Mobile Banking
Meaning
As mobile networks are upgraded with
WAP, GPRS and UMTS to deliver nextgeneration multimedia services, the banks are
getting ready to unleash services on mobile
phones. Customers will be able to view their
account statement, transfer funds between
accounts, be notified of large payments or get
notified of transactions above a pre-defined
threshold, and will have immediate and full
control over their finances. Next-generation
mobile banking services will deliver significant
improvements with user-friendly icon driven
instructions, instant access, security and
immediate transaction processing all at a
lower session cost. Banks will attain higher
levels of customer satisfaction and increased
loyalty by providing anywhere, anytime
banking. They will benefit further from lower
administrative costs, lesser number of
branches, reduced headcount, streamlined
call centers and lower handling charges Page1
Mobile Banking
savings which, hopefully, will be passed onto
customers.
Introduction
Internet Banking helped 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 Mobile Banking The FutureWhite Paper Overview AbstractThis
paper describes the basic concepts, services offered, market survey and
technology which enables Mobile Banking. Over the last few years, the
mobile and wireless market has been one of the fastest growing markets in
the world and it is still growing at a rapid pace. This opens up huge markets
for financial institutions interested in offering value added services. With
mobile technology, banks can offer a wide range of services to their
customers such as doing funds transfer while traveling, receiving online
updates of stock price or even performing stock trading while being stuck in
traffic. Mobile devices, especially smart-phones, are the most promising way
to reach the masses and to create stickiness among current customers,
due to their ability to provide services anytime, anywhere, with high rate of
penetration and potential to grow.Document AudienceThis document is
primarily intended for Marketing, Sales, Product Support, Internet Services
Group, Project Engineering and anyone who is interested in Mobile Banking.
countries, but definitely a big barrier if we consider most of the developing
countries of Asia like China and India. Mobile banking addresses this
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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'. Customers don't need access to a computer
terminal to access their bank accounts, now the can do so on-the-go while
waiting for the bus to work, 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.
History
Mobile banking customers now enjoy a more user-friendly service
compared with the service's beginnings in the early 2000s. The decade has
been a time of trial and error, as financial institutions struggle to meet
consumer preferences for mobile banking features.
1.
o
Early 2000s
Banks faced mobile banking challenges in the early part of the
decade. Consumers found it difficult to view their financial information on
the small cell phone screens that were common at the time. Some banks
offered the service, only to soon discontinue it; in 2002, Wells Fargo
developed a mobile banking service and only 2,500 customers enrolled in
it. Because of the poor response, they soon withdrew the offering.
Mid-2000s
As the size and capabilities of mobile devices increased, so did the
effectiveness of mobile banking. Banks introduced services that
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accommodated more types of cell phones and mobile devices, including
smart phones. Consumers preferred the easier navigation and improved
images and graphics offered by updated, technologically advanced mobile
services.
2008 and Beyond
o
In 2008, smaller banks began to offer mobile banking. More
customers of large banks were also using the service. As of February 2009,
over 1.9 million customers were using Bank of America's mobile service in
the U.S. Other industry players also entered the market; AT&T offers a
mobile banking application that allows customers from different banks, with
different types of mobile devices, to more easily conduct transactions.
Definition
In today world Mobile Banking is a
popular term. Mobile Banking means a
financial transaction conducted by logging on
to a banks website using a cell phone, such
as viewing account balances, making
transfers between accounts, or paying bills. It
is a term used for performing balance checks,
account transactions, payments etc. via a
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mobile device such as a mobile phone. In
recent time Mobile banking is most often
performed via SMS or the Mobile Internet but
can also use special programs called clients
downloaded to the mobile device.
Features
It's Convenient
Hello Money is based on a preset menu, hence you don't
need to remember any keywords, install any applications or
send any SMSs'. Just dial *598*1#, choose the transaction you
want, and you're set to bank!
No Operator charges, free on roaming
(international/domestic), and no GPRS connection needed to
carry out your transactions!
