MOBILE BANKING IN INDIA
VIJAY MAHAWAR
200647705
SYMBIOSIS CENTRE FOR DISTANCE LEARNING
2006 BATCH
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NO OBJECTION CERTIFICATE
This is to certify that MR. VIJAY MAHAWAR is an employee of this organization for the
past 2 months.
We have no objection for him to carry out a project work titled “MOBILE BANKING IN
INDIA” in our organization and for submitting the same to the Director, SCDL as a part of
fulfillment of the PGDBA (Finance) Program.
We wish him all the success.
Seal of the company Signature of the competent authority
of the Organization
Place:
Date:
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DECLARATION BY THE LEARNER
This is to declare that I have carried out this project work myself in part fulfillment of the
PGDBA (Finance) Program of SCDL.
The work is original, has not been copied from anywhere else and has not been submitted to
any other University/Institute for an award of any degree/diploma.
Date: 15th April 2010 Signature:
(VIJAY MAHAWAR)
Place: GHAZIABAD
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CERTIFICATE BY THE SUPERVISOR (GUIDE)
Certified that the work incorporated in this Project Report “Mobile Banking in India”
submitted by MR. VIJAY MAHAWAR is his original work and completed under my
supervision.
Material obtained from other sources has been duly acknowledged in the Project Report
Date: Signature of Guide:
Place:
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TABLE OF CONTENTS CHAPTER 1: INTRODUCTION.......................................................................................................7
CHAPTER 2: OBJECTIVE AND SCOPE......................................................................................11
CHAPTER 3: CHALLENGES FOR A MOBILE BANKING SOLUTION....................................12
Handset operability...................................................................................................................12
Security.....................................................................................................................................12
Scalability & Reliability............................................................................................................13
Application distribution............................................................................................................13
Personalization..........................................................................................................................14
CHAPTER 4: THEORETICAL PERSPECTIVE............................................................................15
Account Information.................................................................................................................16
Payments, Deposits, Withdrawals, and Transfers.....................................................................16
Investments...............................................................................................................................17
Support......................................................................................................................................17
Content Services.......................................................................................................................17
CHAPTER 5: METHODOLOGY AND PROCEDURE OF WORK..............................................28
RBI Guidelines on Mobile Banking..........................................................................................29
CHAPTER 6: ANALYSIS OF DATA.............................................................................................42
CHAPTER 7: FINDINGS, INFERENCES AND RECOMMENDATIONS....................................48
LGTelecom,SouthKorea..........................................................................................................48
RelianceInfocomm,India..........................................................................................................49
Citibank.....................................................................................................................................50
ICICIBank..................................................................................................................................50
HDFCBank.................................................................................................................................51
RBI.............................................................................................................................................52
NokiaMoney.............................................................................................................................54
CHAPTER 8: CONCLUSION..........................................................................................................56
CHAPTER 9: SUMMARY..............................................................................................................57
ANNEXURES..................................................................................................................................59
ANNEXURE I (PROPOSAL)..................................................................................................59
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ANNEXURE II (REFERENCES)............................................................................................61
ANNEXURE III (FIGURES/CHARTS/DIAGRAMS).............................................................62
ANNEXURE IV (LIST OF TABLES).....................................................................................63
ANNEXURE V (GENERAL TERMS/ACRONYMS).............................................................64
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CHAPTER 1: INTRODUCTION
Internet Banking 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. 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.
China, which already witnessed the mobile boom, is expected to have about 300 million
mobile users by the end of 2004. All 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.
How Mobile Banking Works
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You’ve probably seen the commercial: A woman, hanging from the side of a mountain,
receives a text message on her cell phone. The message is from her bank, telling her that her
account is about to be overdrawn. With just a few clicks on her phone, she transfers funds
from her savings account to her checking account. Problem solved. She finishes her climb,
confident that her financial life remains in order.
This scenario, though highly dramatized for effect, illustrates what many believe is the
future of banking. It’s mobile banking, or m-banking, which enables mobile phone users to
access basic financial services even when they are miles away from their nearest branch
orhome computer. In some parts of the world, such as the Philippines,Brazil and Africa,
mobile banking is already flourishing. But in theUnited States, only about 10 percent of
consumers -- about 1.7 million people -- currently use their cell phones to conduct bank
transactions. That number is expected to grow to 35 million by 2010.
Mobile Banking Background
For 30 years, financial institutions have been on a quest to satisfy their customers’ need for
more convenience. First came the automated teller machine (ATM), which New York’s
Chemical Bank introduced to the American public in 1969. It did little more than
dispense cash at first, but the ATM evolved over time to become a true bank-away-from-
bank, providing a full suite of financial transactions.
Then came Internet banking in the mid-1990s, which enabled consumers to access their
financial accounts using a home computer with an Internet connection. Despite its promise
of ultimate convenience, online banking saw slow and tentative growth as banks worked out
technology issues and built consumer trust. Today, Internet banking has reached a critical
mass, with about 35 percent of U.S. households conducting bank transactions online.
Yet banking at the living room computer still has some serious limitations. First, only 62
percent of American households have a computer, according to a 2003 study conducted by
the U.S. Census Bureau. And only 28 percent of Americans have broadband Internet access,
which is essential to efficient, convenient service. The biggest issue, however, is mobility.
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Even with a laptop, it’s almost impossible to stay connected in virtually any location on the
planet.
Not so with mobile phones. They can be carried anywhere and are -- by an enormous
number of people. More than 238 million people in the U.S. have mobile phones. That’s a
whopping 78 percent of the population. And worldwid e there are more than 3.25 billion
mobile phone subscribers, with penetration topping 100 percent in Europe.
If mobile phones only delivered voice data, then their use as a vehicle to deliver banking
services would be limited. Most phones, however, also provide text-messaging capabilities,
and a growing number are Web-enabled. That makes the mobile phone an ideal medium
through which banks can deliver a wide variety of services.
Banks classify these services based on how information flows. A pull transaction is one in
which a mobile phone user actively requests a service or information from the bank. For
example, inquiring about an account balance is a pull transaction. So is transferring funds,
paying a bill or requesting a transaction history. Because banks must respond or take some
action based on the user request, pull transactions are considered two-way exchanges.
