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I Ms. SWAMI BHAVSAR Student of T.Y.BCom (Banking &

Insurance- Semester V) of Malini Kishor Sanghvi College of Commerce &

Economics, hereby declare that I have completed the project on ‘MOBILE

BANKING’ in the academic year 2009-2010. The information submitted is true

and original to the best of my knowledge.

Date of submission Signature of student



This is to certify that SWAMI BHAVSAR of T.Y.B.com (BANKING &

INSURANCE – SEMESTER-V) of Malini Kishor Sanghvi College of Commerce

& Economics has successfully completed the project on “MOBILE BANKING”

in the academic year 2009-2010. The information is true & original to the best of

our knowledge.

Signature of Principal Signature of Project Guide

(Dr. (Mrs) Krushna Gandhi) (Mr.Mukesh kanojya)

Signature of Co-ordinator

(Purvi Dholakia)



Any accomplishment requires efforts of many people & this work is no different. I

am grateful to the UNIVERSITY OF MUMBAI to have introduced this final

project of our curriculum.

With a deep sense of gratitude, I wish to express my sincere thanks to my project

guide Prof. MUKESH KANOJYA for his support in preparation of project report.

I take the opportunity to thank Prof.Purvi Dholakia, T.Y.Bcom (Banking &

Insurance) coordinator for giving me the opportunity to work on this project.

I would also like to express my gratitude towards the library staff of M. K.

SANGHVI COLLEGE, my family & friends without whose support my project

would not have been possible.



The last time that technology had a major impact in helping banks service their customers was with the introduction of the Internet banking. Internet Banking helped to give the customer's anytime access to their banks. Customer's could check out their account details, get their bank mobile phone banking is the domain of a lucky few with constantly changing customer preferences and a greater emphasis placed on mobility, it could soon become a mainstream ability.

mobile-phone owners currently have access to mobile banking but choose not to utilise it. This is predicated to change by 2014, when 45 percent of users will actually use it. advancing technologies will enable mobile banking to become a convenient and quick way for consumers to check their balance as well as pay for goods.

"Mobile banking is quickly moving from infancy to commonplace, which will help separate the winners from losers in banks' ability to attract and keep technology-loving consumers," "Consumers are hungry for the 'always-on' and 'real time' ability to monitor and manage their money, and mobile banking serves that need better than any other."

one of the factors driving the mobile banking surge, is the increased usage of smart-phones, such as the iPhone, as well as the race between phone companies to develop the basic thin-client capabilities dubbed "wrapper applications" designed to integrate financial services into mobile online sites. It will also work in tandem with online banking, with mobile banking being used as a "remote control" and ''online'' as a detailed form of control panel for more complex transactions.

By 2014, the percentage of people using mobile banking will equate to approximately 99 million US adults conducting mobile banking transactions at least once per year. 52 percent of these customers are reckoned to be using smart-phones.

"Mobile banking is quickly becoming an essential consumer capability," said Mark Schwanhausser, Financial Services Channels Analyst speaking to

Cellular News.

"Just as the iPod changed the music industry and their business models, our data shows that iPhone users are changing the banking industry by leading the way in monitoring and managing finances through mobile devices."


Mobile banking is a credible channel, but usage in developed markets will

remain low

IT spending on mobile banking is continuing, but it is not the highest priority channel

Mobile banking’s greatest opportunity involves serving the needs of the unbanked

Retail banks and technology vendors must be prepared to play the long game


Mobile banking has struggled in Europe and North America: will this change in 2009/10?

The difficult economic climate is refocusing the attention of consumers to their personal finances Mobile banking devices and interfaces have

thankfully improved, thereby enhancing the user experience After multiple false starts, the mobile banking ecosystem is entering its next phase of development in 2009 Catering to the unbanked will have a positive influence on the growth of mobile banking.

Assessing the mobile banking market opportunity in developing regions Investment programs have been launched to stimulate mobile banking services in developing countries Charting the emergence of mobile banking services in developing countries

Other operators are seeking to mirror the success of M-PESA Serving the unbanked in developed regions is also a natural fit for mobile banking services Mobile banking services will replace traditional remittance flow methods Summarizing the market opportunity for mobile banking


In 2009, mobile banking features in the channel strategy plans of most retail banks

Mobile banking channel is not a high priority channel for IT investment in 2009

Retail banks must be willing to play the long game in order to achieve decent revenues


technological impacts

Banks must ensure they make adequate security provisions for mobile banking services

Banks will have to share revenues from mobile services with others in the ecosystem statements, perform transactions like transferring money to other accounts and pay their bills sitting in the comfort of their homes and offices.







































































The Indian banking can be broadly categorized into nationalized (government owned), private banks and specialized banking

institutions.The Reserve Bank of India acts a centralized body monitoring any discrepancies and shortcoming in the system. Since the nationalization of banks in 1969, the public sector banks or the nationalized banks have acquired a place of prominence and has since then seen tremendous progress. The need to become highly customer focused has forced the slow-moving public sector banks to adopt a fast track approach. The

unleashing of products and services through the net has galvanized players at all levels of the banking and financial institutions market grid to look anew at their existing portfolio offering. Conservative banking practices allowed Indian banks to be insulated partially from the Asian currency crisis.Indian banks are now quoting al higher valuation when compared to banks in other Asian countries (viz. Hong Kong, Singapore, Philippines etc.) that have major problems linked to huge Non Performing Assets (NPAs) and payment defaults. Co-operative banks are nimble footed in approach and armed with efficient branch networks focus primarily on the ‘high revenue’ niche retail segments.

The Indian banking has finally worked up to the competitive dynamics of the ‘new’ Indian market and is addressing the relevant issues to take on the multifarious challenges of globalization. Banks that employ IT solutions are perceived to be ‘futuristic’ and proactive players capable of meeting the multifarious requirements of the large customers base. Private banks have been fast on the uptake and are reorienting their strategies using the internet as a medium The Internet has emerged as the new and

challenging frontier of marketing with the conventional physical world tenets being just as applicable like in any other marketing medium.