Using Hello Money, you can pay your bills to any of the
billers who are registered with us.
Hello Money can be operated in Hindi or English (if language
is supported by handset) by simply selecting the language of
your choice in the Hello Money menu.
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It's Fast
Hello Money is extremely quick to use on any GSM phone
(even the most legacy handsets) and you can get realtime
responses to your requests
Hello Money works wherever the operator network exists
(Available to Idea, Vodafone, BPL and Airtel subscribers).
Hello Money is a USSD service and so unlike GPRS you don't
need to wait for activation to start accessing Hello Money.
You don't need to download or install any applications to
access Hello money. Simply dial *598*1# and start banking!
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It's Secure
Hello Money is a USSD based service (Unstructured
Supplementary Services Data which allows quick transmission of
information via a GSM network) using a highly secured
technology. It works on simple protocols which are based on
short codes.
The USSD protocol ensures that no information is stored on
your phone. This protocol also ensures that there is no loss of
data on either end.
Hello Money has an in-built USSD encryption and 'no store
just forward' facility for secured transactions.
Your Hello money account can only be accessed via a PIN.
This ensures that ONLY YOU can access your account. The
default PIN is part of the Welcome kit/Insta Kit. However,
regenerated PINs are sent via SMS. To increase security it is
mandatory for you to change the PIN on your first transaction
with the new PIN on Hello Money. The PIN sent by SMS will be
valid only for 72 hours. Please keep your debit card handy while
changing your PIN.
Incase your handset is stolen / misplaced, call and inform
our customer service helpline as soon as possible.
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Mobile Banking Business
Models
A wide spectrum of Mobile/branchless banking models is
evolving. These models differ primarily on the question that who
will establish the relationship (account opening, deposit taking,
lending etc.) with the end customer, the Bank or the
NonBank/Telecommunication Company (Telco).Models of
branchless banking can be classified into three broad categories Bank Focused, Bank-Led and Non Bank-Led. Bank-focused model
The bank-focused model emerges when a traditional bank uses
non-traditional lowcost delivery channels to provide banking
services to its existing customers. Examples range from use of
automatic teller machines (ATMs) to internet banking or mobile
phone banking to provide certain limited banking services to
banks customers. This model is additive in nature and may be
seen as a modest extension of conventional branch-based
banking Bank-led model The bank-led model offers a distinct
alternative to conventional branch-based banking in that
customer conducts financial transactions at a whole range of
retail agents (or through mobile phone) instead of at bank
branches or through bank employees. This model promises the
potential to substantially increase the financial services outreach
by using a different delivery channel (retailers/ mobile phones), a
different trade partner (Telco / Chain Store) having experience and
target market distinct from traditional banks, and may be
significantly cheaper than the bankbased alternatives. The bankled model may be implemented by either using correspondent
arrangements or by creating a JV between Bank and Telco/nonPage8
Mobile Banking
bank. In this model customer account relationship rests with the
bank. Non Bank-led model The non-bank-led model is where a
bank does not come into the picture (except possibly as a safekeeper of surplus funds) and the non-bank (e.g. Telco) performs
all the functions.
