Have you heard the slogans “Aap ka bank aapki jeb mein” / “Your bank is in your pocket”?  It is absolutely true when it comes to ‘Mobile Banking’. It is a service provided by a Financial Institution (FI) that allows its customers to conduct a range of financial transactions remotely using a mobile device such as a mobile phone or tablet, and using software, usually called an app, provided by the FI for the purpose. Mobile banking is usually available on a 24X7 basis.

mobile banking, mobile security, Female hands using mobile banking on smart phone

Typical mobile banking services may include:

  • 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, etc.
  • Transaction:
  1. Funds transfers between the customer’s linked accounts
  2. Paying third parties, including bill payments and third party fund transfers,etc.
  • Investments:
  1. Portfolio management services
  2. Real-time stock quotes
  3. Personalised alerts and notifications on security prices
  • Support:
  1. Status of requests for credit, including mortgage approval, and insurance coverage
  2. 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

“There is substantial potential for mobile based payments,” said Shri Raghuram Rajan in his first speech after taking over as the Governor of the Reserve Bank of India. True, there’s surely huge potential for mobile-based payments in India. But the question is how long will it take for us to fully use that potential?

Incidentally, getting registered for mobile banking is as easy as ticking a box on our application form to open an account, but doing the actual transaction is altogether another thing as it encounters a number of challenges. As a result, usage of mobile banking is not growing at that speed as it is expected to be.

But before we look into the challenges mobile banking faces in India today, let us understand the various types of mobile payments out there.

What’s out there:

Mobile banking transactions can be broadly classified into two: Push type and Pull type. Push type is a one-way transaction where your bank sends you information pertaining to your account via SMS. Pull type is a two-way transaction, where you send a request and the bank replies.

This can be further classified into five types, as under:

  • First is inter-bank mobile payment service (IMPS), which is a fund transfer service through National Payments Corporation of India (NPCI). This service lets you transfer funds from one account to another across banks within the country using your mobile phone. You can use the IMPS via your banks’ app, USSD dial-in number, encrypted SMS banking or net banking.
  • Second, bank apps. Here you need to download your bank’s application or software on your mobile phone via internet. This works on both GSM and CDMA handsets for Android and iPhone platforms.
  • Third type is USSD-based. For this type, all you have to do is to dial the bank’s service code and you can ask for information on your bank account. You don’t need a smartphone or high end phone to use the USSD platform.
  • Fourth type is SMS – based. This is the most popular type of mobile banking. You can get your account information via SMS.
  • Fifth is Internet – based mobile banking. This way of banking is where you use your mobile screen like a computer monitor.

Apart from these, there are more options like the mobile wallets which even an unbanked customer can use. For this, a smart phone and an internet connection are not essential.

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 a 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 localised, with countries like India using portals like “R-World” to enable the limitations of low end java based phones.

Security: As with most internet-connected devices, as well as mobile-telephony devices, cybercrime rates are escalating year-on-year. The types of cybercrimes which may affect mobile-banking might range from unauthorised use while the owner is using the toilet, to remote-hacking, or even jamming or interference via the internet or telephone network data streams. 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:

  • 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.
  • 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.
  • Authentication of the device with service provider before initiating a transaction. This would ensure that unauthorised devices are not connected to perform financial transactions.
  • User ID / Password authentication of bank’s customer.
  • Encryption of the data being transmitted over the air.
  • Encryption of the data that will be stored in device for later / off-line analysis by the customer.

One-time Password (OTP) is the latest tool used by financial and banking service providers in the fight against cyber fraud. Instead of relying on traditional memorised passwords, OTPs are requested by consumers each time they want to perform transactions using the online or mobile banking interface. When the request is received the password is sent to the consumer’s phone via SMS. The password is expired once it has been used or once its scheduled life-cycle has expired.

Because of the concerns made explicit above, it is extremely important that SMS gateway providers can provide a decent quality of service for banks and financial institutions in regards to SMS services.

Scalability and Reliability: Another challenge for the Financial Institution 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 (anytime, anywhere banking, in real sense) 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 RBI 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 / synchronisation of other dependent components.

User adoption: Studies have shown that a huge concerning factor of having mobile banking more widely used, is a banking customer’s unwillingness to adapt. Many consumers, whether they are misinformed or not, do not want to begin using mobile banking for several reasons. These can include the learning curve associated with new technology, having fears about possible security compromises, just simply not wanting to start using technology, etc.

Personalisation: It would be expected from the mobile application to support personalisation such as:

  • Preferred Language
  • Date / Time format
  • Amount format
  • Default transactions
  • Standard Beneficiary list
  • Alerts, etc.

Conclusion: There is no doubt that mobile subscriber base as well as consumer opting for mobile banking is increasing in India. But, challenges like education and awareness, complexity of operations, handset and security issues along with pricing issues amongst various players first need to be sorted out. We are confident that with the support and guidance of Mint Street, in times to come, India will be able to meet her substantial potential for mobile based payments / services.

Mobile Banking Services (MBS) – The Future of Banking
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