrade / synchronization of other dependent components.

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MOBILE BANKING

Personalization

It would be expected from the mobile application to support personalization

such as :

1. Preferred Language
2. Date / Time format
3. Amount format
4. Default transactions
5. Standard Beneficiary list
6. Alerts

Features of Mobile Commerce

Mobile Commerce is characterised by some unique features that equip it

with certain advantages against conventional forms of commercial
transactions, including Electronic Commerce:

i) Ubiquity: Ubiquity means that the user can avail of services and carry out
transactions
largely independent of his current geographic location (the “anywhere”
feature).

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MOBILE BANKING

ii) Immediacy: Closely related to the feature of ubiquity is the possibility of

real-time
availment of services (the “anytime” feature). This feature is particularly
attractive for
services that are time-critical and demand a fast reaction, e.g. stock market
information.

iii) Localisation: Positioning technologies, such as the Global Positioning

System (GPS),
allow companies to offer goods and services to the user specific to his
current location.
LBS can thus cater to consumers’ needs and wishes for localised content and
services.

iv) Instant connectivity: Ever since the introduction of the General Packet
Radio Service
(GPRS) mobile devices are constantly “online”, i.e. in touch with the network
(the
“always-on” feature). This feature brings convenience to the user, as time-
consuming dialup
or boot processes are not necessary.

v) Pro-active functionality: Mobile Commerce opens, by the virtue of its

ability to be
immediate, local and personal, new avenues for business. The user may
choose the
products, and services, which he wants to be kept informed about. The Short
Message
Service (SMS) can be used to send brief text messages to customers
ensuring that the
“right” (relevant) information is provided to the user at the “right” place, at
the “right”
time.

vi) Simple authentication procedure: Mobile devices function with an

electronic chip called

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MOBILE BANKING

Subscriber Identity Module (SIM). The SIM is registered with the network
operator and
the owner is thus unambiguously identifiable. The clear identification of the
user in
combination with an individual Personal Identification Number (PIN) makes
any furthertime-consuming, complicated and potentially inefficient
authentication process redundant.
Employment of Mobile Technologies in the
Banking Sector
A cornerstone of Mobile Commerce is built by Mobile Banking, the availment
of bank-related
financial services via mobile devices. It comprises of services in the field of
accounting, brokerage and financial information. Mobile Banking is
increasingly being employed by many banks around the world to generate
additional revenues, reduce costs or to increase customer satisfaction, often
with very promising results. For instance, the utilisation of transaction-based
MFS of Finland-based Nordea bank grew by 30% in 2004.The number of
France’s Société Générale customers using mobile services crossed the mark
of one million in year 2004, registering an impressive growth of nearly 200%
vis-à-vis 2003. These facts point toward a positive shift in the customer
perception of Mobile Banking. On the other hand, technological
developments like Universal Mobile Telecommunications System (UMTS)
have provided a new platform for realistic mobile applications.

Unlike in the past, when banks offering mobile services suffered a severe
setback due to lack of
customer interest and unripe technologies, the time seems to be now ripe for
(re-)launching mobile services. Mobile Banking is usually defined as carrying
out banking business with the help of mobile devices such as mobile phones
or PDAs [8; 11]. The offered services may include transaction facilities as
well as other related services that cater primarily to informational needs
revolving around financial activities. Considering these factors we can define
Mobile Banking as following:

“Mobile Banking refers to provision and availment of bank-related financial

services
with the help of mobile telecommunication devices. The scope of offered
services

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MOBILE BANKING

may include facilities to conduct bank and stock market transactions, to

administer
accounts and to access customized information.”
Mobile Banking, as defined above, includes a wide range of services. These
services may be
categorised as following:

Mobile Accounting

Mobile Accounting is sometimes characterized as transaction-based banking

services that revolve around a bank account and are availed using mobile
devices .Not all Mobile Accounting services are however necessarily
transaction-based. A more precise definition of Mobile Accounting would
therefore characterize it as “availment of account-specific banking services
of non-informational nature”. Mobile Accounting services may be divided in
two categories to differentiate between services that are essential to operate
an account and services that are essential to administer an
account.

Mobile Brokerage

Brokerage, in the context of banking- and financial services, refers to

intermediary services related to the bourse, e.g. selling and purchasing of
stocks. Mobile Brokerage can be thus defined as transactionbased, mobile
financial services of non-informational nature that revolve around a
securities account. Mobile Brokerage, too, may be divided in two categories
to differentiate between services that are essential to operate a securities
account and services that are essential to administer that account.

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Mobile Financial Information

Mobile Financial Information refers to non-transaction based banking- and

financial services of
informational nature . Mobile Financial Information services include subsets
from both banking and financial services and are meant to provide the
customer with anytime, anywhere access to
information .The information may either concern the bank and securities
accounts of the customer or it may be regarding market developments with
relevance for that individual customer. The information may be customised
on the basis of preferences given by the customer and sent with a frequency
decided by him. The information should be provided, ideally, on both, pull
and push basis.Information services are an integral part of Mobile Accounting
and Mobile Brokerage but they may also be offered as a stand-alone,
independent module, i.e. Mobile Financial Information can be offered without
offering Mobile Accounting or Mobile Brokerage but vice versa is not feasible.