A push transaction, on the other hand, is one in which the bank sends information based on
a set of rules. A minimum balance alert is a good example of a push transaction. The
customer defines the rule -- "Tell me when my balance gets below $100" -- and the bank
generates an automatic message any time that rule applies. Similar alerts can be sent
whenever there is a debit transaction or a bill payment. As these examples illustrate, push
transactions are generally one way, from the bank to the customer.
You can also classify mobile banking based on the nature of the service. Transaction-based
services, such as a funds transfer or a bill payment, involve movement of funds from one
source to another. Inquiry-based services don’t. They simply require a response to a user
query. The chart below summarizes these various types of mobile banking services.
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Clearly, push transactions are not as complex as their pull counterparts. Mobile banking
solutions also vary in their degree of complexity, and some only offer a fraction of the
services you would find in a bricks-and-mortar branch. In this respect, mobile banking isn't
always full-service banking. The factors that affect this are the type of phone being used,
the service plan of the mobile subscriber and the technology framework of the bank. We’ll
look at these technologies next.
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CHAPTER 2: OBJECTIVE AND SCOPE
This 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.
Mobile banking (also known as M-Banking, mbanking, SMS Banking etc.) is a term used
for performing balance checks, account transactions, payments etc. via a mobile device such
as a mobile phone. Mobile banking today (2007) is most often performed via SMS or
the Mobile Internet but can also use special programs called clients downloaded to the
mobile device.
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.
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CHAPTER 3: CHALLENGES FOR A MOBILE BANKING SOLUTION
Key challenges in developing a sophisticated mobile banking application are :
Handset operability
There are a large number of different mobile phone devices and it is a big challenge for
banks to offer mobile banking solution on any type of device. Some of these devices
support Java ME and others support SIM Application Toolkit, a 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
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 :
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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.
Application distribution
Due to the nature of the connectivity between bank and its customers, it would be
impractical to expect customers to regularly visit banks or connect to a web site for regular
upgrade of their mobile banking application. It will be expected that the mobile application
itself check the upgrades and updates and download necessary patches (so called "Over The
Air" updates). However, there could be many issues to implement this approach such as
upgrade / synchronization of other dependent components.
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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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CHAPTER 4: THEORETICAL PERSPECTIVE
The advent of the Internet has enabled new ways to conduct banking business, resulting in
the creation of new institutions, such as online banks, online brokers and wealth managers.
Such institutions 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
Associationand 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).
With mobile technology, banks can offer 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. Smartphones and 3G connectivity provide some
capabilities that older text message-only phones do not.
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. Another study from 2010
by Berg Insight forecasts that the number of mobile banking users in the US will grow from
12 million in 2009 to 98 million in 2015. The same study also predicts that the European
market will grow from 7 million mobile banking users in 2009 to 131 million users in 2015.
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.
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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
5. Bill payment processing
6. Peer to Peer payments
7. Withdrawal at banking agent
8. Deposit at banking agent
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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 merchant's account.
Investments
1. Portfolio management services
2. Real-time stock quotes
3. Personalized alerts and notifications on security prices
4. mobile banking
Support
1. Status of requests for credit, including mortgage approval, and insurance coverage
2. Check (cheque) book and card requests
3. Exchange of data messages and email, including complaint submission and tracking
4. ATM Location
Content Services
1. General information such as weather updates, news
2. Loyalty-related offers
3. Location-based services
Based on a survey conducted by Forrester, mobile banking will be attractive mainly to the
younger, more "tech-savvy" customer segment. A third of mobile phone users say that they
may consider performing some kind of financial transaction through their mobile phone.
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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, 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.
Based upon the above classifications, we arrive at the following taxonomy of the services
listed before.
PULL BASED TRANSACTION BASED TRANSACTION 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.
Table1:Classificationofmobilebankingservices.
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)
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3. WAP (Wireless Access Protocol)
4. Standalone Mobile Application Clients
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.
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.
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 have been
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)'.
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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.
Diagram1:SMSNetworkArchitecture
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.
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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 actually 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.
Diagram2:WAPNetworkArchitectureforMobileApplications
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
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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 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.
However countries like India face a serious obstacle in the proliferation of such clients as
few users have mobiles, which support J2ME or BREW. However, one of the biggest
CDMA players in the Indian telecom industry, Reliance Infocomm has about 7.01 million
users all of which have handsets, which support J2ME. Reliance has unveiled one of the
most ambitious data services deployment program in the country. On the other hand a
country like South Korea with its tech-savvy population has a widespread adoption of the
higher-end mobiles, which support application development.
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Diagram3-MobileBankingArchitecture.
Advantages of Mobile Banking
The biggest advantage that mobile banking offers to banks is that it drastically cuts down
the costs of providing service to the customers. For example an average teller or phone
transaction costs about $2.36 each, whereas an electronic transaction costs only about $0.10
each. Additionally, this new channel gives the bank ability to cross-sell up-sell their other
complex banking products and services such as vehicle loans, credit cards etc.
For service providers, Mobile banking offers the next surest way to achieve growth.
Countries like Korea where mobile penetration is nearing saturation, mobile banking is
helping service providers increase revenues from the now static subscriber base. 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.
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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 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.
The customers can also request for additional information. They can automatically view
deposits and withdrawals as they occur and also pre- schedule payments to be made or
cheques to be issued. Similarly, one could also request for services like stop cheque or issue
of a cheque book over one’s mobile phone.
There are number of reasons that should persuade banks in favor of mobile phones. They
are set to become a crucial part of the total banking services experience for the customers.
Also, they have the potential to bring down costs for the bank itself. Through mobile
messaging and other such interfaces, banks provide value added services to the customer at
marginal costs.
Such messages also bear the virtue of being targeted and personal making the services
offered more effective. They will also carry better results on account of better customer
profiling.
Yet another benefit is the anywhere/anytime characteristics of mobile services. A
mobile is almost always with the customer. As such it can be used over a vast geographical
area. The customer does not have to visit the bank ATM or a branch to avail of the bank’s
services. Research indicates that the number of footfalls at a bank’s branch has fallen down
drastically after the installation of ATMs. As such with mobile services, a bank will need to
hire even less employees as people will no longer need to visit bank branches apart from
certain occasions.