Mobile Banking Services
Banks offering mobile access are mostly
supporting some or all of the following services:
Account Information
Mini-statements and checking of account history
Alerts on account activity or passing of set thresholds
Monitoring of term deposits
Access to loan statements
Access to card statements
Mutual funds / equity statements
Insurance policy management
Pension plan management Payments & Transfers
Domestic and international fund transfers
Micro-payment handling
Mobile recharging
Commercial payment processing
Bill payment processing Investments
Portfolio management services
Real-time stock quotes
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Personalized alerts and notifications on security prices Support
Status of requests for credit, including mortgage approval, and insurance
coverage
Check (cheque) book and card requests
Exchange of data messages and email, including complaint submission and
tracking Content Services
General information such as weather updates, news
Loyalty-related offers
Location-based services
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, 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 Have you heard about mobile banking?Base:
360 IT industry and corporate users of mobile phones and banks
offering Mbanking Source: DATAQUEST Given the profile of the
people surveyed, its no surprise that over 26% of the sample had
heard about mobile banking services. Dataquest did a mix of
60:40 (non-IT: IT people) in the NCR region. Awareness about
mobile banking services was higher among IT people. HDFC
Banks CN Ram agreed"We have 1.75 lakh registered users for
mobile banking services. And we are hitting 4,000 transactions
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per day." Would you like to use mobile banking services?Base:
265 respondents not aware of m-banking services Source:
DATAQUEST While awareness remains at 26%, people are keen to
try out mobile banking. 63% of the respondents evinced interest
in the services. Given the convenience factorthe fact that
mobile banking can be used from anywhere in the world as long
as one can send and receive SMSmost were interested. Since
m-commerce is still about the core virtues of mobile
communication, issues like mobility, any-time access and ease of
usage emerged as the driving factors in the ongoing year.
Push Based Pull BasedTransaction Based
Fund Transfer
Bill Payment
Other financial services like share trading. Enquiry
Based
Credit/Debit Alerts.
Minimum Balance Alerts
Bill Payment Alerts
Account Balance Enquiry
Account Statement Enquiry
Cheque Status Enquiry.
Cheque Book Requests.
Recent Transaction History.
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Technologies Behind
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
IVR Interactive Voice Response
IVR or Interactive Voice Response service operates through prespecified 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.
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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).
Ten years ago, online banking leapt from nice-to-have
status to must-have. In hindsight, its pretty obvious why it
became so popular, but at the time there were still questions as
to if and when it would break out into its own channel, on par
with telephone and in-branch delivery. Today, we are at a similar
point in the development of mobile banking. The adoption curve
of mobile banking in the next 10 years will look a lot like the
1995-to-2004 take-up of online banking. However, there is a huge
difference. With higher penetration than internet and broadband,
Mobile banking offers a lot more potential, especially in the
developing countries. With voice prompts and text-to-voice
capabilities it seems only a little while when one-button mobile
banking will be the industry standard. We believe mobile banking
and payments are at a tipping point. While they have already
taken root in much of the world, Indian financial institutions
are finally arriving at the party, one they largely abandoned in
2001/2002 when the first generation of PDAbased banking failed
to take root. This time around adoption is expected to be
relatively rapid, especially with names like ICICI, Bank of America
and Citibank launching mobile services. 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
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with a reply SMS containing the specific information. For
example, customers of the HDFC Bank in India can get their
account balance details by sending the keyword HDFCBAL' and
receive their balance information again by SMS. However there
have been few instances where even transaction-based services
havebeen made available to customer using SMS. For instance,
customers of the Centurian 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. The
main advantage of deploying mobile applications over SMS is that
almost all mobile phones 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. Figure 1: SMS Network Architecture WAP
Wireless Access Protocol WAP uses a concept similar to that
used in Internet banking. Banks maintain WAP sites which
customer's access using a WAP compatible browser on their
mobile phones. WAP sites offer the familiar form based interface
and can also implement security quite effectively. Bank of
America offers a WAP based service channel to its customers in
Hong Kong. The banks customers can now have an anytime,
anywhere access to a secure reliable service that allows them to
access all enquiry and transaction based services and also more
complex transaction like trade in securities through their phone
Which option would you preferMobile or online Banking?Base:
360 Source: DATAQUEST According to research firm Ovum, mobile
commerce is expected to grow to over $35 billion by 2007. And
banking is going to be a major benefactor of the same. According
to studies by some global firms, one of the most used services for
mobile commerce would be mobile bankingwith services like
transfers, balance and trading bringing in the revenues for mobile
bankers. No wonder then, banks are making their infrastructure
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"mobile-enabled". While, some like HDFC Bank are riding on their
existing infrastructure of Net-banking, others like the IDBI Bank
are making considerable investments to provide wire free banking
experience. IDBI Banks mobile banking infrastructure is based on
the GSM Data Suite of products that makes its services accessible
through any GSM operator acrossthe world.
