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 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.

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.

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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.

TYPES OF BANKS

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1998-99

State Bank of India and Associates 08

Nationalized Banks 19

Domestic Private Sector Banks 25

New Domestic Private Sector Banks 09

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.

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

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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 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

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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 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 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

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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

 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

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 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: -

 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
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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
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

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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. 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

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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.

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

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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 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.

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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
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.

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MOBILE BANKING SERVICES

Mobile banking can offer services such as the following:

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

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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 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

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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. ‘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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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

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MOBILE BANKING

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.

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

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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
favourablereputation of the firm’s logistical capacities may help generate additional orders.

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

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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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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.

 Mobile operators benefit from increased customer stickiness, data usage and,
potentially, customer experimentation with other forms of mobile content.

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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)

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.

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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 SERVICE CENTRE

3. WAP (Wireless Access Protocol)

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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.

4. STANALONE MOBILE APPLICATION CLIENTS

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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 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

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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.

ADVANTAGES OF MOBILE BANKING

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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.
 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

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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.

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 :

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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.

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

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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.

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.

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MOBILE BANKING

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.

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

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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).

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
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

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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
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:

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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.

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

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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 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.

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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.

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.

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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.
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

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

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

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

4. www.directeasy.com

5. www.axisbank.com

Bibliography

1. Book:- Ecommerce in Indian Banks

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2. Magazines: - Professional Banker The ICEAI University

3. Business world

4. Economic times

Questionnaire from the point of view of Customers

using Mobile Banking Service:

Name:-

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Profession:-

Age:-

In which bank you hold account with:-

 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

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Whether any other Bank approached you and

Informed about it.

Such a services offered by them. Whether you were

Already aware of it.

 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?

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Yes No

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

Mobile Banking?
Yes No

Questionnaire from the point of view of Banks

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Name of the Bank:-

Branches:-

 Does your bank provide Mobile Banking?

Yes No

 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

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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?
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?

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

safety of their transaction?

 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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