ism project airtel money mbile banking

7/23/2019 ISM Project Airtel Money Mbile Banking

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SAHIL GANDHI D016

ANURAG RAO D050

ELLINA RATH D051

VISHAL SINGH D057

SRIJAN SRIVASTAVA D058

DEV SURTI D059

Human Resource Management

Mobile Banking: A Study of Airtel Money

3/18/2013

NMIMS Mumbai

DIV D

Contents

Abstract: 3

1. Introduction. 4
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1.1 Industry. 4

1.2 Company: Overview, Vision and Mission. 5

2. Organizational Strategies and Business processes: 6

2.1 Organizational Strategies. 6

2.2 Business Processes. 6

3. Problem Statement and Requirement analysis. 9

3.1 Problem statement. 9

3.2 Requirement Analysis. 9

4. Business Solutions. 10

A. Attributes and characteristics: 10

B. Value to Stakeholders: 12

C. Infrastructure Requirement: 13

D. Delivering Value Proposition: 14

E. Cost- Benefit analysis: 15

F. Swot Analysis and PEST Analysis: 16

G. Competition analysis: 21

H. Challenges: 22

I. Ethical Issues: 23

5. Actual Scenarios. 24

5.1 Interbank Mobile Banking Service. 24

5.2 M-Pesa. 25

5.3 Money on Mobile. 25

5.4 Future scope. 26

5.5 Conclusion. 28

References: 29

Annexure: 30

Abstract:

The increased usage of mobile phones in todays age provides tremendous opportunities for thegrowth of mobile banking. Mobile commerce blatantly stands as a natural successor to theelectronic commerce and a natural evolution that facilitates this successor is the scheme of mobile
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payments. A mobile payment may be defined as where a mobile device is used to initiate, authorizeand confirm an exchange of financial value in return for goods and services. Mobile devices mayinclude mobile phones, PDAs, wireless tablets and any other device that connect to mobiletelecommunication network and make it possible for payments to be made. The realization ofmobile payments will make possible new and unforeseen ways of convenience and commerce. Itcan become a compliment to cash, cheques, credit cards and debit cards. It can also be used forpayment of bills (especially utilities and insurance premiums) with access to account-basedpayment instruments such as electronic funds transfer, Internet banking payments, direct debit andelectronic bi ll presentment.

With Indian telecom operators working on offering services like money transaction over a mobile, itis a near possibility for a bank to offer phone based credit systems. This will make credit cardsredundant and also aid in checking credit card fraud apart from offering enhanced customerconvenience. The use of mobile technologies is thus a win-win proposition for both the banks andthe banks customers. Mobile banking service is primarily available over SMS (Short MessagingService) or through GPRS (General Packet Radio Service) or sometimes through USSD(Unstructured Supplementary Service Data). The services available range from funds transfer,balance enquiry services, request services, utility bill payments to merchant payment.

To enable wide coverage of mobile banking services, major telecoms and banks are entering intodeals and MOUs. The telecom companies will act as Business correspondents and provide a rangeof financial products and services offered by the bank through the mobile operators retail outlets. A

mobile account will have to be opened by every user for doing mobile banking transactions. Thepresent focus of the banks and telecom companies will be on the unorganized sector like migrantlabourers who need money remittance services. A remitter in one city of India can send money backto his home in another city or village either by account transfer or instant money transfer module. Theaccount transfer method is where money is transferred from the account of the remitter to that of thebeneficiary when they both have accounts with the same bank. The second method is by the instantmoney transfer module, whereby, the remitter with an account with a particular bank remits money tothe beneficiary who has a registered mobile connection but does not have a bank account.

1. Introduction

1.1 Industry

Based on a recent analysis by the Boston consulting Group, $350 bi llion in payment and bankingtransactions could flow through mobile phones by 2015 compared with about $235 bi llion of totalcredit and debit card transactions today. The analysis depends on various factors such as the

willingness of banks, telecom operators, regulators, and consumers collectively to embrace thisform of payment. Recently, the transaction limit for mobile wallet card has been increased to INR50k and Mobile Banking in India is all set to generate free based income of 20,250 crore over thenext five years, mainly driven by lower transaction cost, favourable regulatory environment and UIDproject. As more and more mobile money initiatives take shape, the fee income that is projected inIndia from the mobile payment and banking transactions could exceed $4.5 billion by 2015.

The two metamarkets of rural and urban make up the Mobile Banking market. Over the next fiveyears, unbanked rural markets could begin to rival the urban markets in size. In urban areas, manyconsumers still rely on cash for 90 to 95 percent of small ticket transactions even when they havebank accounts. Mobile payments can prove to be a tremendous convenience for these consumers.According to NPCI (National Payments Corporation of India) data, the total number of mobile

banking transactions has increased to 86,884 amounting to Rs 33.79 crore in November 2012 from15,759 transactions amounting to Rs 5.30 crore in December 2011. The banking industry averagesabout 3 lakh transactions per day through mobile banking. For the countrys largest bank StateBank of India, of its total customer base of 200 million, about 5.2 million have registered for itsmobile banking services. Two of the countrys largest private sector banks ICICI Bank and HDFCBank have also launched services on its mobile banking platform.


