Mobile Banking & M-Commerce and Related Issues

Mobile Banking & M–Commerce and Related Issues


By
Sanjeev Banzal
sbanzal@gmail.com


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Table of Contents
Chapter-1
Introduction ....................................................................................... 1
Chapter-2
Mobile Payment Solutions & Technologies .......................................... 7
Chapter-3
Present scenario in the Developed/Developing world......................... 14
Chapter-4
Existing frame work for m-Commerce in India .................................. 18
Chapter-5
Issues in M-Commerce ..................................................................... 24
Chapter-6
Way Forward .................................................................................... 29



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Chapter-1
Introduction

1.1
‘Commerce’ is the trading of ‘something’ of value between two
entities. That ‘something’ may be goods, services, information, money, or
anything else the two entities consider to have value. Trading was the
main facility in earlier times with barter facility for goods and services.
Later, currency was introduced as standardized money to facilitate a
wider exchange of goods and services. Today’s era is an information era
and the world is passing through an Information revolution. One of the
profound consequences of the information revolution is its influence on
how economic value is created and extracted. Today the information is
more easily accessed, absorbed, arranged and is priced in different ways.
Markets are expanding from regional to global. Knowledge is replacing
land, labour and capital as the key value driver. Intelligent networks and
virtual spaces are limiting the need for surface and air travel. With the
technological progression particularly in computers and Internet field
has led to the birth of electronic commerce (E-commerce) which enabled
the business processes to be more simplified, efficient, quick and
accurate resulting in improved productivity with higher satisfaction level
to the customers. Also, improved processes resulted in reduced cost of
production and transaction cost and therefore the profitability of
businesses increased manifolds. The emerging wireless and mobile
networks have added another dimension of mobility and extended
e-commerce to another research and application subject called mobile
commerce popularly known as m-Commerce.

1.2
M-Commerce is the buying and selling of goods and services
through wireless handheld devices such as mobile telephone and

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personal digital assistants(PDAs). M-Commerce is a platform where a
mobile customer can avail various banking and other related commercial
facilities through his mobile phone. M-Commerce is not the transaction
itself. It provides services and information, which can trigger a future
transaction. The scope of m-Commerce therefore goes beyond the initial
one time commercial transaction. The main areas of m-Commerce use
are in text messaging or SMS, mobile payment, financial & banking
services, logistics, goods/services buy/sell, information services and
wireless customer relationship management etc.
Benefits of m-Commerce:
1.3 The benefits of m-Commerce with respect to customers, merchants
and banks are as below:
• Ubiquitous Personalized service – anywhere, anytime
• Remote payment for utility bills; insurance premiums; credit card
bills; EMIs etc
• Integration with existing payment systems e.g. Credit/debit card
payment option
• Promotion of Location based services
• Faster transaction time
• New business opportunities for stakeholders
• Point of Sale(POS) device may not require
• Branding and business opportunities for banks
• Higher volume in banking with less cash transaction
• Penetration into cash dominated category

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• Help developing customer loyalty
• Reduction in cost of infrastructure and usages
Types of m-Commerce
1.4
The m-Commerce can be classified broadly in the three main
categories:-
M-Payment: through Credit/debit cards:
Mobile phones linked to credit/debit cards can be used to make
payments. e.g. M-payment applications like mChek, PayMate,
ngpay etc
E-Money:
Cash loaded in the mobile phones. Consumers use this virtual
cash as real value for all types of transactions. E.g. Prepaid cash
card, recharge voucher amount etc
M-Banking:
Mobile phone used for accessing the bank accounts. All payments
are routed through the bank. e.g. Balance query, share trading
alert, banking transactions etc.

