Mobile banking seen as Rs20,000 crore fee opportunity

Mobile banking in India is set to generate fee-based income of Rs20,250 crore over the next five years, according to a report by Boston Consulting Group.

The income will be shared between banks, telecom operators, service providers and device makers with the pie tilting more towards the bankers.

The fee will be available thanks to the $350 billion worth of transactions in the mobile banking and payments space. About 70% of this income is expected from an urban customer base while the remaining 30% will be from the rural areas.

The main factors boosting mobile banking would be the lower cost of transaction, favourable regulatory environment, the government’s unique identification campaign, BCG said.

“It is far less costly to offer banking and payments services using mobile technology than to build new branches,” said Neeraj Aggarwal, partner and director, BCG India. A business correspondent enabled with a mobile phone can service a customer for much cheaper rates than the cost of service at a bank branch, Aggarwal said.

Though not many agree with the numbers, bankers and other industry experts share the enthusiasm that mobile banking and payments is the next big thing in financial services.

“Initiatives in the recent past have been positive which is, in turn, is giving a positive direction for mobile banking. Currently, government payment to rural employees is driving the mobile banking space but going ahead standardisation of services across different platforms and interoperability between various players will help the business grow big,” said Loney Antony, managing director of Prizm Payments, an electronic payment services company.

Though volumes haven’t come up yet in the market, mobile banking is expected to pick up soon thanks to the financial inclusion initiatives run by the banks, experts say.

“If we look at the growth in our mobile tie up with Nokia over the last four months, then going ahead we can easily have two million transactions in a year,” says Lalit Sinha, general manager (alternative banking), Union Bank.

Its tie-up with the Finnish mobile maker is for prepaid transactions in both rural and urban areas.

However, going ahead technology will play a major role in making mobile banking more user friendly, experts say. 

“The platform provided by National Payments Corporation in India, which will provide customers access to mobile banking across banks and telecom operators will be a step in the right direction,” Sanjay Sharma, managing director and chief executive officer, IDBI Intech, said.