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While more and more customer segment gets comfortable with using mobile banking, theconsumers in the 18-32 year age bracket are more likely to adopt mobile banking than others. Thegrowing popularity of mobile banking, particularly for small-value transactions, prompted the RBI toraise the limit for end-to-end encryption from Rs 1,000 to Rs 5,000 and remove the transaction limitof Rs 50,000 per customer per day for funds transfer and for purchase of goods and services.According to a KPMG report, with mobile Internet usage is expected to exceed desktop Internet useby 2014, mobile banking services will become even more important. With the ecosystem players i.eoperators, banks and mobile manufacturers coming together and launching pilot services, themobile banking industry is ready for a takeoff. However, a questions looms around the issue thatwhether these services plan to keep consumers at the center or is it just a proof of concepts? Thisproject aims to answer this question by studying and analysing the Airtel money service launched byAirtel.

1.2 Company: Overview, Vision and Mission

Bharti Airtel Limited is a leading integrated telecommunications company with operations in 20countries across Asia and Africa. Headquartered in New Delhi, the company ranks amongst thetop 5 mobile service providers globally in terms of subscribers. In India, the company's productofferings include 2G, 3G and 4G services, fixed line, high speed broadband through DSL, IPTV,DTH, enterprise services including national & international long distance services to carriers. Inthe rest of the geographies, it offers 2G, 3G mobile services. Bharti Airtel had over 246 millioncustomers across its operations at the end of February 2012. Bharti Airtel offers GSM mobileservices in all the 22-telecom circles of India and is the largest mobile service provider in thecountry, based on the number of customers. Ranked among the six best performing technology

companies in the world by Business Week, Bharti Airtel had over 223 million customers acrossits operations at the end of April 2011.

Airtel M Commerce Services Limited (AMSL) is a fully owned subsidiary of Bharti Airtel Limited.AMSL's flagship product is semi-closed wallet - launched under the brand name 'Airtel Money'.Semi-closed wallet is a prepaid payment instruments that is redeemable at a group of clearly-identified merchant locations/ establishments, which contract specifically with the issuer (AMSLis the issuer in this case) to accept the payment instrument. In 2010, airtel M CommerceServices Limited (a wholly owned subsidiary of Bharti Airtel Limited) was granted the license touse the Semi Closed Wallet by the Reserve Bank of India. The company has designed a secureand robust backend system, to offer India's first mobile based wallet service - airtel money.

These instruments do not permit cash withdrawal or redemption by the customer. Under theAirtel Money service launched, users can load cash on their mobile devices and use it to payutility bills and recharges, shop at merchant outlets and make online transactions. It is availableacross 300 key cities in India as a fast, simple and secure service. It has now become the firstmobile based service to offer customers the convenience of instant money transfer from an airtelmoney wallet to another airtel money wallet and bank accounts. The service has made cashlesspayments a reality for customers across cities. With a strong eco system of partnerships, Airtelmoney is now accepted in over 2200 merchant establishments across Delhi NCR alone. Today,a mobile wallet has the potential to cause large scale digitisation and/ or virtualisation of cashtransactions. Ubiquitous mobile connectivity, wide distribution network, large scale customerservice infrastructure and robust micro transaction processing are some of the key capabilitiesthat Airtel has built over the years. Airtel has leveraged these capabilities to create a state-of-the-art payments infrastructure across the country.

Vision:

To live an empowered, happy and sustainable life, millions need to be brought into digi-presence. Ensure digital presence through far-reaching, even and efficient network coverage and


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deep internet penetration

Airtel through its Mobile, digital TV and Broadband platforms facilitates financial services,education and health. Providing financial, education and health services through mCommerce,mEducation and mHealth.

Airtel leverages its reach and accessibility to foster sustainable community development.Enable community development and quality education through the Bharti Foundation, and regionalcommunity service.

Mission:

Including and empowering millions throughSustainable social and economicempowerment

2. Organizational Strategies and Businessprocesses:

2.1 Organizational Strategies

Mobile banking and payment market is expected to grow to around 900 million users and morethan $ 1 trillion in transactional value by 2015. Across the world, there are around 5 bi llion mobilephones whereas there are only 2 billion bank accounts. Hence, mobile banking is the way forwardfor the commercial banks. With the development of mobile technologies in late 2000s, banks havelaunched mobile payment applications or wallets, but with its inherent challenges on legal andbusiness front. The banks have to understand that collaboration with mobile network providers willhelp them in generating business opportunities. The same concept should be understood by theservice providers too.

Here are some of the organizational strategies adopted by the banks:

Mobile banking: Using a mobile phone to access a bank account and makepayments provides more convenience to customers. Banks should actively invest andexpand this channel in future, in particular for corporate treasurers;

Mobile commerce: Using a mobile phone to buy products. This is driven by e-commerce companies looking to uplift their product sales and generate revenue from

advertising. M-commerce provides great opportunity as financial services are provided as apart of shopping experience. Efficient payment mechanisms can greatly improve theshopping experience.

Mobile money transfers: Using a mobile phone to send money to someone. Theseservices are currently run by the mobile network operators but only on a domestic basis.These services can be extended to international person-to-person remittances in developedcountries. This can provide a basic payments service to the under banked in a developingcountry by converting cash to electronic transactions. Telcos should form joint ventures withbanks to provide global money transfer solutions.

