MOBILE MONEY SERVICES IN INDIAN

PERSPECTIVE

MANISH SAXENA,

Joint Advisor,

Telecom Regulatory Authority of India,

Regional Office, Jaipur

WHAT IS MOBILE MONEY

Mobile Money is a transformational service that uses

information and communication technologies (ICTs) and

non-bank retail channels to extend the delivery of

financial services to clients who can not be reached

profitably with traditional branch-based financial services.

Typical examples are e-wallets that are used to make

person-to-person (P2P) transfers and a range of

payments or to receive salary and government to person

payments (G2P)

KEY CHARACTERISTICS OF MOBILE MONEY

SERVICES

•Customers get money into and out of the service using a

network of transactional agents that operate outside

bank branches.

• Customers initiate transactions using an interface that

is available on mobile handsets.

•Mobile Money drives financial inclusion i.e. extends

financial services to the unbanked strata of the society

GLOBAL OVERVIEW OF THE MOBILE MONEY SOURCE: GSMA STATE OF THE INDUSTRY REPORT MOBILE MONEY:2015

• Mobile Money has done more to extend the reach of financial services in

the last decade than traditional “bricks and mortar” banking has in the last

century.

• Mobile Money is now available in 93 countries via 271 services.

• There are 411 million mobile money accounts globally which have grown at

the rate of 31%. 134 million accounts were active in December 2015.

• In South Asia, the 19% growth (Y-o-Y) of OTC is dwarfed by the 47% growth in

registered accounts

• In 2015, 51 of 93 countries have an enabling regulatory framework.

• Mobile Money providers are processing an average of 33 million

transactions a day.

• At least 19 markets have more mobile money accounts than bank accounts.

• 37 markets have 10 times more registered agents than bank branches.

• 15 providers reported revenues of more than US$1m during the month of

June 2015.

WHY MOBILE MONEY WOULD SUCCEED IN INDIA

• India is a vast country with about 70% population living in villages. India has

more than 100,000 bank branches out of which only about 5% are in rural

areas. Sending money through banks becomes impossible for the millions of

villagers who migrate to big cities for work. The post office system is also

used a lot to transfer money, but is not considered entirely reliable. As a

result , most migrant workers send money home in cash through travelling

relatives or acquaintances-a method fraught with chance and risks.

• At the same time, government assistance schemes like JSY and

employment plans like MNREGA (Mahatma Gandhi National Rural

Employment Guarantee Act) have given rise to a new breed of middlemen.

This unscrupulous lot takes commissions to disburse money to the

beneficiaries, but don’t always deliver. And the cheated beneficiary is none

the wiser, largely due to ignorance and illiteracy. Plus there are the

inevitable delays due to red tape.

WHY MOBILE MONEY WOULD SUCCEED IN INDIA

• Financial inclusion is the need of the hour in a country like India and it has

been emphasized enough by government, companies and individuals. This

financial inclusion can not be achieved simply with the traditional banking

services. Most banks have been unable to scale mobile money services and

lack incentives to make necessary investments.

• It is a world wide phenomenon that MNOs can make financial inclusion

viable and sustainable because of the strong business case for mobile

money. India has enviable mobile penetration. It has about 1100 million

mobile subscribers as on 30th November, 2016 out of which about 461

million i.e. 42% are Rural Consumers (Source : TRAI Report). While a large majority

of the mobile services in India are based on 2G and 3G technology, the

country has seen adoption of 4G accelerate in recent months.

• Recent emphasis given by government of India on making India Digital and

a less cash society has promised a great future for Mobile Money in India.

INDIA ON THE GO

The Total value of all transactions done using electronic payment

systems in India in December 2016 was Rs.105 trillion according to

representative data released by the Reserve bank of India (RBI) on

17.1.17.

• Banking in India is witnessing the “WhatsApp moment” threatening to disrupt the banking ecosystem in India as payments move to mobile and lending to algorithms. ( As quoted by Nandan Nilekani)

• With the launch of UPI (unified payments interface), by National Payments Corporation of India, India has crossed a significant milestone. Apart from making payments easier, UPI enables micro credit.

• Smart Phones and increasing Internet penetration will help India’s digital cause. Around 90% of all devices will be Internet Enabled by 2017, and the number of Internet users will touch 650 million by 2020 from 300 million in 2015 (Prediction by 25the July 2016 report by Google and BCG).

• This Report further forecasts the size of the digital payments industry in India to touch $500 billion by 2020, contributing 15% to India’s GDP.

• India currently ranks second in the world with more than one billion mobile subscription . Of this around 240 million consumers use smartphones, and this base is projected to increase to over 520 million by 2020.

• Smartphone subscriptions in the country will increase fourfold to 810 million by 2021, according to the India edition of the Ericsson Mobility Report released in June 2016.