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With Indian telecom operators working on offering services like money transaction over a
mobile, it may soon be possible for a bank to offer phone based credit systems. This will
make credit cards redundant and also aid in checking credit card fraud apart from offering
enhanced customer convenience. The use of mobile technologies is thus a win-win
proposition for both the banks and the bank’s customers.
The banks add to this personalized communication through the process of automation. For
instance, if the customer asks for his account or card balance after conducting a transaction,
the installed software can send him an automated reply informing of the same. These
automated replies thus save the bank the need to hire additional employees for servicing
customer needs.
How Mobile Banking Reminders Work
John Shepherd-Barron came up with the idea for automatic teller machines (ATMs) in the
early 1960s while taking a bath; by 1967, the first such machine was up and working.
Shepherd-Barron developed the device because he was frustrated at not having access to his
own money on the weekends, when banks were closed. Now, with widespread ATMs and
developments such as online banking, people have access to their accounts anytime, day or
night.
Mobile banking is one way that people can pay bills, transfer funds and access account
information without setting foot in a bank or taking the trouble to boot up their computers.
All that's needed is a cell phone with wireless capabilities, and as more people buy phones
that can access the Internet, mobile banking is sure to grow. Most banks offer the service at
no additional charge to account holders, which means the only fees you'll accrue will
depend on your data and text plans with the cell phone company. TowerGroup, a finance
research company, estimates that by 2013, 53 million people will use mobile banking,
compared to the 10 million people who used it in 2009 [source: Choney].
One key factor that TowerGroup cited for mobile banking's growth was the ability to check
a balance at anytime and from anywhere. By sending a text message to your bank, you can
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get not only your balance, but recent account activity, upcoming payments owed and nearby
ATM locations. But if you'd rather have this information sent to you automatically, without
a prompting text, then you can sign up for mobile banking reminders. These alerts take the
form of text messages. If you'd like to get a comprehensive look at your bank account with
the ease of pushing a button, then read on to find out what reminders are offered and how
you can access them.
Setting Up Mobile Banking Alerts
Mobile banking allows you to pay bills on your commute, check your bank balance from
the store checkout line and transfer funds during television commercials. But another
feature mobile banking offers is the opportunity to sign up for text reminders about your
account.
Though different banks may offer slightly different alerts, these are the kinds of reminders
most users can receive:
1. daily balances
2. notifications that an account has been credited
3. notifications that an account has been debited
4. notifications that an account's balance is above or below a certain amount
5. reminders about upcoming due dates on bank-related loans or bills that are paid
online
6. reminders when those bills are overdue
7. reminders about maturity dates of certificates of deposit
Setting up these reminders can be done online or in person, depending on the bank. Let's say
you'd like to receive a text message when your checking account exceeds $10,000, because
you want to deposit the excess into your savings account. If your bank allows online setup,
you'd be able to view all your accounts, select the one that you'd like to receive updates
about (in this case, checking) and enter the values that will serve as your thresholds for
alerts ($10,000, for example). You would then likely need your phone's SMS address to
direct the messages. Once you received the alert, you'd be able to text your request for a
funds transfer to your savings account.
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With most banks, you could receive as many alerts as you'd like; you could have one
reminder that alerted you to more than $10,000 in your checking account, as well as one
that told you when your funds were dipping dangerously low. Remember, though, that
charges will vary according to your cell phone plan. Though the messages will not be
encrypted, banks assure that mobile banking is safe, even if you were to lose your phone.
However, treat these text messages the way you would any e-mail from your bank. Don't
click on links that may lead to phishing scams, and be wary of any e-mail that asks for
private information, such as a Social Security number or a password.
Though people are still getting the hang of mobile banking, one study already demonstrates
the possible benefits. In tests conducted in the Philippines, Peru and Bolivia, researchers
found that sending text messages about saving increased people's account balances by 6
percent, indicating that a quick reminder was more efficient than a financial lecture or a
long letter. The researchers believe these findings could translate to the United States as
well. It may be that a simple text message is all the reminder you need to keep an eye on
your financial future.
mCheque - Overview
mCheque is a secure card-present transaction system.
Acceptance of VISA/Visa Electron in mChq mode does not require a PoS terminal. Any
GSM mobile phone (with an enhanced mCheque SIM) can be used to accept a VISA/Visa
Electron payment in mChq mode.
Upto 16 different VISA or VISA Electron cards from different Banks can be securely
personalized Over-the-Air (OTA) on mobile SIMs.
mCheque is inter-operable across multiple operators and banks.
Key management process is regulated by IDRBT-Hyderabad (subsidiary of Reserve Bank
of India) in agreement with the participating Bank.
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CHAPTER 5: METHODOLOGY AND PROCEDURE OF WORK
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 Non-Bank/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 bank-led model may be
implemented by either using correspondent arrangements or by creating a JV between Bank
and Telco/non-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 safe-keeper of surplus funds) and the non-bank (e.g. Telco) performs all the functions.
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RBI Guidelines on Mobile Banking
Mobile Payment in India - Operative Guidelines for Banks
1. Introduction
1.1 With the rapid growth in the number of mobile phone subscribers in India (about 261
million as at the end of March 2008 and growing at about 8 million a month), banks have
been exploring the feasibility of using mobile phones as an alternative channel of delivery
of banking services. A few banks have started offering information based services like
balance enquiry, stop payment instruction of cheques, record of last five transactions,
location of nearest ATM/branch etc. Acceptance of transfer of funds instruction for credit to
beneficiaries of same/or another bank in favor of pre-registered beneficiaries have also
commenced in a few banks. Considering that the technology is relatively new and due care
needs to be taken on security of financial transactions, there has been an urgent need for a
set of operating guidelines that can be adopted by banks.
1.2 For the purpose of these Guidelines, “mobile payments” is defined as information
exchange between a bank and its customers for financial transactions through the use of
mobile phones. Mobile payment involves debit/credit to a customer’s account’s on the basis
of funds transfer instruction received over the mobile phones.