2.2 Business Processes

The current model used by the telecom companies is a sms based model. The data sent by thecustomers passes through certain encryption processes using Wireless Application Protocol(WAP). WAP is used for communication between digital mobile devices, internet and PDAs.Encr tion rocesses are used for secure transactions between the telcos and the customers. The


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customer needs to enter the password and some other reference codes to complete thetransaction. However these encryption systems are not good enough to protect the sensitive dataof the customers.

Airtel Money has entered in to a strategic alliance with Axis bank for financial inclusion. Thispartnership, like many such others, will provide payment and financial services to millions of peoplein India who does not have a bank account. A no-frills savings account of Axis Bank is opened for

customers on the airtel money platform called Airtel Money.

SMS based transaction using Mobile networks

A customer can add balance to the account by online or mobile recharge. This amount iscredited to a no-frills account registered with Axis bank.


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While making payment the customers to send a message to the Airtel money services usingthe biller nick name.

The sms routes through the network and passes through several encryption processes. Thecustomer is prompted for password and reference code before confirming the payment.

The data is send across to the bank server where it again passes through the banks firewall.

The transaction is completed as the amount is debited from the bank account of thatcustomer.

Services offered by Airtel Money:


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Risks in the present business process:

3. Problem Statement and Requirementanalysis

3.1 Problem statement

Given the security issues and the reachability challenges especially in rural India, how Airtel Moneycould increase the number of mobile transactions.

3.2 Requirement Analysis AS-IS

1. People

Users/Customers

o People are hesitant in using the mobile services such as m- payments, moneytransfer, etc offered by the banks and other service providers because they find themtoo complex and unsecured

o Fear of bank account hacking due to security issues

o Skepticism about success of mobile transactions

o Privacy issues

Banks/Service providers

o Integration of processes to ensure security and privacy

o Technological challenges leads to lower customer satisfaction and thus loss ofbusiness for the banks/service providers

2. Process

Security issues with WAP (Wireless Application Protocol)

The encryption process used currently is not good enough for the protection of sensitive databetween bank and customer


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SMS Spoofing attacks

Virus Attacks in mobile banking

Risk with Digital Signature

3. Technology

Lack of proper mobile service infrastructure in rural India

Non-compatibility of mobile handsets

Server overloads at the banks

Mobile Network issues: low speed, unreliable connection, and high cost

TO-BE

1. People Make m-payment application user friendly with little or no learning curve for the customers

Strong Anti-hacking mechanisms to ensure security and privacy

Speedy and successful transactions will increase the customer satisfaction and henceincrease m-commerce transactions

2. Process

Increased security by using public key infrastructure security, biometrics and passwordsintegrated into the mobile payment solution architectures

End to End process control using multiple security layers to prevent hacking and entry ofviruses

Strengthened SMS banking as it can be used by the small scale traders

3. Technology

Sharing of tower infrastructure will increase the reach and strengthen the network facilities

Mobile connections with high speed available at low cost

Availability of low cost 2G/3G enabled mobile handsets


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4. Business Solutions

A. Attributes and characteristics:

Convenient, flexible, affordable and proximity to the poor are four characteristics crucial for thesuccess of mobile banking services.

Security, Privacy and Trust

Mobile banking platforms and applications offer unique security risks and challenges, but manyfinancial institutions fail to adequately address those risks upfront. M-transactions should notcompromise with the privacy of customer data. Mobile payments have to be as anonymous as cashtransactions. The system should be foolproof, resistant to attacks from hackers and terrorists. Thismay be provided using public key infrastructure security, biometrics and passwords integrated intothe mobile payment solution architectures. So to make mobile banking platform secure the mainrequirements are:

1. Customer awareness training: customers should be made to understand the risks and besafe about their behavior, so that they can protect themselves as they begin to use thesemobile devices .

2. Encryption and active session management monitoring: Encryption algorithm should besophisticated.

3. Use of biometrics: Use of fingerprints and facial recognition can help make the transactionmore secure.

4. Apps: For institutions launching mobile apps, it's important to monitor app stores to ensurecustomers are downloading the right apps.

Interoperability:

Development should be based on standards and open technologies that allow one implementedsystem to interact with other systems.

Partnership

Partnership should be made with other banks and technological firms to understand therequirements and build a convenient and fully secure network for mobile banking.

Current Partners and Resources

Bank Partner Axis Bank:

Axis bank has provided access to its NEFT portal to Airtel money allowing it tooffer remittance services to its customers.

Technology Partner- Infosys:

Infosys offers its WalletEdge, the mobile commerce platform of Infosys tosupport cashless payment and settlement needs of Airtel money customers. Itfacilitates creation of unique ecosystem of merchants, financial and retailinstitutions to offer wide spectrum of payment options. The platform will enableend customers to pay bills recharge accounts, shop at over 7000+ merchantoutlets, transact online through multiple channels including mobile phones,IVRs, ATMs and POS. The platform is secure and scalable.


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Channel partner Distributors and Retailers of Airtel Communications:

1. Key activities-Distributor: Whole selling of Airtel money e-float, liquidity management,training and logistics support to retailers through their FOS network.

2. Key activities-Retailers: Retailing of Airtel money e-float, customer awareness andacquisition, resolving customer queries

Other partners Airtel (parent company):

i. Made available its vastexisting distribution channel. Association with brand Airtel helps Airtelmoney to gain brand recognition and trust.

