Mobile payments – potentials and challenges My recent discussion with group of friends on revision of m-wallet guidelines by RBI made me write this post. It was revealed to me that most often people confuse mobile banking (access to banking account through mobile and m-wallet (o!ered by the likes of airtel money" paytm and m-pesa# . $uckily some of the carriers carriers (%irtel and &odafone had advertised well for me to set the premise for the mobile based 're-'aid instrument (''I as the central banker in India would prefer to call it. M-wallet ecosystem (like our physical currency ecosystem is well advance in enya and many %frican nations where the mobile money is considered safer and easier. )lectronic money has reduced operational costs in the supply chain by eliminating cash management issues and associated risk of being stolen. In India m-wallet is seen as a way for the essential *nancial inclusion and to reach the masses faster than traditional routes for subsidies and supports. +he electronic nature of transactions ensure the safety and con*dence of the bene*ts reaching the needy. +he m-wallet ecosystem ecosystem in India is still not e,cient as it works by 'ush 'ush marketing marketing from the m-wallet organiations organiations and cash management is done at the wallet provider end. +his fails to solve the cash management problem and passes it to the m-wallet providers who hope for an ecosystem to develop where physical cash-in would be eliminated. %ll use cases for m-wallet like the migrant workers" workers" upply chain cash management and $oan repayment model focus on having a place to cash-in. +his passes the burden of cash management to the merchants and mwallet operators. +he concept of an m-wallet ecosystem is not established. established. /hat prompted this post is the recent trend in mobile transactions using ''I accompanied with a signi*cant policy guideline on 're-'aid instrument Mass transit systems (''I-M+ by RBI. Both of them seemed to mark the end of early cocoon phase in the life of mobile wallets and mark the signi*cant beginning of other. +rend +rend in +ransaction +he m-wallet transactions transactions volumes volumes and values published by RBI indicate indicate a clear growth trend till 0eb 1234. 5ata indicates that people make trial transaction which pull down the value per transaction and as they gain con*dence the value per transaction goes up. +he overall value per transaction is hovering around Rs 622. +his is signi*cant signi*cant as median median transaction transaction could be higher higher considering considering high volume low value transactions made by newly on boarded ''I users. March and %pril show a signi*cant surge in the number of transactions and the value per transaction dropped down to Rs.378. +he trend is an indication indication of higher higher number of individuals individuals following following the technology technology and moving towards the tipping point where the ecosystem for the technology is in place as more and more people use the technology. 9ne could discard it as the sales e!ort" :owever the surge in volume of transactions is phenomenal with a month on month growth averaging 74; (in the past two months compared to the earlier values of lesser than 34; (in the past one year. +he drop in value is an indicator of newer transactions as much more people are e<ploring the new system making minimum value transactions to check the feasibility and security. I have
added the trend graphs for volume and value of m-wallet transctions for reader=s reference. (5ata source> RBI data on payment indicators If this trend sustains I am sure that in two years RBI might cut back the budget on printing paper currency cu rrency..
&olume - Millions
1 2 ?o v-36
2 @u l-34
RBI Cuidelines 9n 18th May 1234 RBI amended payment system guidelines with a new category 're-'aid Instruments for Mass transit systems (''I-M+. +his targets very high volume low value transaction urban users. +he policy brings technology closer to the user" and with constant usage hopes to develop the habit of e-currencyDmcurrency.. +he 'olicy allows the M+ operators to issue and operate such payment currency wallets providing m-wallet companies another big client on their list. +his could be a landmark policy policy by the Eentral Eentral bank in its e!orts to bring bring into account most transactions and reduce usage of physical currency. % way to bring *nancial inclusion to the bottom of 'yramid. It is a welcome move as it enables the establishment of an ecosystem where the payment instrument is used and an easier way for the users to cash-in.
?eed of the hour +hough the RBI has to be applauded applauded for its e!orts in the direction direction of *nancial *nancial inclusion through through m-wallets" what is not seen is the interaction between the central banker and the technology development organiations. +he Roadmap of m-wallet technology should be in sync with the RBI roadmap for the payment system. % collaboration of the central bank with all technology providers in this area is collaboration
essential as it eliminates the gap in policy implementation time and availability of technology. Eurrently most of the transaction on m-wallets are miniscule Eurrently miniscule and the overall value is less but it is worth the e!ort to observe the patterns and deploy predictive analytics associated with such high volume low value transactions. Infrastructure for monitoring should be built simultaneously by the owner operators as a single failure when there are the overusers. a billion transactions will a!ect badly the reliability of the system among +he F5 interface" interface" though though the most reliable reliable and secure secure mode for for transactions transactions has signi*cant drawbacks as it is di,cult for the rural folks to key in data for each transaction. +echnology has to be innovative to make this mode user friendly and match the needs of lesser literate masses for whom it is meant to be. /ell GHMiles to go before it beepsHG.