ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Models of Mobile Banking

The RBI's cautionary approach to the "transformational" model of mobile banking is justified.

The Reserve Bank of India’s (RBI) approach to mobile banking has been one of caution ever since it first issued guidelines to banks facilitating mobile banking transactions in October 2008. It has only recently modified these by raising the daily cap of both funds transfer and transactions involving purchase of goods and services, allowing transactions by banks up to Rs 1,000 without end-to-end encryption, and withdrawal of cash through a mobile phone (limited to Rs 5,000 per transaction), through ATMs and agents appointed as business correspondents. These agents may include the individual grocery/medical/fair price shop owners, individual PCO operators, retired teachers, representatives of small savings schemes and individuals owning petrol pumps. The deputy governor of RBI, K C Chakrabarty, in his speech at the India Telecom 2009 Conference, reiterated the central bank’s position of not conceiving, at the initial stage, of mobile payments without bank accounts.

In a paper commissioned by the Department for International Development (DFID) in 2006, David Porteous distinguishes between additive and transformational models of m-banking – the former targets existing bank customers, offering the mobile channel as an additional one, and the latter intentionally reaches out to unbanked groups, and thus has a potential “transforming” effect on the socio-economic development of a country. It is the latter that is of greater significance in developing countries; it is widely touted as an instrument in achieving financial inclusion, while at the same time obviating the need to set up bank branches in remote areas. The demand for moving fast on m-banking is usually supported by success claims (mostly in terms of number of users) from experiences in other countries, primarily the Philippines, South Africa and Kenya, where both bank-based and non-bank based models of m-banking have been in existence since 2001, 2004 and 2007, respectively.

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