Mobile banking in India on rise, SBI and ICICI lead volume & value

Mobile based banking seems to be on rise in India and it can be gauged from data provided by the central bank on mobile banking. According to RBI’s data, volume of mobile based transactions has gone up over 40 % in August this year when compared to the month of February.

In February 2012 mobile based banking transactions stood at 2. 8 million, while in August the figure increased by  more than a million with nearly 4 million recorded  transactions.

While the volume of m-banking transactions has been increasing since February, the size of value also ballooned with significant 81% when compared February’s total transaction value.

In February total amount processed via m-banking stood at Rs.196 crore, whereas in August amount value rose by Rs. 158 crore and pegged at Rs. 354 crore. See the graph below to understand the month on month (MoM) rise in m-banking transaction.

While India’s largest public sector bank, State Bank of India (SBI) has been leading the volume of m-banking transaction,   ICICI bank is ahead in value wise. Volume wise Axis, Citi Bank and HDFC have stood at 3rd, 4th and 5th position respectively.

In August this year SBI had processed around 2.7 million transactions worth 121 crore, a 17% rise in volume and 26% by value in comparison of February 201. On the other hand, ICICI processed only one fourth of SBI’s transaction s (around 3.58 lakhs), however value wise ICICI had surpassed SBI’s total transaction value.  Importantly, if we compare the ICICI’s m-banking transactions on metrics, volume and value of February 2012 with August, the bank had registered 60% and 98% growth in volume and value respectively.

Why is mobile banking on the rise?

In fact there are various reasons besides the usual convenience and ease of concluding banking transaction at fingertips. Firstly increase in number of banks supporting Inter Mobile Payment System (IMPS). Till February 2012, only 35 banks offered the service. However, now about 50 banks offer the service. In August, around Rs. 43.64 core had transacted through IMPS, approx 12% of overall mobile based banking transactions. Secondly fruitful partnership between telcos and banks. For instance in May this year,  Bharti Airtel and Axis Bank teamed up to open no-frills savings account on Airtel Money platform called airtel money Super Account powered by Axis Bank. Post this partnership, in June; Axis bank had experienced 43% and 93% rise in volume and value of m-banking transactions respectively.

Despite of this rise in m-banking transaction, banks are yet to fully exploit this technology even for their existing customers, the current growth rate is low compared to the number of bank accounts and the vast mobile subscriber base of more than 900 million. Even RBI’s deputy governor, H R Khan opined on slow adoption of m-banking in the country.

“The need of the hour, therefore, is that the banks and the mobile operators reach a workable understanding while protecting their mutual interests. Such an approach would result in a “win-win” situation for both and, more importantly, serve the larger cause of public good of financial inclusion”.

Largely, growth of m-banking in India was choked by tough regulatory guidelines. As per RBI guideline, only banks which have been permitted to provide mobile banking transactions by the RBI can launch mobile mobile wallets & mobile accounts. If an operator wants to offer mobile wallet service, it needs to get into a partnership with a bank (like Airtel & Axis bank). As of now, prepaid balance on a mobile phone can only be used to buy mobile value added services and is useful for little else.

According to a research report named Digital India – The rush to mobile money: madness or masterstroke by Boston Consulting Group (BCG) , payments and banking transactions through mobile phones in India are expected to touch $350 billion (Rs 15,75,000 crore) by 2015. BCG also expects that government payments through mobile-based transactions to touch $40 bn (Rs 1,780 crore) by 2015. Recently National Payment Corporation of India (NPCI) had extended IMPS for merchant payment so that consumers can pay at retail shops by using their mobile phones.

Currently, India has around 300 million mobile active phone subscribers, compared with 240 million individuals with bank accounts. More than half of Indian households approximately  110 million household don’t have a bank account. However, 42% of households have at least one mobile phone with nearly 90% of those phones are capable of handling basic financial transactions. Further, With expected regulatory ease-off from RBI and well oriented partnership between telcos and banks, in our view potential of m-banking has just started taking off and will witness robust growth in future.

Some Indian companies that are into mobile payments

Paymate- Mobile Commerce Company
ngPay- Mobile banking and payment service provider
Oxicash- Prepaid service provider
MoneyonMobile- Mobile Payment Platform
Movida- Mobile Payment Services

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