BANKING LAW

TOPIC- ASSESSMENT OF BENEFITS AND CHALLENGES FACED IN

MOBILE BANKING (IDENTIFY SEPARATELY FOR PRIVATE AND
PUBLIC SECTOR BANKS USING QUESTIONNAIRE/SURVEY METHOD
WITH USERS).

SUBMITTED BY- HEENA YASMIN SHAIKH

BBA LLB SEM- 10

ROLL NO- 18

GUIDED BY- Mr. ISHAN MAHESHWARI (Asst. Prof of Law)

Indian Institute of Legal Studies

Dagapur, Matigara, Siliguri, Darjeeling, West Bengal 734001.

 Table of contents:

Contents Page Number

Acknowledgement I

List of Abbreviation II

Research Methodology IV

Content Page no.

Chapter 1 Introduction 1
i. RBI’s guidelines to regulate Mobile
Banking
ii. Regulation of Mobile Banking in India

Chapter 2 Features, Advantages and Disadvantages of 4

Mobile Banking.

Chapter 3 The benefits of Mobile Banking to the poor 7

Chapter 4 Challenges with adoption of Mobile Banking 9

i) Regulatory challenges
ii) Demographic challenges

Chapter 5 Survey Report on Issues and Challenges faced in 11

Mobile Banking

Conclusion and Suggestion 15

Bibliography
 ACKNOWLEDGEMENT

With profound gratitude and sense of indebtedness I place on record my sincerest thanks to,
Mr. Ishan Maaheshwari, Asst. Prof of Law, Indian Institute of Legal Studies, for his
invaluable guidance, sound advice and affectionate attitude during the course of my studies.

I have no hesitation in saying that he molded raw clay into whatever I am through his
incessant efforts and keen interest shown throughout my academic pursuit. It is due to his
patient guidance that I have been able to complete the task.

I would also thank the Indian Institute of Legal Studies Library for the wealth of information
therein. I also express my regards to the library staff for cooperating and making available the
books for this project research paper.

Finally, I thank my beloved parents for supporting me morally and guiding me throughout the
project work.

_____________ Heena Yasmin Shaikh

Teacher’s Signature Student’s Signature

Date: __/__/__2022 Date: / /2022

I
 List of Abbreviation

ATM Automated Teller Machine

MFI Microfinance Institution

OTP One Time Password

PIN Personal Identification Number

RBI Reserve Bank of India

WAP Wireless Application Protocol

II
 RESEARCH METHODOLOGY

 AIMS AND OBJECTIVES:

The researcher would aim to study in detail the significance and the challenges in mobile
banking.

The following will be the objectives of the study –

1. To highlight the basic difference between the advantages and disadvantages of mobile
banking.
2. To find out the problems faced by the customers while using mobile banking .
3. To recommend suggestions the way to improve Mobile banking services.

 STATEMENT OF PROBLEM

Once a time, people have to spend three to four hours to go for bank transaction sometimes
cost of transaction was more than that of money deposited or withdrawn. E-banking allows
customer to conduct financial transaction on a secure website. In current scenario, Advances
in mobile technology are allowing for delivery of financial products and services more
conveniently and effectively than traditional banks. Mobile Banking renders various services
to the customers such as fund transfer to inter and intra bank, Balance enquiry services or
mini statements, Request services, utility bill payments and credit card payments.

However, the mobile banking has some hurdles for using Mobile Banking like Mobile
Banking is not available on all mobile phone, Regular use of Mobile Banking may lead to
extra charges levied by the bank for providing the service, Mobile banking users are at risk of
getting fake SMS messages and scams, the loss of a mobile banking PIN and other sensitive
information.

Hence, the researcher has attempted to analyze the problems faced by the customers during
using of Mobile Banking

III
  RESEARCH HYPOTHESIS

Research is commonly referring to a search of knowledge. It is done with the help of study,
observation, comparison and experiment. Thus, the researcher has been motivated by the
hypothesis that despite of providing so many facilities via bank to customer their still lies
lacunas in the usage and response in mobile banking from customer to the bank.

