New Age Banking - Opportunities and Challenges

The telecom revolution has changed many aspects of human life and banking is one of them. Increasing mobile and internet penetration has revolutionized the way people bank. Banking solutions such as mobile and internet banking has helped customers save time, money and efforts as most of the transactions - such as bill payments, cash transfer, checking account balance and making investments - can be performed at home at one’s own convenience.

India is one of the fastest growing mobile markets in the world. There are about 400 million mobile users in India. Out of that, 200 million do not have a bank account. It is financially unviable for banks to set up branches in remote villages. Hence branchless banking through the use of technology is the only way to bring the vast unbanked population under the banking umbrella. It can help lower cost for both the bank as well as the customer to access financial services. As most of the transactions are non cash – in or cash – out, mobile banking is a viable option. Local kirana stores can act as designated collection and disbursement centers. With broadband going wireless, banks can set up kiosks with laptops in rural areas to facilitate banking transaction, like the ITC e - choupal model.

Despite all the merits, mobile banking is still a way to go in India due to the many challenges. There are numerous regulations that exist for banking sector to maintain the security and reliability, same amount of regulations can’t be applied on branchless banking model, hence risk involved from the financial security point of view is high. There are also various bodies involved in providing the mobile banking facilities such as the banks, mobile operators, software providers, handset manufacturers etc. The inter-operability of various groups and their ability to adapt to the RBI regulation are some of the challenges. Apart from the above challenges, customer’s adaptability due to illiteracy and ignorance and low transaction amounts are some of the other challenges from the user perspective.