The Indian banking has come from a long way from being a sleepy business institution to a highly proactive and dynamic entity. This transformation has been largely brought about by the large dose of liberalization and economic reforms that allowed banks to explore new business opportunities rather than generating revenues from conventional streams (i.e. borrowing and lending). The banking in India is highly

fragmented with 30 banking units contributing to almost 50% of deposits and 60% of advances. Indian nationalized banks (banks owned by the government) continue to be the major lenders in the economy due to their sheer size and penetrative networks which assures them high deposit mobilization.

The Indian banking can be broadly categorized into nationalized, private banks and specialized banking institutions.

The Reserve Bank of India act as a centralized body monitoring any

discrepancies and shortcoming in the system. It is the foremost monitoring body in the Indian financial sector. The nationalized banks (i.e.

government-owned banks) continue to dominate the Indian banking arena. Industry estimates indicate that out of 274 commercial banks operating in India, 223 banks are in the public sector and 51 are in the private sector. The private sector bank grid also includes 24 foreign banks that have started their operations here. Under the ambit of the nationalized banks come the specialized banking institutions. These co-operatives, rural banks focus on areas of agriculture, rural development etc.,

unlike commercial banks these co-operative banks do not lend on the basis of a prime lending rate. They also have various tax sops because of their holding pattern and lending structure and hence have lower overheads. This enables them to give a marginally higher percentage on savings deposits. Many of these cooperative banks diversified into specialized areas (catering to the vast retail audience) like car finance, housing loans, truck finance etc. in order to keep pace with their public sector and private counterparts, the co-operative banks too have invested heavily in

information technology to offer high-end computerized banking services to its clients.




State Bank of India and

Associates 08

Nationalized Banks 19 Domestic Private Sector

Banks 25

New Domestic Private Sector

Banks 09

Foreign Banks 29

Complementing the roles of the nationalized and private banks are the specialized financial institutions or Non Banking Financial Institutions (NBFCs). With their focused portfolio of products and services, these Non Banking Financial Institutions act as an important catalyst in contributing to the overall growth of the financial services sector. NBFCs offer loans for working capital requirements, facilitate mergers and acquisitions, IPO finance, etc. apart from financial consultancy services. Trends are now changing as banks (both public and private) have now started focussing on NBFC domains like long and medium-term finance, working cap

requirements. IPO financing to etc. to meet the multifarious needs of the business community.



The commercial financing model in Indian banking can be broadly

categorized into project finance and working capital finance. These two segments form the pivot around which banks operate.


Banks offer long term and short terms loans to business houses,

corporations to set up their projects. These loans are disbursed after the approval from the banks’ core credit validating committee. In India, there are 11 national level land 46 state level financial and investment

institutions that cater to long term funding requirements of the industry. The project finance segment is highly competitive with various players offering innovative schemes to entice corporate.


In order to meet the diverse needs and requirements of the business

community, banks offer working capital funds to corporate. Working capital finance is specialized line of business and is largely dominated by the

commercial banks. The Indian banking saw dramatic changes in the last decade or so ever since the advent of liberalization and India’s integration with the world economy. These economic reforms and the entry of private players saw nationalized banks revamp their service and product portfolio to incorporate new, innovative customer-centric schemes. The Indian banking finally woke up to the surging demands of the ever-discerning Indian consumer. The need to become highly customer focused (generated by high competitive levels) forced the slow-moving public sector banks to adopt a fast track approach. Taking a leaf out of the private sector banks, the public sector banks too went for major image changes (including

corporate brand building exercises) and customer friendly schemes. These customer friendly programs included revamping of the product and service portfolio by introducing new product & service schemes (like credit cards, hassle-free housing loan schemes, educational loans and flexi-deposit


schemes) integration of the branch network by using advance networking technology and customer personalization programs (through ATMs and anytime banking etc.). Many banks have started capitalizing on the recent stock market surge by adding (Initial Public Offering) IPO financing options and schemes in their product mix. IPO finance has received a positive response from the investors and is becoming popular amongst the business community. The objective of all these strategies was very clear – to bridge the service & product gap that was inherent in the banking system. To cater to the increasing customer demands and the surge in business volumes, many public sector banks have ploughed back funds to invest heavily in technology upgrades and systems like LANs, WANs, VSATs etc. Marketing and brand building programs were also given a new thrust in the new liberalized banking scenario. Promotional budgets were hiked to cater to the new and large discerning target audience. Banks were now keen on marketing their products and service though various mediums to reach their core customers. Direct marketing, Internet marketing, hoarding, press ads, television sponsorships, image makeovers etc. became an

integral part of a bank’s marketing mix. To meet the personalized needs of the customer and in order to differentiate its services, banks repositioned themselves in specialized fields, like housing loans, car finance, educational loans etc. to optimally service the customer. Permission marketing became the new strategy that banks began to propound i.e. feeding the customer (with his or her consent) with product and service information and thereby enticing him towards the bank’s product – service portfolio.


He liberalize policy of Government of India permitted entry to private sector in the banking, the industry has witnessed the entry of nine new generation private banks. The major differentiating parameter that distinguishes these banks from all the other banks in the Indian banking is the level of service that is offered to the customer. Verify the focus has always been centered around the customer – understanding his needs, preempting him and

consequently delighting him with various configuration of benefits and a wide portfolio of products and services. These banks have generally been established by promoters of repute or by ‘high value’ domestic financial institutions. The popularity of these banks can be gauged by the fact that


in a short span of time, these banks have gained considerable customer confidence and consequently have shown impressive growth rates. Today, the private banks corner almost four per cent share of the total share of deposits. Most of the banks in this category are concentrated in the high-growth urban areas in metros (that account for approximately 70% of the total banking business ). With efficiency being the major focus, these banks have leveraged on their strengths and competencies viz.

Management, operational efficiency and flexibility, superior product positioning and higher employee productivity skills.