 RESEARCH QUESTIONS:

The following questions can be formulated:

1. What is mobile banking?

2. What are the advantages and disadvantages of mobile banking?

3. What are different challenges faced while using mobile banking?

 METHODOLOGY OF RESEARCH

“Methodology” does not merely mean the methods used by the researcher to complete his
research work but it also means and implies the concepts and theories, which underlie the
methods. The methodology used for the completion of this project is Doctrinal and Empirical.
Chapter -1

Introduction

Technology advancement has resulted in making a lot of time consuming easy and quick.
Mobile banking is one such activity which is possible due to technological advancement. It
helps customers to access their bank accounts 24/7 and at any time or place through their
mobiles, with or without the aid of the internet. Nowadays, several banks have come up with
apps in order to help ease the process of mobile banking, examples of such apps or mobile
applications are SBI’s YONO App, HDFC Mobile Banking apps, ICIC iMobile etc.

Concept and Use of Mobile Banking:

Mobile banking is a form of electronic banking which permits customers to avail banking
services without having to physically visit the bank. It is performed between the bank
employees and their customers through the Short Message Service (SMS) service or through
the internet. The Reserve Bank of India had recognised the importance of providing such
services to Indian customers. They came up with the first set of rules to regulate mobile
banking in 2008. In India, ICIC bank was the first to introduce mobile banking in 2008 itself.
Mobile banking services can be used by bank customers for several services like, receiving
mini bank statements on mobiles, accessing card and loan statements, managing insurance
and pension plans, details on recent transactions, alerts in case of unauthorised access to
one’s account, notifications on last payment dates and change of PIN (Personal Identification
Number) and reminders through the internet.

Importance of Mobile Banking:

Mobile Banking allows its consumers to be able to access banking services from anywhere.
Business and business owners are now able to save time by making use of mobile
applications to process their payments or even receive funds from clients directly to their
phone numbers. It is particularly popular among small to medium-sized enterprises (SMEs).
With mobile technology, banks are able to cut down on operational costs while still
maintaining client satisfaction. The fact that any client of a bank can make use of their app to
request a service, such as opening an account or even the ability to schedule debit orders or
other payments from an application, allows for larger transactions volumes, eventually
driving business growth.

RBI’s Guidelines to Regulate Mobile Banking:

The guidelines by RBI were influenced by the bank’s power under section 18 of the Payment
and Settlement Systems Act, 2007 and were last updated in 2014. These guidelines are
applicable to all commercial banks (this includes Regional Rural Banks too), Urban
Cooperative Banks, State Cooperative Banks and also District Central Cooperative Banks. 1
Only banks which hold license, have been supervised and have a physical presence in India
hold the permission to give out mobile banking services under the guidelines. Also, such
services are restricted only to customers and debit or credit card holders of the bank giving
the service. The guidelines provided by RBI through the ‘Risks and Controls in Computers
and Telecommunications’ circular issued in 1998.  

1
https://ruralmarketing.in/stories/rbi-issues-guidelines-for-operationalising-mobile-banking/ visited on
4/05/2022 at 7:20 pm IST
 Regulation of Mobile Banking in India

The RBI issued the ‘Statement on Developmental and Regulatory Policies’ on December of
2020 and on 18th February, 2021 they posted the ‘Master Direction on Digital Payment
Security Controls’, which shall be commonly known as Reserve Bank of India (Digital
Payment Security Controls) directions, 2021. They are applicable to Regulated Entities such
as Scheduled Commercial Banks. Small Financial Banks, Payments Banks and Credit card
issuing NBFCs. These security controls have also brought in mobile banking in its purview
along with other forms of digital banking options. It was introduced to device control in areas
like Security control, Fraud Risk Management, Reconciliation mechanism, Customer
Protection etc.  The RBI under the directions contained in the master direction asks customers
to immediately remove the copy of a mobile banking application if they spot an anomaly or
exception in the app which is not usual or something that is not built into the app.

