The Consultative Group to Assist the Poor (CGAP), the leading microfinance think tank housed at the World Bank, recently posted an interview with with Naushad Contractor about India’s mobile banking trends in their technology blog. Naushad heads marketing for mobile commerce at Vodafone Essar ltd., India. He is also on the regulatory committee of the Mobile Payments Forum of India. He was a member of the core team that launched and made Remit2India.com the World’s No.1 Independent Money Transfer Portal for Non Resident Indians.
Q: Is mobile banking popular or hyped?
I think Mobile Banking is increasingly becoming popular but it is much more hyped than it is popular. Everyone says “I Do” but actually not many actually do as they say. However, the factor of sheer convenience for the customer and lower transaction costs for the banks is creating a conducive pull + push environment for increasing understanding and usage of this relatively new concept. As in the early days of internet banking, most people will tend to use mobile banking just as an information tool rather than conducting too many transactions on the mobile. Even the initial transactions will be much lower in value. Once trust in mobile banking increases as a result of good user experience, both usage and transaction values will begin to normalize.
Q: With regard to this sort of product, what is driving change in India?
A large unbanked population coupled with acceptability of the medium and deeper and wider reach of mobile phones makes India so conducive for mobile banking and payments. A crying need for basic financial services and remittance channels catalyzed by an amazingly fast growing mobile subscriber base will force necessary changes to make such services more widely available. It is only a matter of time before such services become the primary channel for reaching financial services to the unbanked both in rural and urban areas.
Q: What are some of the more difficult challenges you see for reaching people in poor, remote areas?
It may sound clichéd but one of the important challenges is being able to reach and serve the poor profitably. What’s key is offering enough value to agents and other channel partners while making enough money at a convenient and affordable end price to the customer. The need, propensity & more importantly the ability to save are other factors that will play a role once we have reached these financially excluded people. Low education levels, lack of trust in other people and language barriers further increase difficulty levels in reaching out to the poor in remote areas.
Q: Banks have been struggling with that for decades; why do you think mobile operators can make it happen?
From the customer’s viewpoint, mobile phones in the last 10 -12 years have reached far more people than banking has. As per a recent BCG report, there are 26 million households in the country who have a mobile phone but no access to basic banking and financial services. The mobile phone as a medium of information and transactions is trusted and accepted by a very large section of society in a very short time span.
From the service provider’s viewpoint, the key differentiator for this relatively higher penetration and widespread acceptance is the willing and able distribution network that telcos have successfully set up. They almost bring the service to the customer’s doorstep. Not leveraging this strength and not synergizing the same with the banking system is probably the single largest factor for slower financial inclusion in the country.
Q: What is the mindset shift that would need to happen for banks to be able to work by themselves or with mobile operators to reach the unbanked?
Banking the unbanked is one of the key directives issued to commercial banks by the Central bank. The progressive Commercial Banks have understood the concept and benefit of using mobile technology to make its efforts for financial inclusion more efficient and effective. More importantly mindset changes are required at the central bank level in order to allow banks to freely work with telecom operators. Many of the fears may be well placed, but in the interest of better Financial Inclusion, it is the need of the hour to use the concept of proportionality for smaller value transactions to counter such fears.
Q: What will we be talking about or worried about five years from now?
Five years is a very long time for the amazingly dynamic world of mobile technology which will be used in mobile banking & payments. I think there will suddenly emerge a few disruptive solutions to the many small problems we are unable to fix today.
However, if I am forced to hazard a guess, I would say we would be talking about how the mobile phone has revolutionized the country for a second time, and this time in the sphere of getting more and more people into the fold of financial services. I believe this even though the current trend of regulation in India that is NOT favorable for leveraging the strengths of the telecom industry to hasten Financial Inclusion and make it more affordable, profitable and efficient. Optimism and realism both lead me to believe that these are minor hiccups and sheer need and public interest will finally help resolve them much faster. The debate on mobile banking and Financial Inclusion with Telecom Companies playing a more active participative role would be over due to its huge success.
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