1.3 Providing the framework for enabling mobile payments services to banking customers
would generally involve the collaboration of banks, mobile payments service providers and
mobile network operators (MNOs). The service can also be provided as a proximity
payment system, where the transactions are independent of the MNOs. In mobile payment
systems, the banks provide the basic service framework, ensure compliance to KYC/AML
norms, creates a risk management and mitigation framework, and ensures settlement of
funds. The mobile payments service providers are intermediaries for providing the
technology framework for the implementation of the mobile payments services. The mobile
network operators provide the telecom infrastructure and connectivity to the customers.
Their role is limited to providing the SMS/WAP/GPRS/USSD/NFC GSM or CDMA voice
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and data services connectivity and in hosting the certain technology solutions like USSD. In
a Non-MNO based systems, proximity or contactless channels like IRDA, RFID, Optical,
NFC, etc. are used for communication between POS and the mobile phone of the customer.
1.4 As a first step towards building a mobile payment framework in India, these guidelines
are meant only for banking customers – within the same bank and across the banks. It
would be the responsibility of the banks offering mobile payment service to ensure
compliance to these guidelines.
1.5 A brief description of the regulatory framework for mobile payments in a few countries
is given at Annex – I.
2. Regulatory & Supervisory Issues
2.1 Only such banks which are licensed and supervised in India and have a physical
presence in India will be permitted to offer mobile payment services to residents of India.
2.2 The services should be restricted to only to bank accounts/ credit card accounts in India
which are KYC/AML compliant.
2.3 Only Indian Rupee based services should be provided.
2.4 Banks may use the services of Business Correspondents for extending this facility, to
their customers. The guidelines with regard to use of business correspondent would be as
per the RBI circular on Business correspondents issued from time to time.
2.5 The guidelines issued by RBI on ‘Risks and Controls in Computers and
Telecommunications’ vide circular DBS.CO.ITC.BC. 10/ 31.09.001/ 97-98 dated 4th
February 1998 will equally apply to Mobile payments, since Mobile devices used for this
purpose have embedded computing and communication capabilities.
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2.6 The RBI guidelines on “Know Your Customer (KYC)” and “Anti Money Laundering
(AML)” as prescribed by RBI from time to time would be would be applicable to customers
opting for mobile based banking service.
3. Registration of customers for mobile service
3.1 Banks should offer mobile based banking service only to their own customers.
3.2 Banks should have a system of registration before commencing mobile based payment
service to a customer.
3.3 There can be two levels of mobile based banking service - the first or basic level in the
nature of information like balance enquiry, SMS alert for credit or debit, status of last five
transactions, and many other information providing services and the second or standard
level in the nature of financial transactions such as payments, transfers and stop payments.
The risk associated with the basic level of information services is much less compared to
the standard level of actual payment services. Prior registration of the customers would be
necessary irrespective of the type of service requested. For the standard level service one
time registration should be done through a signed document.
4 Technology and Security Standards
4.1 The technology used for mobile payments must be secure and should ensure
confidentiality, integrity, authenticity and non-repudiability. An illustrative, but not
exhaustive framework is given at Annex-II.
4.2 The Information Security Policy of the banks may be suitably updated and enforced to
take care of the security controls required specially for mobile phone based delivery
channel.
5. Inter-operability
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5.1 When a bank offers mobile payments service, it may be ensured that customers having
mobile phones of any network operator should be in a position to request for service.
Restriction, if any, to the customers of particular mobile operator(s) may be only during the
pilot phase.
5.2 To ensure inter-operability between banks and between their mobile payments service
providers, it is recommended that banks may adopt the message formats being developed by
Mobile Payments Forum of India (MPFI). Message formats such as ISO 8583 , which is
already being used by banks for switching of ATM transactions , may be suitably adapted
for communication between switches where the source and destination are credit card/ debit
cards/pre-paid cards.
5.3 The long term goal of mobile payment framework in India would be to enable funds
transfer from account in one bank to any other account in the same or any other bank on a
real time basis irrespective of mobile network a customer has subscribed to. This would
require inter-operability between mobile payments service providers and banks and
development of a host of message formats. Banks may keep this objective while developing
solution or entering into arrangements with mobile payments solution providers.
6. Clearing and Settlement for inter-bank funds transfer transactions
6.1 For inter-bank funds transfer transactions, banks can either have bilateral or multilateral
arrangements.
6.2 To meet the long term objective of a nation-wide mobile payment framework in India as
indicated at para 5.3 above, a robust clearing and settlement infrastructure operating on a
24x7 basis would be necessary. Pending creation of such an infrastructure on a national
basis, banks may enter in to multilateral arrangement and create Mobile Switches / Inter-
bank Payment Gateways with expressed permission from RBI.
7. Customer Complaints and Grievance Redressal Mechanism
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7.1 The customer /consumer protection issues assume a special significance in view of the
fact that the delivery of banking services through mobile phones is relatively new.
Some of the key issues in this regard and the legal aspects pertaining to them are given at
Annex-III.
8. Need for Board level approval
8.1 Banks should get the Mobile payments scheme approved by their respective boards /
Local board (for foreign banks) before offering it to their customers. The Board approval
must document the extent of Operational and Fraud risk assumed by the bank and the
bank’s processes and policies designed to mitigate such risk.
8.2 Banks who have already started offering mobile payment service may review the
position and comply to these guidelines within a period of three months from issuance of
these guidelines.
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Annex-I
International Experience
There is very little material available on the regulatory frame work for mobile payments by
central banks. Although there are a number of research articles available, they refer to the
practices available rather than regulatory guidelines. Efforts to collect specific regulatory
guidelines, from a few countries where person to person remittance through mobile channel
has been implemented, have not been a success. Mobile payment framework in most
countries is covered under the General Electronic Banking Guidelines. However, on the
website of Consultative Group for Assisting the Poor(CGAP), there are several discussion
papers on mobile payments. Examples of Kenya, Philippines, South Africa and Tanzania
have been described in great detail. In these countries, cash-in and cash-out for the purpose
of remittance is permitted to be done by the distributors of mobile companies. State Bank of
Pakistan has also placed a 'Draft policy paper on Regulatory Framework for Mobile
Payments in Pakistan' on their website for public comments.