The Regulated Entities for the types of banks on whom these directions are applicable shall
be able to verify the version of mobile banking application which the customer has installed
before starting with the transactions. Banks should ensure secure delivery of PINs and
Passwords to customers. The mobile banking applications are to be crafted in such a way that
they do not retain or automatically save passwords, PINs, Username or any other confidential
that could lead to third party or unauthorised access.

There are some other important directions for Regulatory Entities to follow under the Reserve
Bank of India (Digital Payment Security Controls) directions, 2021, in order to ensure a safer
mobile banking experience for their customers.  Besides abiding by these guidelines, Indian
banks are also being encouraged to implement improved infrastructure as better infrastructure
will provide better security to customers’ private data and they will trust the mobile banking
services more. There are certain steps that a customer availing mobile banking services can
take up to ensure secure transaction and they include installing mobile banking applications
from secure and reliable sources, to use only secure network connections while connecting to
their digital bank accounts and not revealing their password, keys or OTPs (One time
password) to just anyone. Lastly, customers have to be educated and made aware of proper
implementation of these steps so as to enable them to secure their accounts and put more trust
on mobile banking.2

2
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1554160 visited on 5/05/2022 at 5pm IST
Chapter 2:

Features, Advantages and Disadvantages of Mobile Banking

Features:

A mobile payment service in order to become acceptable in the market as a mode of payment
the following conditions have to be met:3

a) Simplicity and Usability: The m-payment application must be user friendly with little or
no learning curve to the customer. The customer must also be able to personalize the
application to suit his or her convenience.

b) Universality: M-payments service must provide for transactions between one customer to
another customer (C2C), or from a business to a customer (B2C) or between businesses
(B2B). The coverage should include domestic, regional and global environments. Payments
must be possible in terms of both low value micro-payments and high value macropayments.

c) Interoperability: Development should be based on standards and open technologies that

allow one implemented system to interact with other systems.

d) Security, Privacy and Trust: A customer must be able to trust a mobile payment
application provider that his or her credit or debit card information may not be misused.
Secondly, when these transactions become recorded customer privacy should not be lost in
the sense that the credit histories and spending patterns of the customer should not be openly
available for public scrutiny. Mobile payments have to be as anonymous as cash transactions.
Third, the system should be foolproof, resistant to attacks from hackers and terrorists. This
may be provided using public key infrastructure security, biometrics and passwords
integrated into the mobile payment solution architectures.

e) Cost: The m-payments should not be costlier than existing payment mechanisms to the
extent possible. A m-payment solution should compete with other modes of payment in terms
of cost and convenience.
3
https://warse.org/pdfs/ijatcse03122012.pdf visited on 7/05/2022 at 3:00 pm IST
f) Speed: The speed at which m-payments are executed must be acceptable to customers and
merchants.

g) Cross border payments: To become widely accepted the m-payment application must be
available globally, word-wide

Advantages of Mobile Banking in India:

Mobile banking has immense benefits. Its introduction allows customers to access their bank
accounts to make payments of bills and other things, transfer money, get alerts in relation to
loans, payment of EMIs and the customer is also alerted through notifications in case of
unauthorised access of their bank accounts or in case of credit card fraud. The alerts provided
can prevent cases of fraud and extortion. All of these services of banks are now available at
the fingertips of customers and the transactions happen much quicker compared to doing
them by physically visiting banks. Customer service from banks is also easily available
through mobile banking. Micro-ATM is a form of mobile banking which is often seen in
shopping malls can be useful in situations where one does not want to carry cash or does not
have enough of it at hand. Instead of having to visit the bank they can simply swipe their
cards on micro-ATM machine and make payments.  

Initially, RBI had put up transaction limits on mobile banking in 2009. The cap was of Rs.
50,000 per day but was removed and currently, banks can freely change the limit based on
their own risk-taking capabilities.