The private banks with their focused business and service portfolio have a reputation of being niche players in the industry. A strategy that has allowed these banks to concentrate on few reliable high net worth

companies and individuals rather than cater to the mass market. These well-chalked out integrates strategy plans have allowed most of these banks to deliver superlative levels of personalized services. With the Reserve Bank of India allowing these banks to operate 70% of their

businesses in urban areas, this statutory requirement has translated into lower deposit mobilization costs and higher margins relative to public sector banks.



Mobile Banking (also known as M-Banking, m-banking, SMS Banking, etc.) is a term used for performing balance checks, account transactions, payments, etc., via a mobile device such as a mobile phone. It was Internet Banking, which ushered in a new era in banking convenience by bringing the entire operations to the computer, and now mobile banking promises to take it to the next level.

Internet Banking helped give the customers anytime access to their banks. Customers could check out their account details, perform transactions like transferring money to other accounts, and pay their bills, sitting in the comfort of their homes and offices. However, the biggest limitation of

Internet Banking is the requirement of a PC with an Internet connection, not a big obstacle if we look at the US and the European countries, but definitely a big barrier if we consider most of the developing countries of Asia like India and China.

Mobile Banking addresses this fundamental limitation of Internet Banking, as it reduces the customer requirement to just a mobile phone. Mobile usage has seen an explosive growth in most of the Asian economies like India, China and Korea. The main reason that Mobile Banking scores over Internet Banking is that it enables 'Anywhere Anytime Banking'.

The last time that technology had a major impact in helping banks service their customers was with the introduction of the Internet banking. Internet Banking helped to give the customer's anytime access to their banks.

Customer's could check out their account details, get their bank statements, perform transactions like transferring money to other accounts and pay their bills sitting in the comfort of their homes and offices.

However the biggest limitation of Internet banking is the requirement of a PC with an Internet connection, not a big obstacle if we look at the US and the European countries, but definitely a big barrier if we consider most of the developing countries of Asia like China and India. Mobile banking addresses this fundamental limitation of Internet Banking, as it reduces the customer requirement to just a mobile phone.


Mobile usage has seen an explosive growth in most of the Asian economies like India, China and Korea. In fact Korea boasts about a 70% mobile

penetration rate and with its tech-savvy populace has seen one of the most aggressive rollouts of mobile banking services.

Still, the main reason that Mobile Banking scores over Internet Banking is that it enables ‘Anywhere Banking'. Customers now don't need access to a computer terminal to access their banks, they can now do so on the go – when they are waiting for their bus to work, when they are traveling or when they are waiting for their orders to come through in a restaurant.

The scale at which Mobile banking has the potential to grow can be gauged by looking at the pace users are getting mobile in these big Asian

economies. According to the Cellular Operators' Association of India (COAI) the mobile subscriber base in India hit 40.6 million in the August 2004. In September 2004 it added about 1.85 million more. The explosion as most analysts say, is yet to come as India has about one of the biggest untapped markets. China, which already witnessed the mobile boom, is expected to have about 300 million mobile users by the end of 2004. South Korea is targeted to reach about 42 million mobile users by the end of 2005. All three of these countries have seen gradual roll-out of mobile banking services, the most aggressive being Korea which is now witnessing the roll-out of some of the most advanced services like using mobile phones to pay bills in shops and restaurants.

Mobile banking has been at the threshold of a revolution for some time. While many operators, as well as banks, had introduced mobile banking applications, it never became popular due to security concerns. The number of people using mobile banking services has jumped from under 10,000 to 120,000 in two years. While the trend is growing, lack of awareness of services, apart from perceived security issues, are inhibiting faster take-off. There is yet another reason why the service will not spread like wild fire - the credit environment. RBI has been tightening the banks, which have been offering unsecured and secured loans with minimal or no customer


verification. With RBI tightening liquidity, personal loan defaults have reached 9% and banks will be very wary of giving you a credit card on the mobile.

Though RBI has specified norms for the banks to provide secure technology and ensure 'confidentiality, integrity, authenticity and non-reputability', security remains a major concern as well as a hurdle. However, with a few precautions and safety measures, users can have a safer m-banking

experience. The m-PIN, which is issued by the bank, should be memorized and the PIN-mailer destroyed immediately. Change your m-PIN regularly and do not share it with anyone. The PIN is valid only for the corresponding

phone number, which means users cannot access their accounts using other hand-sets. Thus, in case of a loss/theft of mobile phone, inform the mobile phone operator as well as the bank to block the banking application.

Similarly, you should also inform the bank, if you change your hand-set or SIM card.

Reserve Bank of India has set-up the Mobile Payments Forum of India (MPFI), a 'Working Group on Mobile Banking' to examine different aspects of Mobile Banking (banking). The Group had focused on three major areas of M-banking, i.e.,

(i) technology and security issues, (ii) business issues, and

(iii) regulatory and supervisory issues.

Each stakeholder group has the following expectations: a) To meet the following expectations of Consumer:

-• Personalized service

• Minimal learning curve

• Trust, privacy and security

• Ubiquitous - anywhere, anytime and any currency


• Interoperability between different network operators, banks and devices

• Anonymity of payments like cash

• Person to person transfers

b) To meet the following expectations of Merchant:

-• Faster transaction time

• Low or zero cost in using the system

• Integration with existing payment systems

• High security

• Being able to customize the service

• Real time status of the mobile payment service

• Minimum settlement and payment time

c) To meet the following expectations of Telecom Network Providers:

-• Generating new income by increase in traffic

• Increased Average Revenue Per User (ARPU) and reduced churn (increased loyalty)

• Become an attractive partner to content providers

d) To meet the following expectations of Mobile Device Manufacturers:

-• Large market adoption with embedded mobile payment application

• Low time to market

• Increase in Average Revenue Per User (ARPU) e) To meet the following expectations of Banks:

-• Network operator independent solutions


• Exceptional branding opportunities for banks

• Better volumes in banking - more card payments and less cash transactions

• Customer loyalty

f) To meet the following expectations of Software & Technology Providers:

• Large markets

g) To meet the following expectations of Government:

-• Revenue through taxation of m-payments

• Standards

There are lots of evidences that not only big cities are using mobile banking, but even thousands of people from rural areas across 12 states are also likely to get their social security pension and wages paid under the National Rural Employment Guarantee Act (NREGA) Scheme with the help of mobiles over the coming few months. Bharti Airtel, too, is in the process of tying-up with two leading banks to extend its mobile remittance services to rural areas, according to its President (Mobile Services), Sanjay Kapoor.