MOBILE BANKING IN THE WORLD

This part of the mobile commerce is very popular in countries where most
of their population is unbanked.Countries like Sudan, Ghana and South Africa
received this new commerce very well.
In Latin America countries like Uruguay, Paraguay, Argentina, Brazil,
Venezuela, Colombia, Guatemala and recently Mexico started with a huge
success.In Colombia was released with Redeban.In Iran banks like Parsian,
Tejarat, Mellat, Saderat, Sepah, edbi and bankmelli offer this service.
Guatemala have the support of Banco industrial.
Mexico released the mobile commerce with Omnilife,Bancomer and a
private company(MPower Ventures). Kenya's Safaricom (Part of the
Vodafone Group) has had the very popular M-Pesa Service - mainly used to
transfer limited amounts of money, but has been increasingly used to pay
utility bills. Zain in 2009 launched their own mobile money transfer business
known as ZAP in Kenya and other African countries

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CASE ANALYSIS

LG Telecom, South Korea

In terms of the evolution of services being offered on mobile applications,
South Korea is showing the way.

The big push came when LG Telecom Ltd., the smallest of Korea's three
mobile service providers teamed up with the Kookmin bank to launch the
‘Bank on' service. Under this scheme mobile users were able to use smart
chips embedded in cell phones for accessing all of the transaction and
enquiry based services. The chip-based service automated the
authentication of users when they accessed their bank's financial services to
make the whole process much faster and convenient. The icing on the cake
came with the ability of these chip enabled cell phones to be used
simultaneously as cash cards.By October 2004 there were already about

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100,000 infrared readers adapted to take payment directly from mobile

phone handsets in Korea.

Users can now use their cell phones to pay for everything, from restaurant
bills, travel tickets, merchandise and even haircuts.

Reliance Infocomm, India

When Reliance Infocomm, India rolled out its CDMA network, (at the time the
mobile market in India was still in its infancy, and data services were almost
never heard off) it made sure that all handsets supported Java.The Reliance
application platform, also known as R-World brought Java compatibility even
to the lower end phones.

Reliance used a novel way to overcome the memory limitations of lower-end

mobile phones, which hampered deploying of multiple standalone J2ME
based clients. Instead of storing applications statically on their cell phones,
users access a single menu based application called R-World, which connects
them to the Reliance servers. Using the menu based user interface, mobile
users select the application, which they want to run and download them
over-the-air to their cell phones. These applications are then executed locally
on the mobiles.

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From mid-2004 Reliance tied up with two of the popular private sector banks,
HDFC and ICICI, to provide a host of their enquiry and transaction based
mobile banking services through its R-World environment.

Conclusions

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 globalisation have produced new
challenges for banks.
Mobile Banking presents an opportunity for banks to retain their existing,
technology-savvy customer base by offering value-added, innovative
services. It might even help attracting new customers.
Further, Mobile Banking presents a chance to generate additional revenues.

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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. Many
banks recognize this threat and are already taking preventive measures by
introducing mobile services. The foremost significance of Mobile Banking
would therefore be of a defensive nature. Instead of providing a positive
differentiation, Mobile Banking would be employed to thwart negative
differentiation vis-à-vis rivals.
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.

Webliography

1. http://brandonmcgee.blogspot.com/

2. http://www.tutorial-reports.com/mobile/mobile-banking

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3. http://en.wikipedia.org/wiki/Mobile_banking

4. www.directeasy.com

5. www.axisbank.com

Bibliography

1. Book:- Ecommerce in Indian Banks

2. Magazines: - Professional Banker The ICEAI University

3. Business world

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4. Economic times

Questionnaire from the point of view of Customers

using Mobile Banking Service:

Name:-

Profession:-

Age:-

In which bank you hold account with:-

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 Does your bank provide Mobile Banking service?

Yes No

 Do you use the Mobile banking facility provided by your bank?

Yes No

 If you are aware of Mobile banking then frequently how do you perform
your banking transaction?
By personally visiting the bank

Through Mobile

 How are you introduced to the concept Mobile Banking?

By the bank you already had an account with

Whether any other Bank approached you and

Informed about it.

Such a services offered by them. Whether you were

Already aware of it.

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 Do you find that doing transaction through Mobile banking is more

comfortable?
Yes No

 How much safe you feel Mobile Banking is?

Fully safe

Unsafe

Safer to some extent

 Are you aware of Different types of risk that are involved in while doing
transaction through Mobile Banking?
Yes No

 Do you regularly changes your password of login ID’s?

Yes No

 Do you think that Traditional Banking System must be replaced by

Mobile Banking?
Yes No

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Questionnaire from the point of view of Banks

Name of the Bank:-

Branches:-

 Does your bank provide Mobile Banking?

Yes No

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 Before providing Mobile Banking facilities does your bank provide any
training for your employees?
Yes No

 Do you face any problem while implementing Mobile Banking?

Yes No

If yes type of problem faced by you?

Technical Problem

Administrative Problem

Any other

 Do you face any resistance from your employees while implementing

Mobile Banking system?
Yes No

If yes extend of resistance

Less More

Very Little

 Do all the employees in your bank like the change of adapting to

Mobile Banking system?

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Yes No

 Is there an increase in number of customers after introducing Mobile

Banking?
Yes No

 How many customer of your bank uses Mobile Banking?

10 – 30% 70 – 90%

30 – 50% 90 & above

50 – 70%

 How do you convince your customer to use Mobile Banking facility?

 What kinds of facilities do you provide to your customer to ensure

safety of their transaction?

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 Which kind of banking system does your bank prefers the most?
Traditional Banking System

Mobile Banking System

 Do you think Mobile Banking is achieving the Banks objective?

Yes No

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