Finance Business

Mobile Financial Services in India

M-finance has the potential to add value on multiple fronts and enhance the overall economic and social system. Customers can initiate and complete financial transactions on their mobiles due to mobile banking. The majority of banks in India and overseas offer this. Customers can monitor their account balance, transfer funds instantly, pay bills, and more through mobile financial services.

Almost all major banks, as well as smaller banks, now provide some type of mobile banking application to meet the expectations of their clients for 24/7 access to their financial accounts. Banks are currently in a good position to make use of their status as a source of trust by boosting the perceived value through a variety of payment systems, including UPI, Wallets, NEFT, RTGS, and IMPS. Let us discuss the mobile financial services in detail.

What is the Future of Mobile Financial Services in India?

India is experimenting with new technology and upending traditional financial services. Mobile banking technology is becoming more and more common. This platform has been seen as a more crucial means of connecting with the unbanked as a result of the rapid increase in users and development in coverage of mobile phone networks in India. Mobile commerce has the potential to be inclusive due to the widespread use of mobile phones, but e-commerce has largely bypassed the majority of the population due to the expense of setting up such channels.

Mobile payments (P2P, P2M, or M2M), mobile microfinance (loan disbursement and payments), or mobile banking (bill pay or account information, e.g. balances or alerts) are the three categories under which mobile financial services fall.

Drivers for M-Finance

Although the government has previously required financial inclusion through priority lending and other measures, and even though India’s telecom dispersion has been rising over the past years, we think that M-Finance is currently at a turning point caused by a combination of government policies, shifting urban and rural India dynamics, and the financial demands of the telecom industry.

• Policies of the Government
• The RBI¹ has been tasked with developing a plan for financial inclusion.
• Companies, individuals, non-profit organisations, cooperative societies, and post offices can now operate as business correspondents for banks after the RBI recognition.
• Soon, residents will be able to open “mobile-linked-no-frills accounts” to conduct financial activities.
• The request from Society:
• There is a tremendous increase in the number of migrant labourers moving from India’s interior to its major cities.
• Domestic remittances account for a sizable portion of household expenditures.
• An affordable, safe, and quick alternative to unofficial money transfer methods is M-Finance.
• Financial pressure
• Telecom providers are battling to reward distributors and reduce churn as new players enter the market.
• By offering the additional revenue stream, M-Finance may significantly boost volumes, improve stickiness, and cultivate customer loyalty.

How Is Dos M-Finance Creating Value?

M-financial services have the potential to add value on many levels and enhance the overall economic and social system. The rural farming community’s need for mobile services is anticipated to rise as a result of partnerships between commodity exchanges and mobile service providers for the transmission of agricultural information via calls or text messages.

Rural areas can now be served by banks due to branchless banking, which also greatly reduces the cost of doing business in new areas. Additionally, it lowers the expenses associated with small-scale transactions, such as microloans. M-Finance can cut the interest rates on microloans by lowering the high operating costs for MFIs. Additionally, M-Finance expedites typical tasks so that field workers can concentrate more on problem areas and new opportunities.

The distribution of banking services may significantly reduce costs if mobile banking is used.

Due to the widespread use of cell phones, one of the main promises of M-Finance is that it may aid in expanding operations in isolated or sparsely populated rural areas. M-Financial service embraces the potential to develop financial products that better meet the demands of low-income consumers, such as those related to paying for healthcare, education, and other costs, and to develop more adaptable products to finance small firms, thereby enhancing the nation’s capacity for entrepreneurship. M-Finance may enable residents of rural locations to avoid making exhausting, multi-day excursions to the nearest large village or town bank, in addition to saving banks from having to invest in establishing these local banking nodes there.

There are many ways that telecom companies might benefit from the M-finance boom. As an illustration, by giving M-Finance merchant status, they can give their retailers a value-added revenue stream. Innovative mobile services like SMS payment reminders and location-based financial services like price information from the nearest can be made available by the M-Finance ecosystem.

To thrive, however, the M-Finance wave must put the consumer and citizen ahead of the industry’s players and regulators. The M-Finance applications will call for fresh and creative approaches to comprehending a citizen’s demands.

