Now you can do mobile banking without internet: How it works

USSD-based mobile banking works on feature phone but it's not secure, say experts

After scrapping old Rs 500 and Rs 1,000 notes, the government is seeking new ways to push inexpensive digital transaction channels. It has also asked telecom operators to support such initiatives like the unstructured supplementary service data or USSD-based banking, which can be used for checking bank balance, get mini statement, and transfer funds by entering an account number, Aadhaar details (if linked to the receiver’s bank account) or mobile money identifier. This inexpensive mobile banking technology supports transactions on feature phones with no internet connection.

After the government’s push, several public-sector banks have also started launching smartphone apps for this service. These include Punjab National Bank, Bank of India, Bank of Baroda, Andhra Bank, Union Bank of India and Dena Bank. Once downloaded, you can use the app to transact without using data on the phone. Despite 53 banks being enrolled for this facility with the National Payments Corporation of India (NPCI) since its launch in 2013, it has not taken off due to several reasons.

“While USSD works on all phones, users should realise it is not a secure transaction. Mobile or internet banking transactions use encryption, which is not possible of USSD,” says Ajay Adiseshann, founder and managing director at PayMate, a payments solution company.

Explains Ritesh Pai, senior president and country head (digital banking) at YES Bank: “India is expected to have over a billion phones by 2020 and half of it will still be feature phones. There’s a need for platforms such as USSD-based banking. But, many don’t use it as it has a fixed charge for each session and the regulator has capped daily transactions at Rs 5,000.”

As USSD involves SMS, the user had to earlier bear a fixed charge of Rs 1.50 for each session (several steps one takes to carry each banking transaction). But, the fee is waived off until December 30 due to demonetisation. The telecom regulator has notified that starting next year, the charges will be a flat 50 paise for each session. This is charged irrespective of whether your transaction goes through or not.

But, some banks are finding their way around it. YES Bank has tied up with a Taiwan-based tech firm Taisys. A user needs to apply a sticker provided by Taisys on his SIM card, which then enables a menu for banking transactions – including payments and fund transfers. The sticker encrypts data and banking can be done using the short message service (SMS). 

So, there’s no cap on fund transfers. If a person buys an SMS pack, the charges are as low as 0.12 paise, according to Pai. YES Bank shares this platform with co-operative banks and micro-finance institutions which have tie-ups with it.

To start using the USSD service, the user needs to be registered for mobile banking service. But, the same is not mandatory for the receiver of funds. All you need to do is dial *99# from your phone and follow the instruction – just like many check their prepaid mobile balance. The service is also available in 11 regional languages. The code slightly varies for other languages – *99*22# for Hindi, *99*23# for Tamil, *99*24# for Telgu and so on.

But NPCI, which has launched the product, is bullish on it. “Considering this makes services like balance enquiry and fund transfers available on all phones (feature as well smartphones), it can also be the most universal e-payment mechanism in the country,” said A P Hota, managing director and chief executive, NPCI.