The use of the mobile phone as an instrument for conducting financial transactions and the potential it has for financial inclusion and growth is being recognised by the apex bank, which has however called for caution in m-commerce adoption

The Reserve Bank of India (RBI) has said that use of mobile commerce
(m-commerce) must be made easy for the common man and it should be facilitated carefully—and well-measured—keeping in mind the concerns over money laundering, financial terrorism and the stability of the payment and settlement systems.

Speaking at the India Telecom 2009 conference, RBI’s deputy governor Dr KC Chakrabarty said, “While e-commerce has skipped the majority of the population due to the cost of setting up such channels, m-commerce has the capability to be inclusive due to the widespread use of mobile phones.”

The current guidelines for mobile banking permit banks to provide mobile banking transactions and mandate that all transactions have to originate from one bank account and terminate in another bank account.

“We all agree that the benefits of m-commerce should reach the common man at the remotest locations in the country. However, the extent and the manner in which m-commerce should be facilitated calls for a cautious and well-considered approach,” he added.

In India, out of the 32 banks which have been given approval to provide mobile banking facilities, only 21 have started providing these services. However, there is not much activity in this space, resulting in low transaction volumes, Dr Chakrabarty added.

According to the deputy governor, the reason for low uptake of mobile banking facilities are the requirements of end-to-end encryption that makes implementation expensive. Transaction limits —which range between Rs5,000 and Rs10,000—also have to be revised upwards.

The other issue banks face in providing mobile banking is that they are required to tie up with individual service providers for enabling such services. Banks face difficulties in entering into such partnerships. Again, mobile service providers do not open up channels for facilitating mobile banking services by banks.

“The successful partnering of banks and mobile service providers would also need the resolution of the issue related to customer ownership,” the deputy governor added.

Dr Chakrabarty also spoke about the growing use and transaction volumes of electronic services in the country. Presently, electronic clearing services (ECS) transaction volumes amount to about 2.5 lakh transactions in 2008-09, up from 1.4 lakh in 2006-07.

The number of bank branches offering national electronic funds transfer (NEFT) service has increased from 42,900 to 54,200 in 2008-09. The aggregate value of transactions increased to Rs2,51,956 crore from Rs77,446 crore during the same period. 
— Aaron Rodrigues