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Applications of m-Commerce:
1.5
Various applications of Mobile Commerce are given the below
Table:-
Application
Example of m-Commerce services offered
Mobile Accounting
Mobile banking
Mobile online stock transaction
Mobile banking information
Payment for insurance, recharge coupons etc
Mobile
information Current affairs
services
Tour and travel information
Mobile search engines and directories
Mobile shopping
Purchase of goods and services
Content purchase & delivery
Mobile ticketing
Sports and cultural events
Cinema Tickets
Mobile marketing
Mobile coupons
Mobile newsletters
Mobile entertainment
Mobile Gaming
Download of music, video and ring tones
Location based entertainment services

Drivers of m-Commerce
1.6
There are various factors responsible for the growth of
m-Commerce. A few of them are listed below:-
• Changing behavior pattern and expectation of consumers with
regard to shopping and brand loyalty

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• Businesses are changing the way they do business. Mobile
phones are enabling these changes to happen.
• Tremendous growth in mobile telephony.
• Exponential growth of consumer interest and adoption of the
Internet and e-commerce.
• Development of real-time transfer of data over 2.5G/high speed
internet network. With the introduction of 3G services and with
the expected private sector participation, 3G will enable faster
data transmission and ubiquitous connectivity.
• The evolution of the handheld devices incorporating Wireless
Application Protocols(WAP) and GPRS.
• With the rise in the number of subscribers of database services,
the cost of entry into m-Commerce is low for most entrants;
• Because of the benefits of m-Commerce as described above it is
attracting players from all economic sectors from technology,
finance, retail, media, all anticipating that m-Commerce will
help in increasing customer acquisition and retention and
generate new revenue opportunities for them.
1.7
By 2010, more than three billion people are expected to own
mobile phones in the world. India is the second largest nation in
the world in terms of number of mobile subscribers and is growing
at the fastest pace in terms of number of mobile subscribers. There
are over 545million mobile phones (as on Jan’2009) in India and
about 18 million are being added every month. As per the reports
available, there are about 149 million(~25%) subscribers registered
for the data services(December 2009 figure). However, as compared
to number of mobile subscriber base in India, user transactions

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through m-Commerce per day are abysmally low (5-10million) and
it can be said that presently M-Commerce is in the nascent stage
in India. However, it has great potential of expansion of business
transaction particularly in non-cash category. If properly
harnessed, it can help in facilitating inclusive growth particularly
in rural India.

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Chapter-2
Mobile Payment Solutions & Technologies

2.1
As mentioned in the first chapter there three broad categories of
m-Commerce. Mobile payment is one of the prominent m-Commerce
methods which are used actively by majority of the user of m-Commerce.
This chapter deals with the various solutions and technologies for mobile
payments.
Mobile Payment (m-payment) Solutions
2.2
There are broadly three different models available for m-payment
solutions on the basis of payment :
• Bank account/debit card based
• Credit card based
• Telecommunication company billing based
Bank Account/Debit based m-payment
2.3
In this model, the bank account/debit card is linked to the mobile
phone number of the customer. When the customer makes an
m-payment transaction with a merchant, the amount from the bank
account of the customer is debited and the value is credited to the
merchant account.
Credit Card based M-Payment
2.4
In the credit card based model, the credit card number is linked to
the mobile phone number of the customer. When the customer makes an
m-payment transaction with a merchant, the credit card is charged and
the value is credited to the merchant account. Credit card based

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solutions have the limitation that it is heavily dependent on the level of
penetration of credit cards in the country.
Telecommunication Company Billing of M-Payments
2.5
Customers make payment to merchants using his or her mobile
phone and this may be charged to the mobile phone bills of the
customer. The customer then settles the bill with the telecommunication
company. This model is not available at present in India.
Technologies for Mobile Payments
2.6
The mobile technology landscape provides various possibilities for
implementing m-payments. Mobile phone may send or receive
information through channels like– SMS, USSD or WAP/GPRS. The
choice of the channel influences the way m-payment schemes are
implemented. Secondly, the m-payment client application may reside on
the phone or else it may reside in the subscriber identity module (SIM).
The detail about customer’s bank account/credit/debit card is stored
inside the phone/SIM. When customer wants to transfer the money to a
merchant he accesses the application and enters phone/account
number. The application running on his mobile encrypts the details of
account-number/credit/debit-card
including
the
amount
to
be
transferred to the merchant. The customer enters MPIN (Mobile PIN)
number. The merchant is alerted for confirmation. Once the confirmation
is received, the amount is transferred from the customer account to the
merchant account. There are other methods like near field
communication
technique,
which
is
a
contactless
application.
Some of these techniques are described briefly as below:-


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