Disadvantages of Mobile Banking in India:

Mobile banking might have made banking much hassle-free and quicker but it is still not used
by a lot of bank customers due to questions of safety. Customers are often worried about
financial frauds, bank account hacking, theft of passwords or PINs. There is also risk of
malware and virus attack which might lead to third party accessing an individual’s private
data and details such as their usernames, passwords etc. There is also risk in mobile banking
through SMS. SMS services do provide end to end encryption of messages being exchanged.
It is vulnerable to SMS spoofing, wherein a third party may pretend to be the original user
and send messages to the bank and might in turn lead to financial frauds.
All mobile banking aided by the use of Wireless Application Protocol (WAP) or just wireless
there is security concerns. Wireless applications use microwave signalling network to
transmit communications but if the network is not secure or has any weakness then it can be
easily attacked by hackers. Most mobile banking services are accessed through PINs or
passwords of the digital bank accounts but since it’s an old method of securing accounts it
leads to easy unauthorised access to these private accounts.

The PINs and passwords can get stolen and a third party can easily use it to access an
individual’s digital bank account. There are also disadvantages steaming from demographic
variables like people above a certain age group do not indulge in mobile banking even if they
are aware of it because they aren’t tech-savvy and there are circumstances where they aren’t
aware of its availability. Also, it can be observed that, Indian youths, mainly students are
more open to adopting mobile banking than their older counter parts. This could be because
of their dependence on technology from a young age. The older section of the population
through more awareness and knowledge can take the decision of welcoming the use of
mobile banking.4

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https://inoxoft.com/what-is-mobile-banking-advantages-and-disadvantages-of-mobile-banking/ visited on
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Chapter 3:

THE BENEFITS OF MOBILE BANKING TO THE POOR

The poor get benefited by having an access to loans at competitive prices. They also get
saved from the long queues in the bank that saves the time and energy. Finally the individuals
benefit from the personalized banking services. Above all it offers the benefit of keeping a
track of the finances for the poor and the government that helps in economic growth.

Cost benefit:

The banks have to make a huge investment in establishing the infrastructure and systems
required for smooth flow of mobile banking. But at the same time the banks also do not need
to set up physical branches at various remote and far-flung locations. This helps the banks in
saving the cost incurred on setting up of the branches, maintenance of the branches and staff.
This reduces the burden of banks which can be passed on to the customers in terms of
decreased costs for banking services. Cost saving can be attained by drifting the customers
towards online banking, which makes it an important goal for the financial service providers
and banks. This can result into savings in terms of reduced cost for the customers. At the
same time the customer does not have to travel to the bank branches or ATMs which might
be located at a distant place for every transaction thus reducing the cost burden for the
customer.

Time benefit:

The customers incur a lot of time in travelling to the bank branches or ATMs for doing their
transactions. They also have to wait in long queues for the banking transactions. The
branches are open for a limited time which makes it even more difficult for the people who
travel long distances for a banking transaction. Mobile phones offer the convenience of
transacting from anywhere and at any time instantly thus reducing the mobility of customers.
This results into reduced travelling cost. The mobile banking can offer the real time access to
financial services without the constraint of time and distance.
Personalisation:

Personalisation refers to the modification of service as per the need or requirement of an

individual. Mobile banking has the potential to offer services specific to the individual
requirement (e.g. time, location and the choice of the user). These services increase the
proximity of the marketer to offer customized push marketing thus increasing the chance of
sale. This helps in increasing the brand presence and thus raises customer loyalty.
Personalisation can be defined as the point to which the interaction between the seller and
receiver can be modified to the needs, interests and habits of the individual. It assures the
receipt of most recent and suitable message by the customer. It improves the customer’s
perception of the seller, and reduces their cost and effort to browse and search information.
Thus, the customers have the benefit convenience and customized communication. The
customers can avail the banking services as per the individual needs through the mobile
banking5

Chapter 4:
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351435564_The_benefits_and_challenges_of_mobile_banking_at_the_Bottom_of_the_pyramid
 CHALLENGES WITH ADOPTION OF MOBILE BANKING

Economic Challenges: The rural population in India is spread across 600,000 villages, each
with a low transaction value. Profitability can only be achieved by large volumes, requiring
significant initiative from financial institutions. Therefore, any mobile banking must be
inexpensive enough to be attractive for the end-customer over existing methods.

