Posts tagged mobile banking

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Banks are tapping technology to connect with potential customers in remote areas..

Besides creating specific products, banks also need to beef up their IT systems in order to deliver what they promise.

Kishori Lal Yadav, who hails from a tiny village in Uttar Pradesh, is quite technology-savvy when it comes to handling money. With a whistle on his lips, he withdraws money from the teller machine in his village.

Despite being illiterate, Yadav doesn’t have to worry about getting lost in a maze of buttons with instructions to press this or type that. His fingerprint is the passport to his world of finances. The biometric ATM uses fingerprint for customer identification and verification and a taped voice system guides him through the process in Hindi. And out comes his money. And Yadav’s whistling gets only louder.

Now, cut to a different scene, that of 30-year-old Raji in the slums of Bangalore. Her life could be a typical story of most daily wage earners. But a revolution is brewing in her life. As a micro-finance institution borrower, Raji earlier had to travel a long way to make repayments, the risks of theft were also high. But thanks to mobile technology, Raji is now hooked to electronic transactions.

Banks are on a dedicated mission to take their services to the unbanked lot. And they are realising that technology can play a big role in their initiative to provide hassle-free, secure banking services, at little cost.

Mobile on winning wicket

Nandan Nilekani, Chairman of the Unique Identification Authority of India, at a recent forum, said that the unique ID programme, aided by technology, can help banks include more people in their fold.

And when it comes to technology adoption, the ubiquitous mobile phone is a huge bet. Just consider these statistics: Over 30 per cent of the new mobile subscriptions every month comes from villages and there are nearly 200 million mobile phone users in the country who do not have bank accounts.

Obviously, this offers a huge opportunity for banks to use mobile phones to provide banking and payment services to the untapped sections. Says Suresh Krishna, Managing Director, Grameen Financial Services, which has been piloting its mobile banking service in Bangalore among a group of 100 borrowers, in partnership with mChek, a Bangalore-based technology provider, “Our mobile banking technology enables our borrowers to conduct all microfinance transactions over a simple mobile phone. Because all transactions are conducted electronically, the risks of fraud and theft have been greatly reduced. Further, if a borrower cannot be physically present for a weekly repayment meeting, she does not have to forfeit her payment, which affects her credit history. Instead, using the mobile banking facility, she can make the repayment from a remote location.”

According to Manjunatha H.S, Country Head – Sales, Integra Micro Systems, technology helps people living in remote areas to have access to banking facilities right at their doorstep without having to spend a single rupee on travel. Integra offers iMFAST (Integra’s Mobile Financial Applications Secure Terminal) — a portable teller machine that performs simple banking functions in rural areas. Operated by business correspondents in villages, the iMFAST solution is a hand-held terminal to handle various transactions such as deposit, withdrawal, loans, RD, insurance, bill payments and train/bus ticket booking in rural areas.

Around 15 nationalised banks, including Bank of Baroda, Canara Bank, Central Bank of India, Indian Bank, and Vijaya Bank are currently using iMFAST for the implementation of Financial Inclusion in more than 500 locations in the country.

HDFC Bank too has launched the Anywhere Bank Terminals at the locations of business correspondents. Through these terminals, rural customers can avail of banking facilities. The bank has also launched the Bank on Wheels pilot to deliver financial services at affordable cost to vast sections of low-income population in unbanked and under-banked geographies, at their doorstep, using biometric ATMs. The bank has employed these technologies in 13 States, including Bihar, MP, Rajasthan and Uttar Pradesh, exclusively for the rural market.

Says Manohara Raj, Business Head, Microfinance, HDFC Bank, “We were able to reach clients beyond 200 km from the branch at times when our branch networks were fewer, using the technological platform. Solutions such as biometric smart cards/mobile technology/point of sale/mobile bank has helped banks increase the outreach and reach the last-mile villages.”

Various technologies are available for financial inclusion initiatives. While each one has its own merits and de-merits, what is needed is a solution that is secure, scalable, compatible, easy to use, flexible, interoperable, robust, cost-effective and upgradable.

