Mobility, as a concept, has captured the collective imagination of the tech savvy populace. CEOs and CTOs wax eloquent on their grandiose plans in this domain. A lot has been written about NFC device use, smart kiosks, mobile banking etc., projecting these as the next big thing in mobile and banking technology. However, I feel the ground reality is far removed from this. Every time I glance around in stores and malls, I notice that very few people use mobile banking. I initially wondered if this was unique to India, as we are not a very tech savvy people. On probing further, I have come to believe that it is a worldwide phenomenon, with even advanced countries yet to warm up to mobility. Africa, however, is an exception, where SMS-based mobile payment and money transfer is quite popular.
In India, branch transactions have decreased by 45% over the past 15 years, thanks to ATMs, Internet banking and mobile banking, and my guess is that a miniscule 5% of these are via mobile devices – including tablets. Current data also indicates that the average transaction value is less than Rs. 1,000 and also, at 5 million transactions per month, mobile banking constitutes less than 3% of the total electronic and clearing transactions through the Indian Payment System. (The RBI report on Payment Systems reports 2,558 million transactions a year, at a monthly average of 213 million transactions).
Mobile banking first appeared on the banking scene 5 to 7 years ago but is still considered the ‘new kid on the block.’ After the initial wave of enthusiasm, the concept has not quite clicked. I would attribute this to the following:
Security Concerns: Despite technological advancements, popular perception is that mobile transactions are not secure; hence people prefer PCs/laptops to mobile devices, especially for conducting higher value transactions, a sentiment which reflects in the average mobile transaction value. A cultural peculiarity in the Indian context is that financial transactions are taken very “seriously”, almost revered, and therefore not to be trifled with on mobile!
Need for Huge Investment: Significant investments made by Visa and MasterCard, popularized card payments even in developing countries. Similar investments can give impetus to mobile and contactless payments, which are already quite popular in a country like Singapore. Mobile payments using the Visa or MasterCard networks are a possibility, and merging these networks can further reduce transaction costs. Mobile instruments equipped with new generation NFC capability must be complemented at the merchant end as well for mobile payments to gain wider acceptance. Research indicates that various collaborative projects in this realm, involving banking and technology bigwigs are underway, which could yield positive results in the coming years.
Cultural Aspects: A vast majority of the developing world still perceives money as paper on hand and cannot relate to its virtual or electronic form. This is especially true of the unbanked population. A significant change in this mindset is required if mobile banking has to gain credence in these emerging economies. Low literacy levels also contribute to this traditional outlook, and we still see people in rural and semi-urban areas hesitant and even unable to use ATMs.
Mobile banking has huge untapped potential, and as per a BCG report, can generate a whopping fee income of $4.5 billion in India alone by 2015. However, a multi-pronged approach is required in order for mobile banking to reach the masses, cutting through socioeconomic barriers. Apart from addressing core issues in mobile banking, promotional strategies involving mobile applications integrated with banking and payment applications can go a long way in popularizing it.