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Annex- II
Technology and Security Standards
The security controls/guidelines mentioned in this document are not exhaustive. The
guidelines should be applied in a way that is appropriate to the risk associated with services
provided by the bank through the mobile platform, the devices used, the delivery channels
used (SMS, USSD, WAP, WEB, SIM tool kit based, Smart phone application based, IVR,
IRDA, RFID, NFC, voice, etc) and the system which processes the mobile transactions and
enables the interaction between the customers, merchants, banks and other participants.
2. The mobile payments could get offered through various mobile network operator based
channels (SMS, USSD, WAP, WEB, SIM tool kit, Smart phone application based, IVR,
voice, etc) and non MNO based proximity or contactless channels (IRDA, RFID, Optical,
NFC, etc) and these various mobile channels offer various degrees of security and
interaction capability. While the objective of the RBI is to have a fully functional digital
certificate based inquiry/transaction capabilities to ensure the authenticity and non-
repudiability, given the complexities involved in getting this through all the channels and
given the need for enabling mobile payments to facilitate financial inclusion objectives, it is
suggested that the banks evaluate each of these channels in terms of security and risks
involved and offer appropriate services and transactions. Banks are also advised to provide
appropriate risk mitigation measures like transaction limit (per transaction, daily, weekly,
monthly), transaction velocity limit, fraud checks, AML checks etc. per channel depending
on the nature of the security features, risk perception by the bank offering the services and
interaction capabilities.
3. It is suggested that the banks issue a new mobile pin (mPIN). To facilitate the mobile
payments mPIN may be issued and authenticated by the bank or by a mobile payment
application service provider appointed by the bank. Banks and the various service providers
involved in the m-banking should comply with the following security principles and
practices with respect to mPIN :
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a. Implement a minimum of 4 digit customer mPIN (6 digit mPIN may be the
desirable goal)
b. Protect the mPIN using end to end encryption
c. Do not allow the mPIN to be in clear text anywhere in the network or the
system
d. Authenticate the mPIN in tamper-resistant hardware such as HSM (hardware
security modules)
e. Store the PIN in a secure environment
f. In case of offline authentication, the banks should ensure that a proper
process is put in place to positively identify the customer the first time when
the service is being enabled. An offline PIN may be used as the
authentication parameter with security levels being as strong as in the case of
online authentication. The bank may choose to issue its own offline PIN or
adopt a customer-defined PIN.
g. A second factor of authentication may be built-in for additional security and
as such the second factor can be of the choosing of the bank
4. All transactions that affect an account (those that result in to an account being debited or
credited, including scheduling of such activity, stop payments, etc) should be allowed only
after authentication of the mobile number and the mPIN associated with it in case of MNO
based payment service. In case of Non-MNO based mobile proximity payment, specific
static or dynamic identifier should be used as second factor authentication along with
mPIN.. Two factor authentication may be adopted even for transactions of information
nature such as balance enquiry, mini statements, registered payee details. ,
5. Proper system of verification of the mobile phone number should be implemented,
wherever possible. This is to guard against spoofing of the phone numbers as mobile phones
would be used as the second factor authentication. It may also be suggested but not
mandatory, that either card number or OTP (one time passwords) be used as the second
factor authentication rather than the phone number.
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6. Proper level of encryption should be implemented for communicating from the mobile
handset to the bank’s server or the server of the mobile payments service provider, if any.
Proper security levels should be maintained for transmission of information between the
bank and the mobile payments service provider. The following guidelines with respect to
network and system security should be adhered to:
a. Use strong encryption for protecting the sensitive and confidential
information of bank and customers in transit
b. Implement application level encryption over network and transport layer
encryption wherever possible.
c. Establish proper firewalls, intruder detection systems ( IDS), data file and
system integrity checking, surveillance and incident response procedures and
containment procedures.
d. Conduct periodic risk management analysis, security vulnerability
assessment of the application and network etc at least once in a year.
e. Maintain proper and full documentation of security practices, guidelines,
methods and procedures used in mobile payments and payment systems and
keep them up to date based on the periodic risk management, analysis and
vulnerability assessment carried out.
f. Implement appropriate physical security measures to protect the system
gateways, network equipments, servers, host computers, and other
hardware/software used from unauthorized access and tampering. The Data
Centre of the Bank and Service Providers should have proper wired and
wireless data network protection mechanisms.
7. The dependence of banks on mobile payments service providers may place knowledge of
bank systems and customers in a public domain. Mobile payment system may also make the
banks dependent on small firms ( i.e mobile payment service providers) with high employee
turnover. It is therefore imperative that sensitive customer data, and security and integrity of
transactions are protected. It is necessary that the mobile payments servers at the bank’s end
or at the mobile payments service provider’s end, if any, should be certified appropriately,
say through a PCI DSS certification or in compliance with each participant banks security
guidelines. In addition, banks should conduct regular information security audits on the
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mobile payments systems to ensure complete security. Further, if a mobile payments service
provider aggregates and processes transaction, including verification of mPINs, additional
security measures such as a Hardware Security Module (HSM) must be deployed over and
above link encryption to ensure that mPIN data is protected adequately.
8. It is recommended that for channels such as WAP and WEB which do not contain the
phone number as identity, a separate login ID and password be provided as distinct from the
internet banking either by bank or the payment service provider. It is recommended that
Internet Banking login ids and passwords may not be allowed to be used through the mobile
phones. Allowing Internet banking login id and password usage on the mobile phone may
compromise their usage on the Internet banking channel. This restriction may be
communicated to the customers while offering mobile payments service. However, Internet
Banking login ids and passwords can allowed to be used through the mobile phones
provided
a. https connectivity through GPRS is used and
b. end to end encryption of the password and customer sensitive information
happens.
9. Plain text SMS is the simplest form of communication through mobile phones, but is
vulnerable to tampering. As long as there is a second level of check on the details of the
transaction so as to guard against data tampering this mode of communication can be used
or financial messages of micro payment transactions (say about rupees One thousand five
hundred) and repetitive utility bill payment transactions (say not exceeding rupees two
thousand five hundred).
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Annex-III
Customer Protection Issues
Considering the legal position prevalent, there is an obligation on the part of banks not only
to establish the identity but also to make enquiries about integrity and reputation of the
prospective customer. Therefore, even though request for opening a savings / current
account can be accepted over Mobile Telecommunication, these should be opened only
after proper introduction and physical verification of the identity of the customer using
prevalent KYC norms.
