You may soon cease to require a smartphone or internet connection for mobile banking; you will be able to transfer money from your bank account to another even with a basic handset.
Finance Minister Arun Jaitley might next month launch mobile banking services for people not using smartphones. The move is aimed at pushing financial inclusion in India and bringing down banks' cost of servicing clients.
Such a service will also reduce the transaction cost for those bank customers who are forced to visit a branch every time they have to transfer money from an account to another as they do not have smartphones or internet access.
For every transaction through this service, a customer will be charged Rs 1.50, which will be deducted from his airtime. This will hardly entail any cost for the bank. By comparison, according to some estimates, when a customer walks into a branch, a bank has to bear a cost of up to Rs 200; in the case of an ATM transaction, the cost comes to Rs 20.
"The transaction cost will reduce over a period of time. It is estimated that over 500,000 transactions will take place in the first year of the launch. The service will also allow balance enquiry and account-to-account transfer at merchant outlets," said a finance ministry official who did not wish to be named.
The National Payments Corporation of India (NPCI) is signing contracts with telecom companies on behalf of banks, including private-sector lenders, for providing the service on basic handsets. The revenue generated from the service will be shared by NPCI and telcom companies.
"The technology used in this service doesn't require downloading a software. The ease of banking provided through this service will aid financial inclusion by encouraging people to open bank accounts," said former financial services secretary D K Mittal.
NPCI is going to use the USSD (unstructured supplementary service data) technology to facilitate banking on basic phones. BSNL and MTNL have already run pilots of the service in Delhi, Mumbai and some other cities. A service based on the USSD platform will be offered on a short code - *99# - irrespective of telecom service provider, mobile handset make or region.
Officials said the technology was ready for long but it took time to get telecom operators on board, as there were disagreements over pricing. The finance ministry was insisting on keeping the price at 40 paise per transaction.
At present, banking facilities can be performed through various applications on smartphones with internet connectivity. After making it available on basic phones, the finance ministry will (in the second phase) also look at providing money-transfer facility through mobile to people without bank accounts.
About 58 per cent of Indians are currently covered by banking services but many accounts have become dormant due to inactivity. According to officials, one reason for this is a lack of time among many workers and labourers, who cannot visit bank branches in office hours.
"Labourers who work seven days a week and don't have the time and money to go to the branch will benefit from this," said another finance ministry official.
According to NPCI, there are 900 million mobile phones and 450 million bank accounts in the country but only 67 million phones are linked to bank accounts. So, there is a huge market to be tapped.
NO UNSMART FEAT THIS
- Services offered: Balance enquiry, account-to-account money transfer
- Who benefits? People who don't have smartphones or internet access
- Cost involved: Rs 1.50 per transaction (to be deducted from the user's airtime)
- Benefit for banks: Saves money on servicing customers at branches or ATMs
- Technology used: USSD platform-based service offered on short code *99#
- Compatible with: All telecom service providers, mobile handsets and banks