Airtel has already partnered with the Indian Farmers' Fertilizers Cooperative Limited (IFFCO) to set up IFFCO Kisan Sanchar Limited in Rajasthan. Under this initiative, the cooperative department will provide mobile hand-sets to farmers at marginal price through its out-lets in the rural areas. These hand-sets would be loaded with green SIM cards, which will flash daily updates on agricultural practices and weather forecasts free of cost.

Enthusiasm for mobile banking services

66% of respondents in the survey considered that mobile banking provides an excellent opportunity to enhance existing customer service.

International factors

European and Asia-Pacific regions are considerably ahead of the US in terms of mobile banking provision – only 10% of US banking organizations taking part in the study currently offer mobile banking against 57% in Europe

Expected growth


With 34% of banks (globally) currently offering mobile services to customers, an additional 32% of respondents plan to offer mobile services in the next 12-24 months.

53% of US banks expect to be offering mobile services in the next 12-24 months, giving potential parity to mobile service provision across the globe by 2010 (see Figure 1)

The suggestion of considerable momentum for mobile banking over the next two years should be received warmly by mobile providers and bankers alike. The ratio of mobile banking users, i.e. customers adopting mobile services remains modest, but is predicted to grow over the next two years with 58% of banks currently

offering mobile banking expecting that at least 1 in 10 customers will be using mobile banking by 2010. However this growth will not come without modification of existing processes:

Our challenges are all based on standardization measures with regard to browsers,

security demands and operator tariff systems.


Mobile banking is defined as:

"Mobile Banking refers to provision and availment of banking- and financial services with the help of mobile telecommunication devices.The scope of offered services may include facilities to conduct bank and stock market transactions, to administer accounts and to access customised information."

According to this model Mobile Banking can be said to consist of three inter-related concepts:

• Mobile Accounting

• Mobile Brokerage

• Mobile Financial Information Services

Most services in the categories designated Accounting and Brokerage are transaction-based. The non-transaction-based services of an informational nature are however essential for conducting transactions - for instance, balance inquiries might be needed before committing a money remittance.


The accounting and brokerage services are therefore offered invariably in combination with information services. Information services, on the other hand, may be offered as an independent module.

The lifespan of all good ideas can be broken into five phases: concept, prototype, pilot, pre-production, commercial deployment. Few ideas ever reach the stage of commercial deployment, because they are just not viable, or have been ill conceived or badly deployed. For some or other reason, mobile banking has been over-saturated with concepts and to some degree with prototypes. The idea of utilising the phone for financial transactions are so obvious that every man and his dog have developed a new concept or have submitted a patent somewhere. Everyone of them believing that they have stumbled on the ultimate approach.

The reality is that very few of these ever progress past the rudimentary prototype stage. And it is actually quite easy to demonstrate simple mobile banking functionality in a prototype environment. Some of the challenges that often have not even been identified and hence solved are issues related to integration, regulatory/legal and usability. These are sometimes

addressed in the few prototypes that migrate to pilot.

A pilot usually consists of a few hundred, maybe thousands of subscribers performing transactions in a controlled environment with limited

functionality. Even if pilots work, they often don't address important aspects like scalability and system responses to unpredicted actions or break-downs. What happens in the case of transactions that have been lost and how does the system respond to situations where a component is not available.

Important legal aspects are also often not addressed yet at this stage. Pilots seldom uncovers the real system challenges and at best highlights key elements regarding user experience.

During the pre-production stage business processes and system reliability and robustness should be attended to. Many different business processes are required if a system is to be deployed in a production environment. This should include registration, dispute resolutions, service activation to name only a few. In examples that we have seen in the market some deployments have neglected key processes leading to very difficult deployments and disillusioned clients. What looked easy during pilot now turns out to be a nightmare of realities.


It is only when a solution is deployed commercially that they most important element of any idea is tested: Can it make money? Mobile banking solutions that are not profitable will fail ultimately. An this is where we at Fundamo can really contribute to making a difference in deploying successful mobile payment/banking solutions. We have seen what works and what does not. We have built powerful business modeling tools and have helped many customers to culminate with commercially successful deployments of novel ideas. We have seen many competing products fail because they were not commercially viable


The advent of the Internet has revolutionized the way the financial services industry conducts business, empowering organizations with new business models and new ways to offer 24x7 accessibility to their customers.

The ability to offer financial transactions online has also created new players in the financial services industry, such as online banks, online

brokers and wealth managers who offer personalized services, although such players still account for a tiny percentage of the industry.


Over the last few years, the mobile and wireless market has been one of the fastest growing markets in the world and it is still growing at a rapid pace. According to the GSM Association and Ovum, the number of mobile subscribers exceeded 2 billion in September 2005, and now exceeds 2.5 billion (of which more than 2 billion are GSM).

According to a study by financial consultancy Celent, 35% of online

banking households will be using mobile banking by 2010, up from less than 1% today. Upwards of 70% of bank center call volume is projected to come from mobile phones. Mobile banking will eventually allow users to make payments at the physical point of sale. "Mobile contactless payments” will make up 10% of the contactless market by 2010.

Many believe that mobile users have just started to fully utilize the data capabilities in their mobile phones. In Asian countries like India, China,

Bangladesh, Indonesia and Philippines, where mobile infrastructure is comparatively better than the fixed-line infrastructure, and in European

countries, where mobile phone penetration is very high (at least 80% of consumers use a mobile phone), mobile banking is likely to appeal even more.