Regulatory Challenges: Although the RBI is supportive of mobile banking in India, there
are many regulations that are being put into place:

i) Restricted to Financial Institutions: The guidelines state that only existing

financial institutions and banks are allowed to offer mobile banking. Although the
guidelines cover Microfinance Institutions (MFIs), significant economies of scale
cannot be achieved by these due to existing large fixed costs. For a very
inexpensive solution, it would have been more effective to allow non-profit
organizations or evangelical organizations to build their own MFI without being
encumbered by large existing infrastructure.
ii) Rupee Transactions: All transactions must be done only in India’s national
currency, the rupee. While this may not be a threat in the beginning, this may pose
a constraint for interoperability between Indian mobile payments and the world.
Also, it excludes providers from the lucrative remittance market in India and
limits areas from which mobile operators can be profitable.
iii) Existing Account Holders: The guidelines also state that only those having a
valid bank account would be allowed mobile banking. This limits the full potential
of mobile banking to extend micro-credit and bring banking to the large number
of unbanked customers in India.

Demographic Challenges: India has 18 official languages which are spoken across the
country. The state governments also are dictated to correspond in their regional language for
official purposes. Additionally, two-thirds of the population in India is illiterate, creating
difficulties in deployment of mobile banking solutions. For a pan-Indian mobile banking
solution, this will be cumbersome to overcome.6

Chapter 5:

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at 6pm IST
 Survey report on issues and challenges faced in mobile banking

In the last few decades, information technologies have changed the banking industry and
have provided a way for the banks to offer differentiated products and services to their
customers. The advent of technology made the banks to change the nature of financial
services offered to its customers.

Primary data was collected from mobile banking users of Siliguri, who are using the mobile
banking services of either State Bank of India a leading public sector bank or ICICI Bank a
leading private sector bank. A sample of 32 respondents who actually use mobile banking
were collected.

Data is collected using a structure questionnaire based.

State Bank of India a leading public sector bank: (22 responds)

 Age:

15-30 years 31-40 years 41-50 years Above 50 years

15 4 2 1

 Gender:

Male 13

Female 9

 Are you aware of Mobile banking?

Yes 22

No -

 What are the mobile banking services you use?

To get account balance update 4

To transfer money 5

To buy goods or services -

All of the above 13

Agree Disagree Neutral

I think mobile banking saves my time 20 - 2

Language and Information content on websites 20 - 2

are easy to understand

Bank website is accessible all the time 11 5 6

It is easy to find out all the information 17 3 2

Error occur during accessing online banking 13 4 5

Bank promptly solves any problem that occurs 15 3 4

during mobile banking

Bank employees are co-operative towards 16 1 5

helping the customers in case of problem in
mobile banking

Bank quickly confirms any online transaction 18 1 3

through SMS Service

Bank website is completely secure for credit card 17 2 3

information

You believe that bank don’t misuse your 16 1 5

personal information

Bank collects personal information of banks 16 1 4

carefully

I am satisfied with the level of data and 17 2 3

information security provided by the bank.
ICICI Bank a leading private sector bank. (10 responds)

 Age:

15-30 years 31-40 years 41-50 years Above 50 years

7 2 1 -

Male 5

Female 5

Yes 10

No

To get account balance update 1

To transfer money 3

To buy goods or services -

All of the above 6

Agree Disagree Neutral

I think mobile banking saves my time 10 - -

Language and Information content on websites are 10 - -

easy to understand

Bank website is accessible all the time 8 1 1

 It is easy to find out all the information 8 - 2

Error occur during accessing mobile banking 5 2 3

Bank promptly solves any problem that occurs 8 1 1

during mobile banking

Bank employees are co-operative towards helping 10 - -

the customers in case of problem in mobile banking

Bank quickly confirms any online transaction 9 - 1

through SMS Service

Bank website is completely secure for credit card 10 - -

information

You believe that bank don’t misuse your personal 10 - -

information

Bank collects personal information of banks 10 - -

carefully

I am satisfied with the level of data and 9 - 1

information security provided by the bank.