2. From a legal perspective, security procedure adopted by banks for authenticating users
needs to be recognized by law as a substitute for signature. In India, the Information
Technology Act, 2000, provides for a particular technology as a means of authenticating
electronic record. Any other method used by banks for authentication should be recognized
as a source of legal risk. Customers must be made aware of the said legal risk prior to sign
up.
3. Under the present regime there is an obligation on banks to maintain secrecy and
confidentiality of customers‘ accounts. In the mobile payments scenario, the risk of banks
not meeting the above obligation is high on account of several factors. Despite all
reasonable precautions, banks may be exposed to enhanced risk of liability to customers on
account of breach of secrecy, denial of service etc., because of hacking/other technological
failures. The banks should, therefore, institute adequate risk control measures to manage
such risks.
4. As in an Internet banking scenario, in the mobile payments scenario too, there is very
limited or no stop-payment privileges for mobile payments transactions since it becomes
impossible for the banks to stop payment in spite of receipt of stop payment instruction as
the transactions are completely instantaneous and are incapable of being reversed. Hence,
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banks offering mobile payments should clearly notify the customers the timeframe and the
circumstances in which any stop-payment instructions could be accepted.
5. The Consumer Protection Act, 1986 defines the rights of consumers in India and is
applicable to banking services as well. Currently, the rights and liabilities of customers
availing of mobile payments services are being determined by bilateral agreements between
the banks and customers. Considering the banking practice and rights enjoyed by customers
in traditional banking, banks’ liability to the customers on account of unauthorized transfer
through hacking, denial of service on account of technological failure etc. needs to be
assessed and banks providing Mobile payments should consider insuring themselves against
such risks, as is the case with Internet Banking.
6. Bilateral contracts between the payee and payee’s bank, the participating banks and
service provider and the banks themselves will form the legal basis for mobile transactions.
The rights and obligations of each party must be clearly defined and should be valid in a
court of law. It is likely that there will be two sets of contracts; one would be a commercial
contract between service providers and the second, a contract between the customer and the
bank, to provide a particular service/ s. At all time, legal obligations of each party must be
made clear through these contracts.
7. Banks must make mandatory disclosures of risks, responsibilities and liabilities of the
customers in doing business through Mobile phone, through a disclosure template on their
websites and/or through printed material.
8. The existing mechanism for handling customer complaints / grievances may be used for
mobile payment transactions as well. However, the technology is relatively new, banks
offering mobile payment service should set up a help desk and make the details of the help
desk and escalation procedure for lodging the complaints, if any public on their websites.
Such details should also be made available to the customer at the time of sign up.
9. In cases where the customer files a complaint with the bank disputing a transaction, it
would be the responsibility of the service providing bank, to address the customer
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grievance. Banks may formulate chargeback procedures for addressing such customer
grievances.
10. Banks may also consider covering the risks arising out of fraudulent/disputed
transactions through appropriate insurance schemes.
11. The jurisdiction of legal settlement would be within India.
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CHAPTER 6: ANALYSIS OF DATA
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
banking—with services like transfers, balance and trading bringing in the revenues for
mobile bankers.
No wonder then, banks are making their infrastructure
"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 Bank’s mobile banking infrastructure is based on
the GSM Data Suite of products that makes its services
accessible through any GSM operator across the world.
The systems at IDBI Bank are also interfaced online
with its banking, demat and payment systems. HDFC
Bank, on the other hand, does not have any separate
infrastructure for mobile banking service. Rather, the bank uses the same server/database as
used for Net-banking. "We have
a Web Server and Application Server which runs on WebSphere 4.04 on Win2000 using
SQL 2000 as the database for storing the profile information.
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.
Chart1:WhichoptionwouldyoupreferMobileoronlineBanking?
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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.
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, it’s
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 Bank’s CN Ram agreed—
"We have 1.75 lakh registered users for
mobile banking services. And we are hitting
4,000 transactions per day."
Chart2:Haveyouheardofmobilebanking?
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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 factor—the
fact that mobile banking can be used from
anywhere in the world as long as one can
send and receive SMS’—most 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.
Some ground realities
According to Financial Chronicle· “State-owned banks have received a much poorer
response fromtheir clients compared with their private-sector peers for mobile banking, with
only a small number of PSB customers showing interest to avail the services”
State-owned banks have received a much poorer response from their clients compared with
their private-sector peers for mobile banking, with only a small number of PSB customers
showing interest to avail the service.
· Union Bank of India, the first state-owned bank which introduced mobile-based banking
services in the market, has so far added only 1,700 customers in mobile banking, bank’s,
· India’s largest lender State Bank of India (SBI) has also received poor response for its
mobile banking product, which it launched in December 2008. It rolled out the service in
association with local technology-service provider, Spanco Telesystems. SBI has so far
Chart3:Wouldyouliketousemobilebankingservices?
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received only 10,000 registrations for mobile banking but hopes to attract more clients to
avail the service in the months ahead, an SBI official said.
· IDBI Bank has also received a lukewarm response from its retail customers for its mobile
banking roll out. The bank has a tie-up with service provider Paymate for the service. Since
the launch the scheme, around 10,000 customers have registered for the service.
· ICICI Bank has 80 lakh customers registered so far for mobile banking while HDFC
Bankhas 40 lakh registered clients. Kotak Mahindra Bank has around 52,000 clients under
the mobile banking fold.
Growth Trends
Despite the general downturn in the banking industry, new research from TowerGroup finds
that 2009 will be a pivotal year for mobile banking as it turns from a niche channel to a
mainstream channel for consumer banking. TowerGroup estimates that mobile banking
usage will grow from 10 million active users in 2009 to over 53 million active users in
2013, representing a compound annual growth rate of 51.8%.
Two factors that have helped the rapid growth of mobile banking are the lower cost of
mobile calls and the rapidly growing mobile penetration. The figure below is from a
comprehensive article from Technology Review
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Chart4:GrowthTrendsinMobileBankinginIndia
Mobile Trends
Mobile devices are proving to be the most compact technological aid of the future, set to
overtake PCs and laptops.