The promise of transparency and security in technology-aided transactions has created a certain level of trust and confidence among users. Says Sanjay Swamy, CEO of mChek, the Bangalore-based mobile payments technology provider: “The range of services that can be performed on mChek, right from an account balance to bank deposits and withdrawals to loan repayments and kirana shop payments, has developed confidence among the women. They feel more secure about their money kept in a bank account and accessible via the mobile rather than kept as cash, where it can be lost or stolen. Security of cash is a huge concern in remote areas. Assuming even a 0.001 per cent theft probability, digital money still saves money for the end consumer by being completely in the digital form. It also encourages the habit to save for a rainy day…

Mobile banking also creates a system for transparent transactions, thus bringing more people into the taxable system. This has the potential to drive revenues as a whole for the government.” The ability to make transactions secure with no paper work at all is another plus. “Apart from this, in the case of Government benefit disbursements, the right amount of benefits reaches the rightful beneficiaries in time without any leakage and intervention of middlemen,” says Santosh Galgali, Project Director – Karnataka, ZERO-M.A.S.S Foundation, which has launched a new-generation biometric fingerprint authentication-based solution for financial inclusion.

The product suite, branded ‘ZERO’, is an end-to-end payment system to serve customers with small-value transactions including cash in/cash out, cashless transactions and remittances, leveraging the security and connectivity of new generation mobile phones.

If numbers are anything to go by, banks seem to be on the right path. Says Suresh Krishna of Grameen Financial Services, “Our borrowers are excited to utilise technological advancements. They have quickly adapted to the processes and enthusiastically teach their families the ropes too. In the two years since we harnessed technology, we have quadrupled in size to serve more than 3,30,000 clients. By 2012, we plan to reach more than two million poor households.”

The Zero-M.A.S.S technology has touched close to 5 million customers in 18 States, including very old beneficiaries of Social Sector Pension schemes, wage earners of NREGA scheme and SHG members. Integra has issued ATM cards to three lakh customers in Karnataka, Madhya Pradesh, Tamil Nadu, Kerala, Andhra Pradesh, Maharashtra, Uttar Pradesh, Sikkim and Jharkhand. HDFC Bank too has reached more than 6 lakh customers using the technological platform.

Behind -the -scene challenges

What goes on beyond getting these numbers is a rigorous exercise in convincing potential users and earning their trust and confidence.

There are also other barriers to technology adoption. Says Manohara Raj of HDFC Bank: “The major challenges in extending services are large costs of covering the huge numbers, relative high maintenance costs for such accounts, small ticket size for each transaction, need for communication modes suited to the illiterate and in local language, affordability of the product or service, need for local acceptance and involvement of locally acceptable personnel, need for large scale coverage, including over difficult geographic terrain and areas where there is no electric power or normal telecommunication and other infrastructure facilities.”

Apart from creating specific products to cater to the consumers, banks also need to beef up their IT systems to be able to deliver what they promise. Grameen Financial Services, for instance, has incorporated technology using Mifos, an open-source software developed by Aditi Technologoies specifically for microfinance institutions.

“Microfinance is about connecting the world’s poor to the global financial system in a practical, sustainable way, and Mifos lets us do that better than ever before. Mifos leads to a 5 per cent increase in loan officer efficiency. Time for IT staff to open new branches has been cut from six to one man-days. New products can be brought to market fifty days sooner. There is up to 10 per cent more cash available to mobilise as loans due to greater visibility and cash management,” vouches Suresh Krishna of Grameen.

There’s money in the model

Financial inclusion could also be a scalable business model for banks and technology providers. “Here’s a business opportunity for banks to access a segment hitherto unexplored,” says Haragopal Mangipudi, Vice-President and Global Head – Finacle, Infosys Technologies’ banking software business division. Sanjay Swamy of mCheck says the company’s vision is to bring together the entire eco-system of partners across the banking sector, banking service providers, as well as telecom operators to serve the base of users. A concerted effort is the need of the hour to ensure