Analysis:

From the above data collected for SBI Bank7and ICICI Bank8, it can be
observed that every person was aware about the mobile banking services.
However, most of these services was used in transferring money and to get
account update. In case of accessibility, co-cooperativeness of bank employees,
and errors occurred during mobile banking, it can be observed that the
customers of ICICI Bank are highly satisfied with the efficiency as compared to

7
https://docs.google.com/forms/d/1FpdyOD2rQHsi1M2Icki37IGSAXHd6zhBt1fdmQzo20k/edit#responses

8
https://docs.google.com/forms/d/1wCeB6eUNPMXI8R8FY7xIHimXqrR3T248poECWKiRrdU/edit#responses
SBI bank. Lastly, customers of both the banks were satisfied equally in aspect
of security of credit card, information and use of personal data.

Conclusion

In conclusion, it can be stated that mobile banking is a blessing in the banking industry.
Initially, internet banking or online banking was introduced and people required computer
systems to access the service but in developing nations like India not every household could
afford to have a computer. However, mobiles were used by a huge percentage of the Indian
population; thus, the introduction of mobile banking in India has been a blessing. Online
transactions through mobile banking have also been proven to be helpful and have hence,
increased during the covid-19 induced pandemic.
Although, a chunk of bank customers nowadays has indulged in mobile banking, there are
quite a few who are still fearful of security breaches while engaging in transactions through
mobile banking. These fears can be somewhat be warded off by the help of the guidelines
enshrined under the Reserve Bank of India (Digital Payment Security Controls) directions,
2021. The banks adopting more secure mechanisms for their mobile banking applications and
better infrastructure will aid in building up the trust of their customer-base. Making bank
customers more aware of the security provisions at their disposal in relation to mobile
banking is essential.

Suggestions:

1. Every device does not have the facility for mobile banking. Hence the bank provide
securable software which adopted in all types of Mobile phone.
2. Some banks will charge an extra fee for their service to mobile banking users. If the
bank cut or reduce this service charge number of mobile banking user will be increase
rapidly.
3. Every banks should provide strongest security to their user which helps to protect
from hackers. Because in current scenario, hackers easily gain from the users account
through sending spam message, viruses, fake application which similar to the original
app. Therefore the bank provide more securable software for giving firewall
protection to their users and also take necessary steps to reduce the hacking activities
with the help of government.
4. The bank must simplify the mobile banking procedure.
5. The bankers should maintain a special section for mobile banking services to meet
their customer needs and to serve them better.
6. The proper training to use of mobile banking to the people of rural background is
proposed.
7. Bank can offer EMI or rental based mobile phone handsets to poor people with doing
tie up with mobile handset company. It may give access to them via m-banking
service
8. Bank should take care that the refund facilities should be provided concerning to
wrong transactions made by customers.
 Bibliography

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 https://ruralmarketing.in/stories/rbi-issues-guidelines-for-operationalising-mobile-
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 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1554160 visited on 5/05/2022 at

5pm IST

 https://warse.org/pdfs/ijatcse03122012.pdf visited on 7/05/2022 at 3:00 pm IST

 https://inoxoft.com/what-is-mobile-banking-advantages-and-disadvantages-of-
mobile-banking/ visited on 10/05/2022 at 8pm IST
 https://www.researchgate.net/publication/
351435564_The_benefits_and_challenges_of_mobile_banking_at_the_Bottom_of_th
e_pyramid

 https://bnwjournal.com/2022/02/01/benefits-and-challenges-of-mobile-banking-in-
india/ visited on 13/05/2022 at 6pm IST