Reach Out to Potential Mobile Banking Customers

Proximity to the customer is vital, and sales teams must proactively visit potential clients at theirhomes or workplaces, offering convenience and free credit upon purchasing mobile bankingservices. This strategy can be supported by a vast distribution is expensive, but rewarding in thelong run owing to volume-based competition in mobile banking sector.

Consumer awareness

Being a product which has never been experienced by mass consumers in India, one of the keyingredients required for the success of Airtel money is consumer awareness. Airtel had understoodthis need early and launched rigorous marketing and media campaigns right from the start. Airtelmoney commercials were on air in most TV channels. The tagline used was Kyuki baat sirf paisoke nahe hai(Its not just about money) which reflects their intention to focus on the value offered tothe customers through this product.

1. On the ground too Airtel has been active in installing marketing collaterals right in time. Mostof the agents received the boards, brochures, flipcharts and other collaterals within a

reasonable interval.2. Airtel had deployed its trainers to visit distributor locations who would train the field staff and

distributor about the concept. Distributor staff then has to convey this knowledge to individualtrainers. This step was made with an intention to enable every retailer to explain this productto the customers who have experience any similar product in past.

Money Transfer services

To increase the mobile banking inclusion in rural area banking institutes should promote moneytransfer services in remote villages, similar to one initiated by Vodafone M-PESA.

B. Value to Stakeholders:

Convenience: From product design to channel development, all activities of Airtel moneyhave been designed with customer convenience in mind. It starts right from the customerregistration.

Easy Registration: The entry level express account allows a customer to get enrolled through hismobile with an Airtel connection. It is not required to visit any place or execute any paperwork forenrolment. It takes 2-3 minutes and customer is ready to use his/her express account. Please referannexure I for details of the process.

Easy balance recharge: The next step for a customer is to load cash into his Airtel moneyaccount. Customers with access to online banking again can easily load their account onlinethrough Airtel moneys web portal. If in case customer does not have access to internet bankinghe/she can visit the nearest Airtel money agent and get e-load just like airtime. Please referannexure I for the details of the process.
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Easy transactions: After their account has been loaded with cash customers will be able to usethis account pay their bills, recharge their talk time, transfers money, and shop with few clicks ontheir mobile. Please refer annexure I for the detai l of the process.

Accessibility: Airtel money offering includes three basic services viz. registration, loadingcash and spending cash. Airtel money has developed its operational model to enable its customersto access these services with minimal efforts.

Airtel money has deployed a large number of agent points in all the major cities of India which offerregistration and cash in service. Airtel claims at have enrolled 7000 plus merchant points in 300cities across India where customers can shop with their e-cash. Apart from shopping other serviceslike mobile recharge, money transfer, and bill payments can be availed directly through customersmobile.

Usability: Airtel money uses a very easy to use simple menu with option to use USSD stringstoo. The menu is self-explanatory and` does not require any special skill to operate. The security isprovided by using a personal m-PIN similar to ATM pins most customers are already aware about.

Novelty: It is the first full featured MNO led wallet based service in India. Apart from serving asan easy alternative to cash/card payment options, Airtel Money has now become the first mobile

based service to offer customers the convenience of instant money transfer from an Airtel moneywallet to another Airtel money wallet and bank accounts

C. Infrastructure Requirement:

Channel recruitment

Along with the mass media campaign, Airtel money has rapidly built up the infrastructure tooffer these services throughout India. The parent company of Airtel already had distributionnetwork throughout India.

Airtel money has utilised this existing infrastructure to offer their services. This allowed it to

rapidly build up reach in all key cities of India. The distributors of Airtel were asked to sign upfor distribution of Airtel money too. They in turn motivated their key retailers to sign up forAirtel money.

The result has been that Airtel money has been fairly successful in rapidly developing alarge network of retail agents and distributors, but most of these have been coerced into thesystem. The result of these developments is well evident on the fields.

Among all the Airtel money agents contacted for this study, most of them had less than 10customers per agent with a negligible transaction volume.

Operational support

The operations team working for Airtel money is not visible on field. As per the field studyconducted for this research, majority of the retailers enrolled for Airtel money have never metany of their staff.

They have only been in touch with the FOS from the distributor who visits on a regularbasis for their Airtel airtime business. These FOS who are the staff of distributor thoughtrained on Airtel money are often not able to convince the retailers with their information.

Further these agents have no direct contact in Airtel money to clarify their doubts about the

service. Thus the retailers do not completely understand the service and in most case alsorefrain from pushing it to their customers.

D. Delivering Value Proposition:


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Channel Structure

v Territory Sales Manage

Separate structure for Airtel Money from Airtel at this level

One TSM handles 5-10 distributors

v Distributor

The distributors for Airtel Money and Airtel are common. Mandatory for alldistributors to offer Airtel Money

5-10 distributors per district

v Feet on Street

Employed by distributors to service the retailers. Functions include visitingretailers, communicating company policies and resolving retailer grievances.

One FOS handles about 10-20 retailers

v Retailer

Recruited from the existing Airtel retailer.

A typical distributor has about 250 retailers. An average of only 10% hasagreed to retail Airtel Money. The reasons are low margins and lack of information.

v Customer

Customer uptake at present is low. a typical retailer has on an average 10customer, in many cases even less.

Customer relations

The customer relationship is shaped by the service provider meeting the customerexpectations. At this stage the customers expect the full rage of services to be available,assistance in terms of knowledge sharing about the products and services, facilitation oftransactions and resolution of queries.