Bankalsointerfacedonlinewithitsbanking,dematandpaymentsyste
ms.Standalone Mobile Application Clients Standalone mobile
applications are the ones that hold out the most promise as they
are most suitable to implement complex banking transactions like
trading in securities. They can be easily customized according to
the user interface complexity supported by the mobile. In
addition, mobile applications enable the implementation of a very
secure and reliable channel of communication. One requirement
of mobile applications clients is that they require to be
downloaded on the client device before they can be used, which
further requires the mobile device to support one of the many
development environments like J2ME or Qualcomm's BREW. J2ME
is fast becoming an industry standard to deploy mobile
applications and requires the mobile phone to support Java. The
major disadvantage of mobile application clients is that the
applications needs to be customized to each mobile phone on
which it might finally run. J2ME ties together the API for
mobile phones which have the similar functionality in what it calls
'profiles'. 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. Quite a few mobile software product
companies have rolled out solutions, which enable J2ME mobile
applications based banking. One such product is Wireless Ibanco.
The mobile user downloads and installs the wireless I-banco
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application on their J2ME pone. The J2ME client connects to the
wireless I-banco server through the service providers GSM
network to enable users to access information about their
accounts and perform transactions. One of the other big
advantages of using a mobile application client is that it can
implement a very secure channel with end-toend encryption. In
2000, fewer than 8 million Africans had a mobile phone -now over
100 million do. That's one in nine. Now, anyone with access to a
cell phone has a place to keep his or her savings without needing
a traditional bank account. We won't see millionaires suddenly
emerging from the shantytowns just because they're "banked,"
but even a small nest egg needs a safe resting place. At the
moment, enthusiasm for m-banking has outrun its
implementation. For one thing, regulators break out in a cold
sweat at the thought of all the overlapping issues involved. But
there are success stories. Leading the way is the Philippines, with
over 3.5 million users split between G-cash and competitor
SMARTmoney. South Africa is the other heavyweight, with MTN
Mobile Banking and Wizzit both entering their second year of
operations. In Brazil, mbanking may even surpass Internet
banking in just five years. And on January 22, SafariCom, partly
owned by Vodafone, is set to expand its MPesa pilot to all of
Kenya.However countries like India face a serious obstacle in the
proliferation of such clients as few users have mobiles, which
support J2ME or BREW.
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Advantages of Mobile
Banking
The biggest advantage that mobile banking
offers to banks is that it drastically cuts down the costs of
providing service to the customers. For example an
average teller or phone transaction costs about $2.36
each, whereas an electronic transactioncosts 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. Service providers are
increasingly using the complexity of their supported
mobile banking services to attract new customers and
retain old ones. A very effective way of improving
customer service could be to inform customers better.
Credit card fraud is one such area. A bank could, through
the use of mobile technology, inform owners each time
purchases above a certain value have been made on their
card. This way the owner is always informed when their
card is used, and how much money was taken for each
transaction. Similarly, the bank could remind customers
of outstanding loan repayment dates, dates for the
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payment of monthly installments or simply tell them that
a bill has been presented and is up for payment. The
customers can then check their balance on the phone
and authorize the required amounts for payment.
Disadvantages of Mobile
Banking
Many consumers use mobile banking on their cell
phones or other portable device because it allows them to
quickly access information such as account balance and
transaction history. The benefits of this convenience are
undeniable, but there are a number of disadvantages that
mobile banking users should be aware of. The
technology's cost, compatibility issues and security
problems may cause you to think twice about using it.
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Conclusion
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 tradeoff 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, 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 mobilephones.
Nevertheless, Bank's need to take a hard and deep look into the
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mobile usage patterns among their target customers and enable
their mobile services on a technology with reaches out to the
majority of their customers.
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