INDIA ON THE GO

SOME OF THE MOST PROMINENT MOBILE WALLETS AND UPI

(UNIFIED PAYMENTS INTERFACE) PAYMENTS APPS IN INDIA

1. BHIM App

2. SBI Buddy

3. Paytm

4. Freecharge

5. Mobikwik

6. Airtel Money ( Largest MNO of India )

7. Vodafone M-Pesa ( 2nd Largest MNO of

India )

8. Axis Bank Lime

9. Chillr

10. IDEA Money (3rd Largest MNO of India )

11. Citrus Pay

12. ICICI Pockets

13. HDFC Pay Zapp

14. Ftcash

15. Oxigen Wallet

16. Mobicash

17. Trupay

18. Itzcash

19. PhonePe

20. Jio Money ( MNO)

Number of Mobile Wallet Users is three times the number of credit cards

issued in India (24 million in 2015-16) ( Google-BCG Report)

A typical Survey conducted by First Data on use

of Mobile Wallet in India

PAYMENTS BANKS IN INDIA

What Are Payment Banks

PAYMENTS BANKS IN INDIA

On 19 August 2015, the Reserve Bank of India gave "in-principle" licences to

eleven entities to launch payments banks to increase the scope of financial

inclusion to small savings account holders, low income households, small

businesses, unorganised sector entities and migrant labour force:

Aditya Birla Nuvo

Airtel M Commerce Services

Cholamandalam Distribution Services

Department of Posts

FINO PayTech

National Securities Depository

Reliance Industries

Sun Pharmaceuticals’ dilip sangvi

Paytm’s Vijay Shekhar Sharma

Tech Mahindra

Vodafone M-Pesa

Out of these, three have surrendered their licenses. ("Chalomandalam

Distribution Services", "Dilip Shanghvi ‘s Sun Pharmaceuticals" and "Tech

Mahindra“ )

PAYMENTS BANKS IN INDIA

• Payments Banks are important as they will magnify the potential of

financial inclusion in the economy. It will empower those citizens who

have only transacted in cash to head towards formal banking.

Traditional banks may be hesitant to open branches in every village due

to its uneconomic returns, but a simple mobile phone coverage is all

that is required now. Keeping in mind the government’s unwavered

digital drive target, customers can shift from cash transactions to

operating their accounts on their mobile phone and transact digitally.

• India also serves as a big remittance market and with money

transfers possible through mobile phones, workers and migrant

labourers could simply shift to Payments Bank and send their money

home. Payment banks can also play a crucial role in implementing the

government’s direct benefit transfer scheme, where subsidies on

healthcare, education and gas are paid directly to beneficiaries’

accounts.

PAYMENTS BANKS IN INDIA

• Airtel Payments Bank (APB), a joint venture between Bharti Airtel Ltd and Kotak

Mahindra Bank Ltd, has been launched on 12.1.17 said it will spend Rs 3,000

crore to develop a pan-India banking network and digital payments ecosystem.

Within a month of its launch, it has expanded its payment bank operations to 200

plus villages across Rajasthan, Telangana , Andhra Pradesh and Karnataka and

plans to expand its payment bank services to 5000 villages across the country.

Each of the retailer, Point of Presence of Airtel, the largest Telecom Service

Provider of India would be Banking Agent.

• India Post Payments Bank (IPPB) has also been launched by Department of

Posts, Government of India on 30.1.17 and plans to scale it up to 650 branches by

September. India Post has more than 155000 post offices through out the country

and after becoming payment bank would prove to be a game changer for financial

inclusion in the country.

• Paytm Payments Bank has also received final approval from RBI on 3.1.17 and

would launch its operations in February 2017.

WAY TO GO

To succeed it is imperative to have • a healthy stage of digital inclusion that is connectivity for all and spread of ICT

networks.

• Awareness, education to people about the concept , advantage and convenience of mobile money

• A mind shift to use Mobile Money as about 68% of transactions in India are still cash based.

• A holistic approach to bring vendors, suppliers and the customer on mobile money platform. In India most of the merchants still don’t want the infrastructure costs and fees associated with e-payments whereas customers still find cash more convenient.

• Enabling regulatory reforms such as permitting cash-out (withdrawal) at third party agents, harmonizing KYC requirements, improving Aadhar-based KYC procedures, harmonizing transaction limits between mobile money accounts opened by non-bank and accounts opened by banks, enabling mobile money providers to pay interest on value stored in an e-wallet, removing the pre-approval requirement for wallet-to-wallet interoperability etc.

• Confidence in the mind of customers that their money is safe and secure in the e-form.

REFERENCES:

1. Mobile Money: the Opportunity for India; MMAI/GSMA position paper 13 November

2013

2. GSMA State of The Industry Report on Mobile Money 2015

3. www.businesstoday.in/magazine/case-study/case-study-vodafone-mpesa-mobile-

cash-transfer-service-future/story/211926.html

4. http://www.livemint.com/Politics/ODcuu2wmWqGWNUY6wHhmmJ/Indias-cash-

conundrum-how-ready-is-India-to-go-cashless.html

5. TRAI press release No.09/2017, Telecom Subscription Data as on 30th November,

2016

6. https://www.bcg.com/en-in/d/press/25July2016-digital-payments-2020-making-

500-billion-ecosystem-in-india-39417

7. https://www.ericsson.com/res/docs/2016/ericsson-mobility-report-2016.pdf

THANKS