As mentioned earlier, most of the services are not available leading to disappointment tothe customers.

The retailers feel that they have received very basic level of training and it does not equipthem to handle the customer queries concerning the products. The unfavourable commissionstructure, when compared to airtime sales, adversely affects the motivation of the retailers tobuild strong customer relation. The commission structure has been dealt in detai l in laterslides.

Low commission is also the reason the distributors shy away from following up withretailers in building relationships with the customers.

The visit by the Airtel money officials lasted around the time of launch. Since then there hasbeen no follow up visits. This also has affected the motivation of the channel in buildingstrong customer relationships.

The ATL marketing by Airtel Money created the initial buzz, but it could not translate intomutually beneficial customer relation due to the above factors. This has led to the currentstatus wherein even the enquiries about Airtel Money have stopped.

E. Cost- Benefit analysis:


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Profitability

1. Robust Inclusivity Framework: It enable banks to include its various customer segments,ranging from NHW1 to specific unbanked community, surmounting the complexity of diverselocation and dissimilar mobile devices.

2. Robust Security: The solution offers extensive application security features like encryption,referral URL check and session management to provide a robust security framework.

3. Cost Savings: Solution present bank with the advantages of reduced integration byleveraging common interface messages, maintenance and deployment cost. This translatesin to significant cost savings without bank having to compromise on features or range ofdevices supported.

4. Customer Delight: It allows the banks to offer convenience of anywhere anytime bankingusing GPRS, WAP or SMS.

F. Swot Analysis and PEST Analysis:

F.1 SWOT analysis

Strength

Strong parent company

Brand Name: As Airtel is a huge brand in India, this new service had instantrecognition amongst the customer.


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Experience from earlier deployment: Airtel Money is also functioning in someAfrican countries (like Kenya, Ghana). Experience earned from those countries willhelp Airtel Money to function better in India

Ability to face Initial Financial Hiccups : Airtel Money have a strong financialbacking of the parent company because of which it will be easier to face initialfinancial hiccups.

Marketing Drive: Airtels strong financial backing helped Airtel Money to launchan extensive marketing campaign across the country

Support of existing channel: Airtel Communication have a very strongchannel, which was instrumentals in quick deployment and pan India launch of AirtelMoney

Product Suite

Airtel Money offers a wide range of products and also have multiple billerswhich makes the product suite very attractive

Easy Adoption : Signing up for the basic offering (express account) is very

easy. This will help the customer to experiment with the product without going throughthe hassle of any documentation.

Easy Graduation : Once the customer starts liking the Airtel money service thenhe can move to the next level account which is the power account. The documentationneeded for this is also very simple.

Easy to use customer interface : Airtel uses very simple menu basedtechnology

Processes: Quick and simple

Agent On-boardingprocess is very quick and involves simple documentation.

This makes the agent roll-out swift and effortless

Cash In: Similar to pre paid mobile recharges, time taken less than one minute

Customer Initiated Processes : All the process are menu driven, easy tounderstand, quick and secured via mPIN

Technology

No Glitches: Technology used by Airtel Money is steady. Retailers have notexperienced any server downtime till now. Though it might happen once the volumesstart coming in.

Strong technology partner * : Airtel Money has a very strong technologypartner, Infosys.

Proven technology: Airtel Money uses USSD technology which is real time,easy tom operate and sends confirmation SMS after each transaction

Weakness

Channel conflict

For a new customer, airtime recharge is the service which s/he uses first onAirtel Money because it is low value. It has potential to get in conflict with airtimechannel, which can act as a big hurdle initially until other services (offered by Airtel

Money) pick up.

Commission: Airtels airtime recharge offers a commission of 2.5% to itsretailers while e-money (return 0.5%)

Roll-out


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Airtels extensive marketing campaign created buzz all over the country but atthat time field level operations were still at nascent stage. If the marketing campaignwould have started once the operation were running smoothly it would have attractedmuch more number of clients.

Retailer selection : Many airtime retailers were forced by distributors and Airtelfield staff to become Airtel Money retailers. Most of such retailers may have joinedthis business just for the sake of relationships they have and may not be interestedenough to invest their time, money and energy in this business

Liquidity Management

Distributor to Retailer: As the turnover time of money invested in Airtel Money ishigh, distributors are not locking-in money. When retailer asks for value from thedistributor, he need to first contact Airtel for the value and then he transmits the sameto retailer. This process often takes 2-3 days

Weakness

Low Customer Trust

False Promise: Customers signed up for this service because of the services

advertised in the marketing campaign like electricity bill payments. But majority of theservices promised are still not active on the Airtel Money platform. This results in lostof trust of the customers.

Mysterious Deductions: According to customers, Airtel communication has ahistory of mysterious deductions from their balance. Because of this most of thecustomer prefer to keep low balances, this trend will most likely extend to Airtel Money

Customer Segmentation

Marketing campaign focussed on upper and upper middle class which alreadyhave strong options for bill payments and money transfers

Communication Gap

Company to Retailer: Existing airtime channel is being utilised to service theAirtel Money retailers. For their staff Airtel money business is subsidiary, so theyinvest lesser time and energy in the nitty-gritty's of Airtel Money. Because of thisdetails of product suite, product offerings, commissions and customer pricing are notknown to the retailers.

Moreover, Airtel Money do not provide any retailer manual which can cover all thebasic details.

