For years now, mobile payments have been globally dubbed the delivery channel of the future. Rewind to 2003, and you will recall how Nokia announced grandly that its tie-up with Visa will transform its 6220 handset model into payment-ready credit card.
Subsequent technological advances helped mobile phones to double up as barcode-scanners at retail check-outs. Over the years, PayPal, Google, EBay, Amazon and other such new economy majors have launched mobile payments, empowering American and European financial institutions, retailers and consumers alike.
All these developments reinforce the widely held belief that mobile payments speed up transaction procedures, are accessible, safe and easy to use. But in India (allegedly an IT superpower), mobile payments — surprise, surprise — have not become popular the same way, belying all expectations and projections.
For instance, many research firms had projected that mobile transactions will cross Rs20,000 crore by 2015. But, subscription data from the Telecom Regulatory Authority of India tell a different tale. Of the 89.38 crore wireless telephone subscribers as on December 31, 2011, only a minuscule chunk uses mobile phones for banking and payments.
Growth rates in percentage terms appear impressive, but it is the absolute numbers that give away the reality. For instance, according to RBI data, the number of mobile transactions in 2010-11 grew 300% to reach 96 lakh, and were valued at Rs780 crore, up from 23.2 lakh deals worth Rs190 crore in 2009-10.
“There are some basic problems with the way mobile payments are perceived. People still think that mobile banking is not safe,” says MS Raghavan, executive director, Bank of India (BoI).
For some little understood reason, Indian consumers prefer online payments to mobile payments, say industry watchers. (This is in contrast to Indian investors who, as a DNA Money story showed last week, are increasingly using mobile devices to trade in the stock market.)
But the problem is not just with the end-users. Providers of mobile payment services like banks, retailers and e-commerce platforms are not well-equipped technologically. This is particularly true of banks. “Public sector banks lag, in terms of the required infrastructure. We are facing challenges in loading the end-to-end encryption application,” says a senior official at a government-owned bank.
That is not all. Mobile payments and transactions have not struck the right chord with the banking regulator. The RBI is sceptical about the use of mobile payments in financial services since they fall outside its purview.
But things will change for the better, says Ram Sangampure, general manager, Central Bank of India. “Banks have requested the RBI to ease the norms a little so that this (mobile payments) channel can take off well. Many banks have formed tie-ups with telecom companies for this purpose.”
Taking a cue from such developments, the RBI has done away with its daily transaction cap of Rs50,000 on mobile transactions. It has freed banks to set their own limits based on their risk perception, provided that their respective boards approve of them.
This has lifted the mood and outlook of mobile payment service providers. The going over the last few years has not been easy, they concede; but, they hasten to add, growth has been impressive in the last 12 months, given the convenience of mobile payments and the drive toward simplification of the whole process. “We have an application which is simple to use even with basic phones,” says Neel Chowdhury, vice-president and chief marketing officer, Obopay.
Experts suggest that uniform services from all players could be the way forward. “There is huge scope for improvement, in terms of standardisation and interoperability,” says Loney Antony, managing director of Prizm Payments, a secure payment services provider across electronic channels. “Mobile payments should facilitate payments across merchants, fund transfers, so on. There is a need for common infrastructure. The National Payments Corporation of India (NPCI) — the market regulator — is taking steps in this direction. Going forward, they could take a lead and help bring about such common infrastructure.”
Positive signs are brightening indeed. Although the Interbank Mobile Payment Service (IMPS), which was launched by seven banks in 2010, has not delivered on its promise that even vegetable vendors and rickshaw drivers could be paid using mobile phones, it has nevertheless grown rapidly to include 34 banks in its fold. IMPS enables bank customers to effect mobile-based fund transfers across member banks.
While only a few retail customers use IMPS, institutional and corporate clients are said to be warming to mobile payments quite well. Collectively, some 18 million bank customers now use mobile payments. NPCI data indicate that 19,101 transactions worth Rs5 crore were done through IMPS last month, up from Rs4.2 crore through 15,759 deals in December 2011.
For a vast market like India, the figures may appear tiny, but they can only grow. And grow they will, sooner, quicker, now that the teething problems have been sorted out, aver the service providers. “Mobile payments are a relatively new medium and will take some time to gain acceptance. But just like ATMs, this new medium is sure to catch the fancy of customers soon,” says Raghavan of BoI.