Thursday, July 21, 2011

Mobile commerce awaits a rural destiny in India July 21st

By G Krishna Kumar

How do you like the idea of paying bus fare by just flashing your mobile phone before the Conductor? The mobile phone, using a technology called Near field communication (NFC), communicates with a device in the bus and the amount is debited from your bank account.

NFC is gaining popularity across the world and is set to revolutionise mobile commerce. Though NFC is in nascent stages in India, it may hold the key to make mobile commerce popular in the country.

Early this year Bharti Airtel launched prepaid cash cards in India, the Airtel Money service. The service, which allows customers to use their mobile phones to make payments, is now available in Gurgaon and Airtel plans to launch it across the country.

Mobile commerce is quite popular in the West and research shows that 91 per cent of UK consumers use it. But in India it is yet to take off. Debit cards, which the mobile money can potentially replace, are easier to carry and help you draw cash. Mobile money providers typically charge transaction and subscription fee and face the challenging task of ensuring universal acceptability of their ‘money’. The law also limits the amount of money which can be transacted through mobiles.

A recent Forrester report expects global m-commerce to reach $31 billion by 2016. For that to happen rural areas may have to step in, in a big way.

Approximately 72 per cent of the world’s population is estimated to be “unbanked”. The mobile phone, which is becoming ubiquitous even in the developing countries, offers an excellent platform to take banking to them. Studies suggest that an increase in the banked population has a direct correlation to increased GDP and reduced poverty.

Kenya has emerged as a leader in mobile banking system with M-PESA, which was launched in 2007 by Safaricom, a mobile Operator. M-PESA is an SMS based, branch-less system that allows individuals to deposit, send and withdraw money using their mobile phone. M-PESA has over 14 Million customers, representing 60 per cent of the adult population.

Pakistan’s Easy Paisa, Bangladesh’s Grameen Bank’s Mobile money are among other initiatives trying to replicate M-PESA’s success.

In India, regulators like RBI and TRAI, several banks, mobile service providers and phone makers are joining hands to take m-commerce to the “unbanked” population.

Eko, a mobile banking technology provider, has tied up with SBI and ICICI banks. It helps people create a bank account and perform basic transactions at local Kirana shops.

Idea Cellular has a similar partnership with Axis Bank. Subscribers would be able to open ‘No-frills savings bank accounts’ at Idea’s retail outlets and avail basic banking services such as cash deposit, withdrawal and transfer. Idea is currently offering the remittance facility in the Dharavi-Allahabad corridor. There have been similar initiatives from Vodafone and Bharti Airtel as well.

Fifty-two per cent of India’s adult population does not have access to any form of formal financial services. With the rising tele-density there is good potential for business.

According to the latest BCG report, the projected fee-based revenue from mobile commerce could exceed $4.5 billion by 2015 in India. This revenue would be shared by banks, mobile service providers and device manufacturers.

A major bottle-neck in mobile commerce in rural areas lies in meeting the Know-your-customer (KYC) norms. Kenya’s National ID system, eliminated the need for KYC norms and played a key role in M-PESA’s success. That is precisely the role India’s Aadhar project is planning to play. If it succeeds, mobile commerce would get a big boost. But to really make it happen banks and telcos have to build awareness among people by promoting it aggressively.

(The writer is Director-Engineering at Teleca Software Solutions India. Views expressed are personal)

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