Use of mobile handsets as a payment device is already well established in Europe and the
leading Asia-Pacific markets.
eg. Almost a million Koreans now do their banking via 3G cell phones (CNN report)
Services which link credit/debit cards with mobile hand held devices have started to pick up
and are expected to play a major role.
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Diagram4:Mobiletrendsindicatethepotentialofm-Banking
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CHAPTER 7: FINDINGS, INFERENCES AND RECOMMENDATIONS
Ten years ago, online banking leapt from nice-to-have status to must-have. In hindsight, it’s
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.
Success Stories
LGTelecom,SouthKorea
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
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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.
RelianceInfocomm,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.
Banking: The Services Bouquet
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Table2:M-Banking:TheServicesBouquet
Citibank
Banks are hoping to extend mobile banking as technology improves. Citibank
has two ongoing cell phone trials. The first is a partnership with MasterCard, AT&T, and
Nokia that places chips in cell phones allowing Citi debit and credit to make payments by
waving the cell phone at a participating store’s register.
Citi’s other pilot is with Obopay that lets debit and credit customers transfer money between
mobile phones. Analysts say even more revenue is possible in the coming years when more
functions are added to cell phones like international transfers, and booking travel
arrangements. While mobile banking is relatively new, the service has shown some traction
with customers. Citi Mobile says it had more subscribers than expected while the service
was being piloted around the country in the spring. Wachovia Mobile says their service has
been getting about 50,000 unique visitors a week since its launch. Celent predicts that by
the end of 2010, 35% of all online banking households will be using mobile banking.
ICICIBank
ICICI Bank have launched mobile services in India to
convenience our customers.
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You can do your banking operations sitting anywhere, anytime. It is discreet, personalised
and on your phone. Use it when at a meeting, in a movie hall, while having your Sunday
brunch or at any other place you cannot usually expect to get the information you want from
your bank. It is an empowering and user-friendly mode of accessing your bank account.
Following figure (Snapshot from ICICI Bank) shows the Mobile banking services offered
by ICICI Bank.
Figure1:MobileBankingofferedbyICICI
HDFCBank
HDFC Bank offers following service using Mobile Banking :
§ Balance Inquiry of all accounts linked to your Customer Identification Number
(maximun up to five accounts)
§ Checking the last 3 transactions in your primary account for MobileBanking
§ Placing a Stop Payment on a cheque
§ Requesting a cheque book
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§ Requesting an Account Statement
§ Cheque Status inquiry
§ Bill Presentment
§ Fixed Deposit Inquiry
§ A Help menu, which gives you the transaction codes for the various transactions
§ IPIN registration request (Only for customers who have registered for HDFC Bank
NetBanking)
RBI
As per RBI Governor Dr Y.V. Reddy that
experiments are currently on at the Institute
for Development and Research in Banking Technology (IDRBT) on using mobile
telephony technology for banking transactions.
According to him, technology - mobile technology in particular - helps in
bringing the masses into the overall financial system and in ensuring easy
financial inclusion.
Mobile telephony makes the financial transactions quicker, safer and cheaper.
RBI would consider using mobile technology for financial transactions provided
there are adequate safeguards.
"We have to make sure that there are enough safeguards. We have to check its
feasibility, the security and safeguards, including the know-your-customer
norms."
One of the recent technological advances that had a significant positive impact on
the payment systems related to chip-based processing. The integration of smart
cards with mobile phones holds exciting promises for the future.
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Perhaps the payment and settlement chain may soon witness a sea change with
the bank account transaction being initiated through a mobile phone, followed,
within a few seconds, by the inter-bank settlement effected in Central bank
money. If and when that happens, the benefits would accrue to all concerned."
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NokiaMoney
Nokia to roll out mobile banking in many Indian cities soon.
Finnish telephone supplier Nokia is planning to roll out its mobile
banking service, Nokia Money, in many Indian cities soon, a Nokia
official said Wednesday.
A pilot of this service launched in Pune in February with YES Bank
had received "extremely encouraging" response.
The company is now looking to have similar tie-ups with other banks to roll out the service
in other parts of the country.
Nokia Money is like a wallet on phone as it lets people transfer money through the mobile
phone. Subscribers also can pay utility bills and top up SIM cards. There will also be the
facility to pay for goods and services. By using this facility a person living in one place can
transfer the money to another person not having bank account and the latter can receive the
money from Nokia dealer in his area.
Nokia has 200,000 retailers in India who could serve as mobile money services agents.
India today is the world's fastest growing cell phone market. There are 500 million mobile
phones in the country and this is expected to cross 900 million by the end of 2013.
At the same time, an estimated 41 per cent of Indians and 46 per cent of mobile subscribers
do not have bank accounts.
Nokia feels the potential for mobile money services is huge. It expects the value of mobile
payment transactions in India will reach up to $1.28 billion by 2013.
Nokia Money Services
Mobile money services puts you in control of your daily finances – transfer funds, pay bills,
and buy goods and services quickly and securely with your mobile phone.
What’s in it for you?
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1. Transfer money securely to your friends and family in a convenient and cost-
effective way.
2. Pay your utility bills from almost anywhere and keep track of everything with
reminders for due dates, overdue charges and payments.
3. Check your balance on the go and manage your expenses and payments at the same
time.
4. Recharge your pre-paid account wherever and whenever you like – adding funds is
easy and it only takes a few moments.
5. Make convenient cashless payments to informal merchants without having to carry
money or bank cards as you travel from place to place.
6. Manage your money with confidence – the latest mobile technology is used to
handle all your finances securely.
7. Save time when dealing with your personal finances – no more waiting in line at the
bank or making unnecessary trips into town.
A smart, cost-effective way to manage your finances:
1. No annual fees*
2. No bank account, credit card or debit card needed
3. No cash loading charges
4. No minimum balance limit
5. Unlimited number of transactions
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CHAPTER 8: 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 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, 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.
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CHAPTER 9: SUMMARY
India’s mobile market has grown to over 50 million subscribers and this number is
constantly on the upswing. India is one of the world’s largest markets for mobile phones. –
A fact acknowledged by Nokia, Motorola and LG among others.