Technology and financial procedures have received most of the focus, but not enough has been written about the entrepreneurial spirit that will lead to the need for scalable M-Finance. This will change the conversation from a conceptual grasp of M-Finance’s potential to an integrated plan for putting it into practice at the local, state, and federal levels.

Who Are The Players Included In M-Finance?

Banks: The key player who is influenced by regulation is the banking sector. Banks can further expand the reach of their products and develop cutting-edge solutions by utilising mobile technologies in addition to providing the fundamental service framework, ensuring compliance with KYC/AML standards, and developing a framework for risk management and mitigation.

Mobile Service Providers: Their job is restricted to hosting certain technological solutions like USSD and providing connectivity for GSM or CDMA voice and data services, including SMS, WAP, GPRS, USSD, and NFC. The telecom operators would be the ones in charge of providing the essential infrastructure, racing on their high levels of dissemination in both urban and rural India.

Microfinance Organisations: Expands their reach and revenue. Because of the cutting-edge features of mobile technology, it improves loan quality. Additionally, this technology spares MFI loan employees from making exhausting trips to many areas.

Business Correspondents: The RBI will let businesses serve as retail agents hired by banks to offer banking services at sites other than bank branches and ATMs, in addition to individuals, non-profit organisations, cooperative societies, and post offices.

Technology providers: Offer guidance on how to make M-finance services available over the phone. As the M-Finance model would raise questions about money laundering and the safety and security of the transactions, they would also be necessary for security solutions.

M-Finance: Displacing Traditional Ones

M-banking services are emerging to meet the needs of a segment of Indian consumers who have been excluded from traditional retail banking services for a long time. The use of such services has made them widely accessible to smartphone users, allowing residents of places without traditional brick-and-mortar banks to now benefit from financial technology platforms. The most likely way for these new finance platforms to appear is through mobile apps.

A financial inclusion cell has already been established by many big banks in India. M-Financial Services appears to be an important part of that plan. M-Finance has been effectively applied globally in both developing and developed countries, showing potential.

However, for M-Financial Services to be successful, there must be a convergence of telecom providers, banks, and enterprise-promoting organisations that can alter the perceptions of citizens and customers about using M-Finance.

Impact of M-Finance on Business

Banks will be able to operate more profitably due to mobile devices. The technology can enable financial inclusion by lowering the cost of reaching a larger population.

Challenges associated with Mobile Banking

Some of the main challenges associated with Mobile Banking services are:

Data vulnerability: Data, particularly sensitive personal data, is the fuel for mobile banking. This data travels through public networks, bank servers, and personal devices, all of which have varied levels of protection. Data security depends on secure storage, strong authentication, and controls because it is extremely vulnerable. Unfortunately, it is possible to get around these checks and detectors, which can result in severe data loss and identity theft.

Limitation in Technical Knowledge: Users of online mobile banking services may lack the technical skills required. They won’t be able to fully take use of mobile banking’s advantages as a result.

Technical Problems and Solutions: When utilising any banking service, including making online payments, technical issues can come up at any time. However, when they are brought to the bank’s attention, they are promptly remedied.

App security issues: Even though mobile banking applications are thought to be significantly more secure than browsers for accessing banking services, attempts at fraud, money laundering, and cyber-attacks however, happen. Numerous credentials thefts and unauthorised transactions could be the result of poor security measures and inadequate technological tripwires.

Unsecured data networks and Wi-Fi: Mobile banking service benefits like “anywhere, anytime” also come with the real risk of “anywhere, anytime” scams. Using free public networks to do banking business might be catastrophic since scammers frequently target gullible individuals looking for free Wi-Fi. Additionally, parallel, risky Wi-Fi networks that are used to steal data and login credentials when users check in to their bank portals may be established near the legitimate network.

Conclusion

M-Finance is extremely popular in India. The Digital India programme promotes M-financing. Paytm was the first payment processor to create its own bank in India, and mobile-first platforms like Paytm will continue to drive innovation in financial services. The rise of cyber security worries in the digital era has a significant impact on the adoption and sustainability of innovative MFS business models, even while innovation is driving this trend. The company must strike a balance between mobile financial services’ consumer convenience and security features.

FAQs

1. https://www.rbi.org.in/