Retailers are trained either by Distributors FOS or by Airtel Communicationsstaff in one of their daily visits. This training is not sufficient to transfer all the required

knowledge to the retailer. Due lack of effective Retailer Training, retailer is not ableto give complete/ correct information to the customer

Opportunities

Moving from Wallet to Bank Account

Presently, customers dont have an option to withdraw their money at a retailerpoint (except by NEFT transfer and withdrawal from a bank). Withdrawal from a retailpoint can be a major opportunity for Airtel Money.

Signing up Billers and Merchants

Airtel has a great opportunity if they tie-up with some big retail chains and onlineportals (like Big Bazaar, Easy Day, Future Bazaar, Flipkart, Yebhi.com etc). By doingso, it would drive transaction volumes and hence would ensure overall profitability ofbusiness model.

Opportunity to penetrate Semi-Urban/ Rural space


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Presently, Airtels main target segment is upper middle class and higher class inurban areas. Airtel should also try to pioneer opportunities in rural areas. Airtel Moneycan become a mechanism to remit money for the migrant workers

Smartphone app

A smartphone app can be another option which can be considered forconvenience of the (upper middle class and higher class) customers.

G2P, MFIs, Franchising

Continue exploring institutional partnerships with banks/government forgovernment to person payments and with MFIs. Its technology, brand and experiencein the building a low cost financial infrastructure can be leveraged by franchising it tointerested parties

Threat

Assisted Transaction vs. Customer initiated Transaction

For low income segment: MicroSave researches shows that low income

segment or unskilled (mostly in rural areas) customer prefer assisted transactionsover assisted transactions.

High income groups have other options (like Internet) to use the same services

High influence of airtime business

Airtel money is highly influenced by Airtels core business, if the demand of theircore business plummets then it will lead to fall in the demand of Airtel money

E-governance infrastructure might be a threat for utility payments

In many states, government is investing hugely in E-governance infrastructurewhere utility payments services are free. While, in Airtel money customer have to payRs.10 for each transaction.

Airtel communication is benchmark for Airtel Money

Retailers and distributors compare Airtel money with normal business of Airtelcommunication. They use it as a benchmark for various purposes like commissions.(Airtel communications offer a commission of 2.75% on each transaction which isvery high as compared to 0.5% offered by Airtel money.)

F.2 PEST Analysis:

Political/Legal factors

Development of framework as per RBI guidelines

All transactions to be done in terms of national currency only

Inter-operatability among the vendors

Economic factors

Financial inclusion by increasing reach in rural areas

Potential to extend micro-credit by making the model inexpensive


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Potential to reach economies of scale

Social factors

Convenience for the customer as well as banks

Demographic challenges can be overcome through customer training

Technology Factors

Technology with well defined complex encryption

Improved security due to better encryption technologies

Protection of sensitive data between bank and the customer

G. Competition analysis:


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H. Challenges:

Economic Challenges: The population in rural India is spread across 600,000 villages,each having a low transaction value. Feasibility and Profitability can only be achieved by largevolumes, requiring significant initiative from financial institutions. Unlike the hugely successful M-PESA of South Africa, whose model has been very successful due to the lack of alternativepayments in South Africa, India does possess some infrastructure in the forms of postalpayments, reasonable transport and local governments. Therefore, any mobile banking must beinexpensive enough to be attractive for the end-customer over existing methods.

Regulatory Challenges: Although the RBI is pretty supportive about mobile banking inIndia, there are many regulations that are being put into place:

i.ii.

iii) Existing Account Holders: The RBI guidelines also state that only those people having avalid bank account would be allowed mobile banking. This limits the full potential of mobilebanking to extend micro-credit and bring banking to the large number of customers who donthave any account in banks.

Demographic Challenges: India has 18 official languages which are spoken across thecountry. The state governments also are dictated to correspond in their regional language forofficial purposes. Additionally, 66 % of the population in India is illiterate, creating difficulties indeployment of mobile banking solutions. For a pan-Indian mobile banking solution, this will bevery difficult to overcome.

Security issues

Encryption process is currently used for secure data transmission between bank and customersbut the main problem is that this encryption process is not good enough for the protection ofsensitive data between bank and customer. The reason is that security methods requirepowerful computing and high storage server capacity. If we take internet banking it is realizedthat there are powerful computer systems and well defined complex encryption process to


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ensure the security. Mobile devices have low computational capacity and hence we are unableto apply complex cryptographic system

I. Ethical Issues:

Exploitation of consumers

It is no secret that regulatory frameworks in third world countries do not always have consumersbest interests in mind. In the instance of mobile banking, it would be very easy for mobile bankingproviders to take advantage of its consumers through fine print and hidden fees, which do notinitially manifest themselves.

Mobile accounts can also be hacked and can be easily exploited for extracting the information toexploit customers.

5. Actual Scenarios

5.1 Interbank Mobile Banking Service

The Interbank Mobile Payment Service (IMPS), the payment platform by National PaymentsCouncil of India (NPCI) was publicly launched in November 2010. IMPS Funds Transfer offersan instant, 24X7, interbank electronic fund transfer service from one account to anotheraccount through mobile phones. IMPS Funds Transfer faci litate customers to use mobileinstruments as a channel for accessing their bank accounts and put high interbank fundtransfers in a secured manner with immediate confirmation features. In June 2012, IMPShad reported 35.51 million unique customers. It had generated 34,084 transactions, up 8%from 31,553 transactions.

