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Mobile Financial Services in India


M-finance has the possibility to create value on multiple fronts and improve the entire financial and societal ecosystem.

What is Future of Mobile financial Services in India?

India is disrupting traditional financial services by exploring the new tech. Mobile technology for banking transactions has been gaining popularity. With the rapid growth in users and expansion in coverage of mobile phone networks in India, this platform has been recognized as an increasingly important medium to reach the unbanked. While e-commerce has skipped the majority of the population due to the cost of setting up such channels, mobile commerce has the capability to be inclusive due to the widespread use of mobile phones.

Mobile Financial Services fall into one of three categories: 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).

Drivers for M-Finance:

While the telecom dispersion in India has been on the increase since the last two years and the Government in the past has mandated financial inclusion through priority lending and other measures, we believe that today M-Finance is at an inflection point driven by a combination of Government policies, changing dynamics of urban and rural India and the financial compulsions of the telecom industry.

  • Government Policies:
  • RBI has mandated to chart out a roadmap on financial inclusion.
  • RBI has recognized companies, individuals, NGOs, cooperative societies and post offices to work as business correspondents for banks.
  • Citizens can soon open a ‘mobile-linked-no-frills account’ for financial transactions.
  • The demand of Society:
  • The number of migrant workers moving from interiors of India to main cities increasing rapidly.
  • Internal remittances form a significant part of household budgets.
  • M-Finance is a cost-effective, secure and fast alternative to informal mechanisms of money transfer.
  • Financial Pressures:
  • Telecom companies struggling to incentivize distributors and prevent churn with the entry of new players
  • M-Finance can drastically increase volumes, improve stickiness by providing the additional revenue stream and gain customer loyalty.

How is dos M-Finance creating Value?

M-finance has the possibility to create value on multiple fronts and improve the entire financial and societal ecosystem.

Tie-ups between commodity exchanges and mobile service providers for the dissemination of crop information through calls or text messages are expected to increase demand for mobile services among the rural farm community

Branchless banking allows banks to extend reach to rural areas, and the cost of serving new territories is significantly lower. Moreover, it cuts costs of dealing in small quantities which is the case for microloans. By reducing the high operating costs for MFIs, M-Finance can lower interest rates for microloans. Moreover, M-Finance speeds up routine processes so that field staff can focus more heavily on problem areas and new opportunities.

Adoption of Mobile banking can lead to significant cost advantage in the distribution of banking services.

A major promise of M-Finance is that it can help expand operations in remote or sparsely populated rural areas due to the high penetration of cell phones. M-Finance embraces the possible to create financial products that better fit with the needs of poor customers such as paying for education, medical expenses, etc. as well as to create more flexible products to finance small businesses thus improving the entrepreneurial capacity in the country. M-Finance may permit people in rural areas to avoid lengthy 2-3 day trips to banks in the closest large village or town not to mention the avoidance of investment in setting these local banking nodes by banks in remote rural areas.

Telecom players can gain from the M-finance wave in myriad ways. As Example, they can provide their retailers a value-added revenue stream by offering M-Finance merchant status. The M-Finance ecosystem can open up innovative mobile services including SMS payment reminders and location-based financial services such as price information from nearest

However for the M-Finance wave to succeed, the focus must shift from the industry players and regulators to the citizen, customer. The applications of M-Finance will require new and innovative ways of understanding the needs of a citizen.

The attention has remained on technology and financial processes while not enough has been said about the entrepreneurial mindset that will create the need for scalable M-Finance. This will shift the debate from a conceptual understanding of the potential of M-Finance to an integrated approach to execute on this strategy at local, state and national levels.

Who are the Players included in M-Finance?

Banks: Banks are the vital player who is driven by regulation. Banks provide the basic service framework, ensure compliance with KYC/AML norms, create a risk management and mitigation framework and can further extend the reach of their products and come up with innovative products taking advantage of the mobile technology.

Mobile Service Providers: Their role is limited to providing the SMS/ WAP/GPRS/USSD/NFC GSM or CDMA voice and data services connectivity and in hosting certain technology solutions like USSD. Racing on their vast diffusion levels in urban and rural India, the telecom operators would be the providers of the critical infrastructure.

Microfinance Institutions: Improves their reach and business. Improves loan quality due to novel features of the mobile technology. This technology also saves MFI loan officers from lengthy travels to different villages.

Business Correspondents: RBI will allow companies, along with individuals, nongovernmental organizations, cooperative societies and post offices to work as retail agents engaged by banks to provide banking services at locations other than bank branch/ATM.

Technology providers: Provide solutions for enabling M-finance services on the phone. They would also be required for security solutions as M-Finance model would pose concerns of money laundering and the safety and security of the transactions.

M-Finance: Displacing Traditional Ones:

M-banking services are developing to fill a need among a group of consumers in India who have long lacked access to traditional retail banking services. The uptake of such services, now widely available to smartphone users, has meant that people living in areas lacking brick-and-mortar bank locations can now take advantage of the benefits offered by financial technology platforms.

These new fintech platforms are most likely to arrive via smartphone apps.

Many large banks in India have already set up a financial inclusion cell. M-Finance seems to be a key component of that strategy. Globally, M-Finance has been implemented successfully in both developing and developed countries indicating potential

In order to succeed, however, M-Finance requires the convergence of telecom operators, banks, and enterprise promoting organizations that can bring about a change in the citizen, customers’ minds towards the use of M-Finance.

Impact of M-finance on Business:

Mobile phones will allow banks to do their existing business more cost-effectively. By cutting costs, the technology can make it feasible to reach a broader population thus enabling financial inclusion.

Mobile phones will allow banks to do their existing business more cost-effectively. By cutting costs, the technology can make it feasible to reach a broader population thus enabling financial inclusion.

Mobile phones will allow banks to do their existing business more cost-effectively. By cutting costs, the technology can make it feasible to reach a broader population thus enabling financial inclusion.


M-Finance is booming in India. Digital India programme encourages to M-finance. Paytm is the first payment processor to launch its own Bank in India and with such innovation in financial services will continue to come from mobile-first platforms like Paytm. Although innovation is leading to an upswing of innovative MFS business models, their uptake and sustainability are greatly impacted by the rise of cybersecurity concerns in the digital age. Company shall create a balance between the user convenience and security aspects of mobile financial services.

Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

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