Indian telecom market is galloping with 162.3 million mobile users as on March 2006 and
an average of 5-6 million mobile users being added every month. Given that mobile phones
in India have become affordable, wherein a user can now go mobile for as low as Rs. 1,500,
mobile banking can be a powerful tool to bank the un-banked. Banks and telecom
companies can collaborate to offer the latest in banking services to rural areas.
Mobile banking is the evolutionary step after Internet banking. It is an additional service
bolted on top of an existing solution, making access to services more immediate and
reducing customer reliance on branch infrastructure or access to the Internet. As customer
confidence increases over the security, it is expected that mobile phones will be the most
preferred and convenient device for conducting banking transactions and emerge as one of
the major payment channels in India.
MOBILE BANKING IN THE WORLD
Mobile banking has come in handy in many parts of the world with little or no
Infrastructure development, especially in remote and rural areas. This part of the mobile
commerce is also very popular in countries where most of their population is unbanked. In
most of these places banks can only be found in big cities and customers have to travel
hundreds of miles to the nearest bank.
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.
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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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ANNEXURES
ANNEXURE I (PROPOSAL)
NAME OF THE LEARN VIJAY MAHAWAR
REGISTRATION NUMBER 200647705
PROGRAM NAME PGDBA (Finance)
ADDRESS Flat No: 17/05, 1st Floor,
Banyan Road, Shipra Suncity,
Indirapuram, Ghaziabad
Uttar Pradesh, India – 201014.
TITLE OF THE PROJECT MOBILE BANKING IN INDIA
OBJECTIVES India’s mobile market has grown to over 50 million
subscribers and this number is constantly on the upswing.
India is one of the world’s largest markets for mobile
phones. – A fact acknowledged by Nokia, Motorola and LG
among others.
Mobile banking can be a powerful tool to bank the un-
banked. Banks and telecom companies can collaborate to
offer the latest in banking services to rural areas.
MY GUIDE Mr. Vijay P. Singh
(Manager-Training Operations at Dell Services, Noida)
1. Complete Training Operations of Dell Services
Academy in Noida.
2. Organizing Technical Induction Program for campus
hires.
Designing, Planning and rolling out strategic directions
for new learning interventions.
3. Fulfilling OCDP,ACDP or any project's specific
training needs.
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4. Operational control on Prometric & LOMA testing
facilities.
5. Managing linguistic dept-(I18N) Analysing trends and
tracking utilization of e-learning tools like MindLeaders
& SkillSoft.
6. Rolling out TNA and training plans for onsite and
offshore projects.
7. Budget planning and cost centre Management.
Contribute to quality system and processes enhancement.
-Managing and supporting training operations for China
delivery centre.
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ANNEXURE II (REFERENCES)
I had used following source for preparing my project report:
1. Website: www.wikipedia.org 2. Articles from India Today Magazine and 3. Times of India and Economic Times Newspaper.
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ANNEXURE III (FIGURES/CHARTS/DIAGRAMS)
TYPE CAPTION PAGE NO.
Chart 1 Which option would you prefer Mobile or online Banking?
Chart 2 Have you heard of Mobile Banking?
Chart 3 Would like to use Mobile Banking Services?
Chart 4 Growth Trends in Mobile Banking in India
Diagram 1 SMS Network Architecture
Diagram 2 WAP Network Architecture for Mobile Applications
Diagram 3 Mobile Banking Architecture Diagram.
Diagram 5 Mobile trends indicate the potential of m-Banking
Figure 1 Mobile Banking offered by ICICI
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ANNEXURE IV (LIST OF TABLES)
TYPE CAPTION PAGE NO.
Table 1 Classification of mobile banking services.
Table 2 M-Banking: The Services Bouquet.
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ANNEXURE V (GENERAL TERMS/ACRONYMS)
Sr. No. Acronyms Description
1 MMS Multimedia messaging service: An evolution from SMS,
allowing messages to contain multimedia objects such as images,
audio, video, and rich text.
2 CSC Common short codes: Special short telephone numbers of just
four to six digits used typically by businesses to make it easier to
send text messages their way.
3 WAP Wireless Application Protocol: An open, international standard
for applications that use wireless communication; primarily used
to enable Web access from mobile devices.
4 MOBILE
IM
Mobile instant messaging: Similar to desktop instant messaging,
but slimmed down to fit on a much smaller mobile device screen.
5 SMS OR
TEXT
ALERTS
Simple one-way messages from the financial institution or
payments provider to the mobile user with account-specific
information.
6 MOBILE
PAYMENTS
Payments initiated through a mobile device, could be via SMS,
WAP, or a device-specific application.
7 MOBILE
BANKING
Online banking functions performed via a handheld mobile
device (PDA, cell phone, etc.); the general term that encompasses
WAP Banking, SMS Banking, or True Mobile Banking.
8 WAP
BANKING
Accessing secure online banking functions through a mobile
device's browser.
9 SMS OR
TEXT
BANKING
Two-way messaging; for example, using text messaging to query
the server for account-specific information and have it returned
to the mobile device, or responding to a bank-initiated text
message to initiate a transaction.
10 TRUE
MOBILE
BANKING
Term used for banking functions delivered through a downloaded
application run locally on the mobile device.
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11 MCHEQUE mCheque is a secure debit/credit card payment system using
mobile phone SIM with security based on EMV 2000
specifications.
12 AML Anti Money Laundering
13 CDMA Code Division Multiple Access
14 GPRS General Packet Radio Service
15 GSM Global System for Mobile
16 IDS Intruder Detection System
17 IRDA Infrared Data Association
18 ISO International Standards Organization ( Some times also
written as International Organization for Standardization)
19 IVR Integrated Voice Response
20 KYC Know Your Customer
21 MNO Mobile Network Operator
22 mPIN Mobile Personal Identification Number
23 MPFI Mobile Payment Forum of India
24 NFC Near Field communication.
25 OTP One Time Password
26 PCI-DSS Payment Card Industry Data Security Standard
27 PIN Personal Identification Number
28 RFID Radio Frequency Identification
29 SIM Subscriber Identity Module
30 SMS Short Messaging Service
31 USSD Unstructured Supplementary Service Data
32 WAP Wireless Application Protocol