This opens up huge markets for financial institutions interested in offering value added services. With mobile technology, banks can offer a wide range of services to their customers such as doing funds transfer while travelling, receiving online updates of stock price or even performing stock trading

while being stuck in traffic. According to the German mobile operator Mobilcom, mobile banking will be the "killer application" for the next generation of mobile technology.

Mobile devices, especially smartphones, are the most promising way to reach the masses and to create “stickiness” among current customers, due to their ability to provide services anytime, anywhere, high rate of


smartphones is growing fast, and should top 20 million units (of over 800 million sold) in 2006 alone.

In the last 4 years, banks across the globe have invested billions of dollars to build sophisticated internet banking capabilities. As the trend is shifting to mobile banking, there is a challenge for CIOs and CTOs of these banks to decide on how to leverage their investment in internet banking and offer mobile banking, in the shortest possible time.

The proliferation of the 3G (third generation of wireless) and widespread implementation expected for 2003–2007 will generate the development of more sophisticated services such as multimedia and links to m-commerce services.



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 8. Pension plan management

9. Status on cheque, stop payment on cheque 10. Ordering check books

11. Balance checking in the account 12. Recent transactions

13. Due date of payment (functionality for stop, change and deleting of payments)

14. PIN provision, Change of PIN and reminder over the Internet 15. Blocking of (lost, stolen) cards

Payments, Deposits, Withdrawals, and Transfers

1. Domestic and international fund transfers 2. Micro-payment handling

3. Mobile recharging

4. Commercial payment processing 5. Bill payment processing

6. Peer to Peer payments

7. Withdrawal at banking agent 8. Deposit at banking agent

Especially for clients in remote locations, it will be important to help them deposit and withdraw funds at banking agents, i.e., retail and postal outlets that turn cash into electronic funds and vice versa. The feasibility of such banking agents depends on local regulation which enables retail outlets to take deposits or not.

A specific sequence of SMS messages will enable the system to verify if the client has sufficient funds in his or her wallet and authorize a deposit or


withdrawal transaction at the agent. When depositing money, the merchant receives cash and the system credits the client's bank account or mobile wallet. In the same way the client can also withdraw money at the merchant: through exchanging sms to provide authorization, the merchant hands the client cash and debits the client's account.


1. Portfolio management services 2. Real-time stock quotes

3. Personalized alerts and notifications on security prices


1. Status of requests for credit, including mortgage approval, and insurance coverage

2. Check (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

Based on a survey conducted by Forrester, mobile banking will be attractive mainly to the younger, more "tech-savvy" customer segment. A third of mobile phone users say that they may consider performing some kind of financial transaction through their mobile phone. But most of the users are interested in performing basic transactions such as querying for account balance and making bill payment.

One way to classify these services depending on the originator of a service session is the ‘Push/Pull' nature. ‘Push' is when the bank sends out

information based upon an agreed set of rules, for example your banks sends out an alert when your account balance goes below a threshold level.


‘Pull' is when the customer explicitly requests a service or information from the bank, so a request for your last five transactions statement is a Pull based offering. .

The other way to categorize the mobile banking services, by the nature of the service, gives us two kind of services – Transaction based and Enquiry Based. So a request for your bank statement is an enquiry based service and a request for your fund's transfer to some other account is a transaction-based service. Transaction transaction-based services are also differentiated from enquiry based services in the sense that they require additional security across the channel from the mobile phone to the banks data servers.

The new generation of mobile phones offers the speedy GPRS, EDGE or 3G data transmission standards and has large, high-definition colour displays. Prices are coming down and services and features are now considerably easier to handle on the mobile. Mobile Banking, in particular, has finally become a fast, user-friendly and affordable service. India's leading telecom companies started their services for Mobile Banking, basically they use these services as a marketing tool to advertise there services on this basis. Here are few giants of telecom industries in India who are offering Mobile Banking in various states.


Utility of Mobile Banking from Banks’


At this stage it would be relevant to understand the usefulness of Mobile Banking from the banks’perspective. It is therefore imperative to understand the business environment in which banks operate and to identify customer groups that the banks may seek to target via Mobile Banking.

Intensified Competition in the Banking Sector:

Bank products are of immaterial nature sold increasingly with the help of computer networks spanning across the globe.The global networks provide the customer with world-wide services, for instance the use of credit cards while abroad. The creation of an EU-wide single domestic market has led to intensification of competition in the EU in all business fields including in the banking sector.

The ongoing Globalisation has further intensified the competition. Technical developments coupled with the process of Globalisation, have made it possible for banks to offer their services in far-flung areas without investing money to build branches and hire additional staff.

This opportunity, of course, is a two-way street: On the one hand, a bank gets access to new markets.

On the other hand it is faced with increased competition on its home turf. To master this combination of opportunities and challenges banks need – apart from business consolidation and cooperation – organic growth. It is therefore necessary to retain the existing customer base while simultaneously

acquiring new, economically prosperous customers. Seen in conjunction with the price-sensitivity of customers and the resultant low relevance of the brand-name banks are compelled to introduce innovative services that

potentially attract prospective customers while retaining others. Even though the brand-name remains a critical factor on account of the need for trust in banking business, the Globalisation and the technological developments, however, have reduced entry barriers so that the number of available reputed brands has increased significantly; thereby intensifying the competition.


Adapting to Requirements of Core Target Groups:

Banks, today, are increasingly confronted with technology-savvy customers who are often on the move. As Wolfgang Klein, Private Customers Director at

Postbank, a leading German bank, puts it: “Today’s customers want to

organise banking transactions while on the move, irrespective of opening hours”.Banks are responding to this development by introducing mobile services. Core target groups of Mobile Banking are often divided in three categories:

a) The Youngsters: the segment of 14-18 years old youth has acquired an important role in the

growth of mobile telecommunications and related services. This group is technology-savvy

and willing to experiment with innovative products and services. The youngsters, often on the

move, demand ubiquitous, anytime service. Though the youngsters as a group are hardly

relevant for banks from a financial perspective, they represent the prospective clientele of

tomorrow and need to be cultivated in the middle to long-term marketing strategy of the


b) The Young Adults: Also this segment is thought to be technology- and innovation friendly.