The key features of IMPS Funds Transfer are as follows:

1. Instant Funds Transfer2. 24*7*365 availability3. Credit and debit confirmations to sender and receiver4. Simple & Easy to use5. Fast, inexpensive, safe & secure, accessible

The service only charges a transaction fee of Rs 0.10, per successful transaction from remitterbanks. Some issues that the NPCI needs to look into:

Lack of awareness about the service: Most Nationalised Banks including TheState Bank Of India and private banks such as HDFC Bank, ICICI Bank, Axis Bank andothers, offer IMPS based money transfer services. However, they do not widely promote it.Rather, the only modes of transfer most Banks mention on their Netbanking interface, areNEFT and RTGS.

Abscence of centralized service: Most participating Banks require customers todownload their own mobile banking apps, in order to access IMPS. For example, ICICIBank customers can only use IMPS through its iMobile app, whereas HDFC Bankcustomers need the NGPay app to avail the service.

The need to remember too many PINs & Passwords: The RBI and banks seemto be so caught up with preventing fraud that theyre losing money putting together services

that users will find difficult to use. For banking transactions, customer need to rememberan MMID, MPIN, apart from an IPIN for Internet banking, and a PIN number for ATMtransactions. So, there needs to be a way of switching over to a single PIN.

Integrating IMPS on a single platform: There is immense need to integrate allmobile payment systems under one umbrella. If the payment products are made inter


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operable, it could actually lead to more transactions on mobile, and give a boost to m-commerce, as merchant payments can also be integrated.

5.2 M-Pesa

Vodafone Money Transfer, or M-PESA as it is more commonly known, is the worlds mostsuccessful money transfer service which started in Kenya in March 2007. It enables millions ofpeople who have access to a mobile phone, but do not have or have only limited access to a bankaccount, to deposit, withdraw, and transfer money, top-up airtime and make bi ll payments.

Customers can register for the service at an authorised agent, often this is a small mobile phonestore or retailer, and then deposit cash in exchange for electronic money which they can send totheir family or friends. Once they have registered all transactions are completed securely byentering a PIN number and both parties receive an SMS confirming the amount that has beentransferred. The recipient, who does not have to use the same network, receives the electronicmoney in real-time and then redeems it for cash by visiting another agent.

Opportunity in IndiaMore than half the countrys 1.2bn population does not have a bank account, but it is the worldssecond- largest mobile phone market, with more than 900m subscribers. If only a fraction of thesecustomers sign on, India could easily become the worlds mobile money leader. In India there ishuge no urban migrant workers who need to send money back to their rural villages, they will beimmensely benefited from this service.

Roadblocks

Regulatory Frameworks The Reserve Bank of India has labelled mobile money as a bankingsolution rather than a telecom product, and therefore strict regulatory framework is needed to be

adhered to. Vodafone has collaborated with both HDFC and ICICI to enter this market. If the banksand telcos dont join hands and invest, the service might fail to be attractive to the customers.

KYC Documents The customers need to go through a lengthy process of identityverification, which many people in India may struggle to satisfy given the widespread lack ofbasic documents.

Network of agents This service requires an agent for both, registering the customer and

redeeming cash against electronic money. Telecom companies will have to build a network ofthousands of such agents right across India to get the service going. This seems to be thebiggest challenge in nationwide launch of the service.

Complexity in processes Retailers are unable to comprehend the basic processes ofdeposit, withdrawal, form processing, PIN management, service activation etc. Most are unableto transact and troubleshoot and have not gained enough confidence to sell effectively.

5.3 Money on Mobile

It is an M-wallet service launched by My Mobile Payments Ltd (MMPL) in June 2012. This service,for the Indian market allows mobile phone subscribers to purchase a wide range of goods and

services through their phone, instead of paying by cash, cheque, debit or credit cards. Money-on-Mobile was earlier launched for the B2B market in India in 2010. Then, in the year 2011, the servicereceived RBIs permission to offer the semi-closed m-wallet for the consumer market across India.Now, it has a network of 118,189 retai ler touch points across India and a presence in more than300 cities. The service has about 32.5m subscribers and a business volume of Rs 20 million perday. The service also have 15 mobile operators and 6 satellite television providers on board.


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The Money-on-Mobile service operators are independent of the users mobile operator or bank. So,any mobile subscriber can enroll for this service through an SMS or the mobile app-based program.The user can load the device with any amount of money, with a minimum of Rs 20. The virtualmoney can be used for prepaid mobile recharges and DTH recharge, paying postpaid mobile bills,utility bills, like electricity and gas and also to purchase airline, bus and movie tickets.

RBIs Role

According to RBI guidelines, M-wallet services cannot be permitted to provide a facility to en-cash

the balance available in mobile wallets, to the customers as it would amount to bypass banking.Mobile transactions are permitted only if attached to a specific use, such as paying electricity billsor shopping at retail establishments that accept mobile payments.

However, encashment is possible if the mobile operators acted as a business correspondent (BC)to a bank.

5.4 Future scope

India has a great prospect to leverage the potential of Mobile banking and build a cash-lighteconomy. In addition to IT edge and relatively dense population, the Government of India is clearlydetermined to achieve financial inclusion and is taking aggressive steps to see this happen.

