0		Mobile, banking, –, will, take-off?

Citibank in partnership with Vodafone and Nokia is trying out near field communication or contact less payment in Bangalore. This is a pilot project to arrive at a business model rather than a  technology pilot.

The same model has been tried without success in New York and Singapore.

Known as near field communication, or NFC, the technology allows users to make payments by tapping their mobile phones against a reader terminal, letting consumers use their phones like electronic wallets.

mChek in partnership with AcCel is already trying out contact less payment. The SIM cards are pre-loaded with the mChek application and tied up with Bharti Airtel. More than 25 million SIM cards are already shipped. Major banks (ICICI Bank, HDFC Bank, Corporation Bank) are also issuing Visa cards on mChek.

There is still a debate about equipping the mobile phones or equipping the mobile phone readers (or terminals) which can read the GSM signal. Right now it looks like a hybrid approach.

Equipping mobile phones is a long-term solution but there are 400 million mobile users already in India and 3 billion mobile phones across the world. If the solution is to equip the phones then it will not work on a mass scale.

How comfortable are users in using the mobile as a wallet is a big question? There might be sometime to arrive at the answer let us take a look at the state of mobile banking.

Mobile banking is a very broad term and lot of people are using it for different purposes. All these 3 come under the umbrella of mobile banking.

1. There is mobile payments using the near-field communication where the mobile acts as a electronic wallet. This is what Citibank-Vodafone, Airtel-mChek are trying to do. Mobile as a wallet.
2. There is regular mobile banking which your bank provides by downloading an application. This is something all major banks provide but the application does not work on all the mobile phones. A little different from the SMS based banking which is asynchronous.
3. Regular remittance where it is not necessary to have a bank account. ICICI Bank has tried this where it is not necessary for the recipient to have a bank account.

In India response for mobile banking is tepid. Union bank of India added only 1700 mobile banking customers. Same is the case with State Bank of India. It has partnered with Spanco Telesystems for mobile banking and the response so far is poor. However that shouldn’t paint a grim picture.

It would take at least 3 years for the mobile payments to take off. More than 1909 million users will be using mobile payments by 2012. That is a 3% of mobile population. The proof is already there in Bangladesh and Nairobi.

Bangladesh is using remittance transfer through mobiles to ease the cost of transfer. It is SMS based which we is something already tried by ICICI Bank.

In Nairobi, people send money through mobile’s to save the extra trip of going back home and delivering the money. M-PESA a mobile payment system works as a virtual bank with a strong distribution network. This is done by tying up with bank. What this has reduced is the need to have bank branch and network in the every corner of the country – which is both expensive, time consuming and most importantly might never happen. All this works through an SMS back and forth.

Though the prospects are bright there are some things which need to be sorted out. Like all things new, mobile banking is suffering to come up with a common platform. Different vendors are trying out different technologies and business models. There is no proven method which can be applied across geographies. It would take a while for this fragmented (technology and business model) industry to take-off. 3 years looks like the right time.

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