Though this group too is financially not very strong, many members of this group are known

to be involved in stock market activities. Further, this group can be expected to enter in short


to medium-run a professional carrier so that it needs to be cultivated in order to retain

customers of this age-group even after they enter professional lives.

c) The Business People: this group of customers, generally in the age-group of 26-50 years, is

thought to be the most important one for Mobile Banking. Members of this group are

generally well educated and economically well-off. They need to be professionally often on

the move and carry mobile devices to ensure accessibility. For this reason they are ideal

candidates to use services offered via mobile devices. From the banks’ perspective this group

is particularly attractive on account of its relative economic prosperity and the need for

financial services, e.g. home loans for young families.

In order to fulfil the requirements of these customer groups banks tend to look at Mobile Banking as a

promising option. However, these services also have their own utility for the banks.

Mobile Banking as Distribution Channel

Mobile Banking enhances the number of existing channels of distribution that a bank employs to offer its services. The efficiency of a distribution channel can be measured by its fulfilment of three major objectives, which are closely related to each other.

Increasing Sales Volume

One of the primary tasks of a distribution channel is to increase the volume of demand for products at profitable prices .This objective is arrived by increasing operational efficiency so that those losses are minimized that are caused by delays in catering to customer orders. Further, a


favourablereputation of the firm’s logistical capacities may help generate additional orders.

List of Operators and Circles enabled for the Mobile Banking Service are as below: -


IDBI's CTO, Neeraj Bhai, echoes the sentiment, "Over 12% of our Internet Banking users use our Mobile Banking services as well."

While ICICI Bank offers its services on GPRS and secure SMS, Barclays Bank's Hello Money is

based on Unstructured Supplementary Service Data (USSD) platform, which is independent of GPRS.


UK-based Barclays is one of the largest corporate money managers in the world. The bank launched its consumer banking services in India last year. And recently, the bank made its mobile banking service available on GSM hand-sets, on Airtel, Vodafone, and Idea networks in forty cities. Customers can choose between Hindi and English. Further, Barclays aims to include more languages and extend it to CDMA hand-sets as well.

ICICI Bank has tied-up with Airtel and m-Chek to load a virtual credit card on a mobile phone to carry on complete banking transactions as well as for making payments. "We conducted a pilot in Delhi and received close to a thousand responses. Mobile phones can be safer as compared to physical cards as they are pin-protected, thereby minimizing the risk of misuse," said Mr. Sachin Khandelwal, General Manager, Head-Cards Product Group, ICICI Bank.

Despite lots of security issues related to mobile banking and lack of

awareness on part of consumers, the technology has taken off on slow pace, still it will be a big hit in coming years. Due to large number of advantages, and these advantages have over-powered all the disadvantages of the technology. All these advantages create a WIN-WIN-WIN situation for the technology:

-• End-users benefit from greater control of their personal finances, as well as time saved by not having to access account details via other channels (Internet, phone, ATM, among others).

• Bankers are of the opinion that mobile banking gives the banks an opportunity to expand their customer base without incurring additional infrastructure costs. It would also help in financial inclusion as it would provide a large number of unbanked people access to banking services

• Banks would save a huge amount of money on card issuance and merchant acquiring with zero point of sale cost. Mobile banking could be used to make remittances from person to person, banking purposes and to make payments for purchases or services provided.


• Mobile operators benefit from increased customer stickiness, data usage and, potentially, customer experimentation with other forms of mobile content.

Given this win-win-win situation, we expect uptake of mobile banking services to be robust among mobile subscribers, users and the banks. Over the next five years, mobile banking deployments will develop

significantly - from "online banking" applications to one with richer interfaces and multiple mobile payment capabilities. The successful evolution of mobile banking and payments will be on the basis of the ability of financial

institutions and mobile operators to balance ease of use with security.


Technically speaking most of these services can be deployed using more than one channel. Presently, Mobile Banking is being deployed using mobile applications developed on one of the following four channels.

1. IVR (Interactive Voice Response) 2. SMS (Short Messaging Service) 3. WAP (Wireless Access Protocol)

4. Standalone Mobile Application Clients

1.IVR (Interactive Voice Response)

IVR or Interactive Voice Response service operates through pre-specified numbers that banks advertise to their customers. Customer's make a call at the IVR number and are usually greeted by a stored electronic message followed by a menu of different options. Customers can choose options by pressing the corresponding number in their keypads, and are then read out the corresponding information, mostly using a text to speech program. Mobile banking based on IVR has some major limitations that they can be used only for Enquiry based services. Also, IVR is more expensive as compared to other channels as it involves making a voice call which is generally more expensive than sending an SMS or making data transfer (as in WAP or Standalone clients).

One way to enable IVR is by deploying a PBX system that can host IVR dial plans. Banks looking to go the low cost way should consider evaluating Asterisk , which is an open source Linux PBX system

Asterisk, due to its open source nature has caught on in a big way and is being sold as an PBX solutions by quite a few companies commercially. However there has been considerable noise on multiple Asterisk related forums over the stability of Asterisk based systems. Companies planning to use Asterisk for their IVR solutions should certainly do a rigorous evaluation of its capabilities before committing their long term future on it.


SMS uses the popular text-messaging standard to enable mobile application based banking. The way this works is that the customer requests for

information by sending an SMS containing a service command to a pre-specified number. The bank responds with a reply SMS containing the specific information.

For example, customers of the HDFC Bank in India can get their account balance details by sending the keyword ‘HDFCBAL' and receive their balance information again by SMS. Most of the services rolled out by major banks using SMS have been limited to the Enquiry based ones.