Rendering financial services to the under-served or poor through a market-led approach isimportant for the sustainability of financial inclusion. However the lack of feasible business modelshas impeded market-led approaches being followed at scale. While this is evident across manycountries and so does in India, which has seen many pilot projects that are still not sustainable.

There are many reforms and enrolment drives which have been undertaken by the Reserve Bank ofIndia (RBI) and the Government of India over the last five years to give drift to the financial inclusionagenda. It can be safely said that the RBI and government policy initiatives and reforms haveconsiderably helped the development of mobile banking systems.

Although, there has been an upsurge in the consumer demand for electronic remittance andElectronic Benefit Transfers (EBT), the absence of compelling value-proposition in basic no-frillssaving accounts is keeping the customers, the Business Correspondent Network Managers and theIndian banking system from realizing the full potential of the branchless banking model.

Mobile Network Operators and Large Corporate Houses Co-Venture: With the popularity ofcollaborations between mobile network operators (MNOs) and banks live up to the promise offinancial inclusion, the RBI and TRAI (Telecom Regulatory Authority of India) have announced thatthey will harmonize and coordinate with each other to avoid any form of regularity conflict. The RBI isgradually strengthening and revising regulations based on mobile banking working groups 2008pragmatic perception and recommendations. Some of these encompass measures andprocedures for banks to be hand and glove with telecom providers, fortifying the security framework,suggesting common standards for completing transactions etc. TRAI is focusing on disputesettlements and fixing tariff rates for mobile banking access.

In the previous year, many large Indian banks have partnered with large mobile network operators(MNOs) and handset vendors to facilitate their connection through mobile channel by providingaccess to financial services. Few such deals are:

1. State Bank of India with Airtel.

2. ICICI Bank with Vodafone.

3. HDFC Bank with Vodafone.

4. Axis Bank with Idea Cellular.

5. Union Bank with Nokia Money.These MNOs have a distribution network of around 1.0 to 1.5 million retailers across India. Thispresents a great opportunity to build a nationwide network of agents something that has so farbeen a challenge due fragmentation in financial inclusion space.

Drivers for Mobile Banking


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There are various factors, drivers that will empower Indian electronic and mobile banking to growexponentially in the coming years.

Under-banked and Un-Banked Population

Out of 600,000 villages in India only one sixth, have banking services. Almost half of the countryspopulation is unbanked. The large section of the Indian population not just in rural areas but also inmany segments of urban markets, offers a large untapped market with a tremendous businesspotential. Financial inclusion is slowly but surely being seen not just as a social responsibility, but as

a potential business model too.

Demographic Factors

In India the population of youth (between the age of 14-29) is the largest globally, which is around27% of the total 1.2 billion. Furthermore, adding the age group of 30-44, it goes up to 47%. Apartfrom the huge size of this segment, they are among those who are the early adopters of latesttechnology and new services, which presents a huge opportunity for m-banking service providers.

Bank Based Services

It has been observed that poor people, whether in urban or rural completely understand the need forformal financial services and are well aware of the fact that they are losing money in the informal

sector. Similarly, they are very aware of the drawbacks and costs of informal remittance schemes,and they need to send money to family and friends.

For doing one transaction from a bank, a poor has to incur significant direct and opportunity cost.The direct cost associated with travelling to a bank branch is not insignificant. As a result there isgrowing willingness to conduct transactions through agents and to pay for these services. Majorityof villagers are willing to pay for services that will reduce their real and opportunity costs.

India continues to be a unique market and regulatory environment with intense involvement of theregulator and the government. Hopefully, the rapid outreach will make the model sustainable for allthe players, banks, BCNMs and agents and at the same time offer services really needed by theclients. These two ends are, of course, aligned and mutually beneficial. The gradual regulatoryevolution to support BCs and banks in their outreach efforts continues and the results are

beginning to emerge.

5.5 Conclusion

The major concern among customers was the safety regarding mobile banking services whichforms a real obstacle, followed by network problem and insufficient operating guidance. Most ofthose who frequently use the Mobile Banking services, usually find the service very useful forinformation based transactions mainly checking account status. This means that the Mobile bankingservices is not solving the purpose it was originally made for, which is to provide customerconvenience and reduce customer visits to the banks. It is strongly believed that ensuring thesecurity of Mobile banking and familiarizing customers with how to use the service will definitelyincrease the rate of using Mobile banking services.

In line with the network operators move in acquiring the latest advanced technology to stay aheadof competitors, banks throughout the world and India have notably been moving in the samedirection. Evidently, Mobile banking is considered a new era in banking, in which banks arespending considerable amount of money to have it available to their customers and to cut theiroperations costs.

References:


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Mobile Banking in India: Practices, Challenges and Security Issues by Vishal Goyal, Dr. U SPandey and Sanjay Batra [ International Journal of Advanced Trends in Computer Science andEngineering, Volume 1, No. 2 , May June 2012]

http://www.nextbigwhat.com/mobile-banking-in-india-report-297/ [ As accessed on 14th

March, 2013 13:50]

http://www.thehindubusinessline.com/industry-and-economy/banking/more-customers-are-

taking-to-mobile-banking/article4232424.ece [ As accessed on 14 th March , 2013 14:00]

Annexure:
http://www.thehindubusinessline.com/industry-and-economy/banking/more-customers-are-taking-to-mobile-banking/article4232424.ece