Telcos get close to mobile wallet services in India but no cigar yet, RBI rules out mobile wallets by network operators

Even as the United Kingdom gave a go ahead to mobile wallet payment scheme proposed by a consortium of operators on Thursday, India’s central bank has saddled operators with yet another regulatory measure which will create more hurdles for operators looking to offer make mobile wallet services in the country. Yesterday at the sidelines of an industry summit, H R Khan, the deputy governor of the Reserve Bank of India (RBI) told PTI

“We don’t want to permit cash-out facility by the mobile network operators (MNOs). We are very clear that they should not bypass the banking regulations. However, mobile wallet facility can be given to them if they work as business correspondents of banks.”

According to draft guidelines for prepaid payment instruments in India prepared by the RBI, only banks which have been permitted to provide mobile banking transactions by the RBI will be allowed to 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. Buying anything else using mobile prepaid balance needs explicit permission from the RBI.

At the industry conference where Mr Khan made the Indian government’s stance clear on mobile wallets, Bharat Poddar, partner and director at Boston Consulting Group had pushed for mobile wallets as an alternative to savings account. In his presentation “Mobile Wallets:  Alternative to savings accounts?” (embedded below) he proposed that mobile wallets can be used as a payment channel independent of the bank account, that they can be used to store value or card information and be used at point of sales, fund transfer and bill payments.

At present, in India, the only telecom operator which offers something close to a mobile wallet is Airtel. The operator has partnered with Axis bank to offer Airtel Money through which one can send money to other Airtel money customers, recharge mobile phones, digital television and pay utility bills. India’s largest bank, the State Bank of India has also launched similar services called SBI Mobi Cash. Nokia had tried launching m-commerce in India through Nokia money in 2010 but soon pulled the plug on the service. The service has not been very successful in the country where a large section of the population does not even have access to banks.

On Thursday, three of the largest telecom operators in the UK  got a green signal from the European Commission to offer mobile wallet services to consumers. Vodafone, Everything Everywhere and O2 had made the bid to offer mobile wallet services through a project dubbed Project Oscar. The services were in direct competition to Google’s near field communication (NFC) chip based mobile wallets and Google was one of the companies opposed to the move.