However there have been few instances where even transaction-based services have been made available to customer using SMS. For instance, customers of the Bank of Punjab can make fund transfer by sending the SMS ‘ TRN(A/c No)(PIN No)(Amount)'.

One of the major reasons that transaction based services have not taken of on SMS is because of concerns about security and because SMS doesn't enable the banks to deliver a custom user interface to make it convenient for customers to access more complex services such as transactions.

The main advantage of deploying mobile applications over SMS is that almost all mobile phones, including the low end, cheaper one's, which are most popular in countries like India and China are SMS enabled.

An SMS based service is hosted on a SMS gateway that further connects to the Mobile service providers SMS Centre. There are a couple of hosted IP based SMS gateways available in the market and also some open source ones like Kannel .


3. WAP (Wireless Access Protocol)

WAP uses a concept similar to that used in Internet banking. Banks maintain WAP sites which customer's access using a WAP compatible browser on their mobile phones. WAP sites offer the familiar form based interface and can also implement security quite effectively.

Bank of America offers a WAP based service channel to its customers in Hong Kong. The banks customers can now have an anytime, anywhere

access to a secure reliable service that allows them to access all enquiry and transaction based services and also more complex transaction like trade in securities through their phone

A WAP based service requires hosting a WAP gateway. Mobile Application users access the bank's site through the WAP gateway to carry out

transactions, much like internet users access a web portal for accessing the banks services.

The following figure demonstrates the framework for enabling mobile applications over WAP. The actualy forms that go into a mobile application are stored on a WAP server, and served on demand. The WAP Gateway forms an access point to the internet from the mobile network.



Standalone mobile applications are the ones that hold out the most promise as they are most suitable to implement complex banking transactions like trading in securities. They can be easily customized according to the user interface complexity supported by the mobile. In addition, mobile

applications enable the implementation of a very secure and reliable channel of communication.

One requirement of mobile applications clients is that they require to be downloaded on the client device before they can be used, which further requires the mobile device to support one of the many development environments like J2ME or Qualcomm's BREW. J2ME is fast becoming an industry standard to deploy mobile applications and requires the mobile phone to support Java.

The major disadvantage of mobile application clients is that the applications needs to be customized to each mobile phone on which it might finally run. J2ME ties together the API for mobile phones which have the similar

functionality in what it calls 'profiles'. However, the rapid proliferation of mobile phones which support different functionality has resulted in a huge number of profiles, which are further significantly driving up development costs. This scale of this problem can be gauged by the fact that companies implementing mobile application clients might need to spend as much as 50% of their development time and resources on just customizing their applications to meet the needs of different mobile profiles.

Out of J2ME and BREW, J2ME seems to have an edge right now as Nokia has made the development tools open to developers which has further fostered a huge online community focused in developing applications based on J2ME. Nokia has gone an additional mile by providing an open online market place for developers where they can sell their applications to major cellular

operators around the world. BREW on the other hand has seen limited popularity among the developer community, mostly because of the


proprietary nature of its business and because of the steep prices it charges for its development tools.

Quite a few mobile software product companies have rolled out solutions, which enable J2ME mobile applications based banking. One such product is Wireless banco . The mobile user downloads and installs the wireless I-banco application on their J2ME pone. The J2ME client connects to the

wireless I-banco server through the service providers GSM network to enable users to access information about their accounts and perform transactions. One of the other big advantages of using a mobile application client is that it can implement a very secure channel with end-to-end encryption.

However countries like India face a serious obstacle in the proliferation of such clients as few users have mobiles, which support J2ME or BREW. However, one of the biggest CDMA players in the Indian telecom industry, Reliance Infocomm has about 7.01 million users all of which have handsets, which support J2ME. Reliance has unveiled one of the most ambitious data services deployment program in the country. On the other hand a country like South Korea with its tech-savvy population has a widespread adoption of the higher-end mobiles, which support application development.



The biggest advantage that mobile banking offers to banks is that it drastically cuts down the costs of providing service to the customers. For example an average teller or phone transaction costs about $2.36 each, whereas an electronic transaction costs only about $0.10 each. Additionally, this new channel gives the bank ability to cross-sell up-sell their other

complex banking products and services such as vehicle loans, credit cards etc.

For service providers, Mobile banking offers the next surest way to achieve growth. Countries like Korea where mobile penetration is nearing saturation, mobile banking is helping service providers increase revenues from the now static subscriber base. Also service providers are increasingly using the complexity of their supported mobile banking services to attract new customers and retain old ones.

1. user experience of browsing the internet from a mobile device is familiar and offers a rich UI experience.

2. allows end user to access corporate association.

3. secure connection can be established on most of the mobile browsers.


• Many non-standards variables including handsets,browsers and operating system.


• Inconsistent user experience due to varying connection speed and different handset.

• User needs to have a data plan,which may be a barrier to adoption among price sensetive demographics.

• No “offline” (out of the coverage) capability.


Mobile banking is poised to become the big killer mobile application arena. However, Banks going mobile the first time need to tread the path

cautiously. The biggest decision that Banks need to make is the channel that they will support their services on.

Mobile banking through an SMS based service would require the lowest amount of effort, in terms of cost and time, but will not be able to support the full breath of transaction-based services. However, in markets like India where a bulk of the mobile population users' phones can only support SMS based services, this might be the only option left.

On the other hand a market heavily segmented by the type and complexity of mobile phone usage might be good place to roll of WAP based mobile applications. A WAP based service can let go of the need to customize usability to the profile of each mobile phone, the trade-off being that it cannot take advantage of the full breadth of features that a mobile phone might offer.

Mobile application standalone clients bring along the burden of supporting multiple mobile device profiles. According to the Gartner Group, a leading wireless computing consulting organization, mobile banking services will have to support a minimum of 50 different device profiles in the near future. However, currently the best user experience, depending on the capabilities of a mobile phone, is possible only by using a Standalone client.


Mobile banking has the potential to do to the mobile phone what E-mail did to the Internet. Mobile Application based banking is poised to be a big m-commerce feature, and if South Korea's foray into mass mobile banking is any indication, mobile banking could well be the driving factor to increase sales of high-end mobile phones. Nevertheless, Bank's need to take a hard and deep look into the mobile usage patterns among their target customers and enable their mobile services on a technology with reaches out to the majority of their customers.


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 mobile banking solution on any type of device. Some of these devices support J2ME and others support WAP browser or only


Initial interoperability issues however have been localized, with countries like India using portals like R-World to enable the limitations of low end java based phones, while focus on areas such as South Africa have defaulted to the USSD as a basis of communication achievable with any phone.

The desire for interoperability is largely dependent on the banks themselves, where installed applications(Java based or native) provide better security, are easier to use and allow development of more complex capabilities similar to those of internet banking while SMS can provide the basics but becomes difficult to operate with more complex transactions.


There is a myth that there is a challenge of interoperability between mobile banking applications due to perceived lack of common technology standards for mobile banking. In practice it is too early in the service lifecycle for

interoperability to be addressed within an individual country, as very few countries have more than one mobile banking service provider. In practice, banking interfaces are well defined and money movements between banks follow the IS0-8583 standard. As mobile banking matures, money

movements between service providers will naturally adopt the same standards as in the banking world.


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 :

1. 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. 2. 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.


3. Authentication of the device with service provider before initiating a transaction. This would ensure that unauthorized devices are not connected to perform financial transactions.

4. User ID / Password authentication of bank’s customer.

5. Encryption of the data being transmitted over the air.

6. Encryption of the data that will be stored in device for later / off-line analysis by the customer.

Scalability & Reliability

Another challenge for the CIOs and CTOs of the banks 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 (true anytime, anywhere banking) 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 Central Bank

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 / synchronization of other dependent components.



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

1. Preferred Language 2. Date / Time format 3. Amount format 4. Default transactions 5. Standard Beneficiary list 6. Alerts

Features of Mobile Commerce

Mobile Commerce is characterised by some unique features that equip it with certain advantages against conventional forms of commercial

transactions, including Electronic Commerce:

i) Ubiquity: Ubiquity means that the user can avail of services and carry out transactions

largely independent of his current geographic location (the “anywhere” feature).


ii) Immediacy: Closely related to the feature of ubiquity is the possibility of real-time

availment of services (the “anytime” feature). This feature is particularly attractive for

services that are time-critical and demand a fast reaction, e.g. stock market information.

iii) Localisation: Positioning technologies, such as the Global Positioning System (GPS),

allow companies to offer goods and services to the user specific to his current location.

LBS can thus cater to consumers’ needs and wishes for localised content and services.

iv) Instant connectivity: Ever since the introduction of the General Packet Radio Service

(GPRS) mobile devices are constantly “online”, i.e. in touch with the network (the

“always-on” feature). This feature brings convenience to the user, as time-consuming dialup

or boot processes are not necessary.

v) Pro-active functionality: Mobile Commerce opens, by the virtue of its ability to be

immediate, local and personal, new avenues for business. The user may choose the

products, and services, which he wants to be kept informed about. The Short Message

Service (SMS) can be used to send brief text messages to customers ensuring that the

“right” (relevant) information is provided to the user at the “right” place, at the “right”


vi) Simple authentication procedure: Mobile devices function with an electronic chip called


Subscriber Identity Module (SIM). The SIM is registered with the network operator and

the owner is thus unambiguously identifiable. The clear identification of the user in

combination with an individual Personal Identification Number (PIN) makes any furthertime-consuming, complicated and potentially inefficient

authentication process redundant.

Employment of Mobile Technologies in the

Banking Sector

A cornerstone of Mobile Commerce is built by Mobile Banking, the availment of bank-related

financial services via mobile devices. It comprises of services in the field of accounting, brokerage and financial information. Mobile Banking is

increasingly being employed by many banks around the world to generate additional revenues, reduce costs or to increase customer satisfaction, often with very promising results. For instance, the utilisation of transaction-based MFS of Finland-based Nordea bank grew by 30% in 2004.The number of France’s Société Générale customers using mobile services crossed the mark of one million in year 2004, registering an impressive growth of nearly 200% vis-à-vis 2003. These facts point toward a positive shift in the customer perception of Mobile Banking. On the other hand, technological

developments like Universal Mobile Telecommunications System (UMTS) have provided a new platform for realistic mobile applications.

Unlike in the past, when banks offering mobile services suffered a severe setback due to lack of

customer interest and unripe technologies, the time seems to be now ripe for (re-)launching mobile services. Mobile Banking is usually defined as carrying out banking business with the help of mobile devices such as mobile phones or PDAs [8; 11]. The offered services may include transaction facilities as well as other related services that cater primarily to informational needs revolving around financial activities. Considering these factors we can define Mobile Banking as following:

“Mobile Banking refers to provision and availment of bank-related financial services

with the help of mobile telecommunication devices. The scope of offered services


may include facilities to conduct bank and stock market transactions, to administer

accounts and to access customized information.”

Mobile Banking, as defined above, includes a wide range of services. These services may be

categorised as following:

Mobile Accounting

Mobile Accounting is sometimes characterized as transaction-based banking services that revolve around a bank account and are availed using mobile devices .Not all Mobile Accounting services are however necessarily

transaction-based. A more precise definition of Mobile Accounting would therefore characterize it as “availment of account-specific banking services of non-informational nature”. Mobile Accounting services may be divided in two categories to differentiate between services that are essential to operate an account and services that are essential to administer an


Mobile Brokerage

Brokerage, in the context of banking- and financial services, refers to intermediary services related to the bourse, e.g. selling and purchasing of stocks. Mobile Brokerage can be thus defined as transactionbased, mobile financial services of non-informational nature that revolve around a

securities account. Mobile Brokerage, too, may be divided in two categories to differentiate between services that are essential to operate a securities account and services that are essential to administer that account.



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