UNIVERSITY OF MUMBAI

A PROJECT REPORT SUBMITTED TO THE

UNIVERSITY FOR THE AWARD OF THE DEGREE

OF BACHELOR OF MANAGEMENT STUDIES (V

SEMESTER)

ON

M-WALLET

BY

AVINASH .S VERMA

AKBAR PEERBHOY COLLEGE OF

COMMERCE AND ECONOMICS

MUMBAI-400008

2012-2013

UNDER THE GUIDANCE OF

PROF.GANESH ACHWAL

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DECLARATION

I MR. AVINASH VERMA student of Akbar Peerbhoy College

of Commerce and Economics studying BMS-Third year (Sem-V)

hereby declares that I have completed this project work on

“M-Wallet” for the Academic year 2012-2013 under the

guidance of our esteemed faculties.

The information submitted in the project is true to the best of my

knowledge and abilities.

DATE: __________________

PLACE: SIGNATURE

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BACKGROUND:

Wallet/ wallet /noun 1.a small book like folding case

for carrying papers, paper money etc., in the pocket. 3. A bag

for holding food, clothing, articles, or the like, as for use on

journey.

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TABLE OF CONTENT

1. Introduction 1.1. Smart start of M-wallet in India 1.3. Now in India Money on Mobile2. Revolution of M-wallet3. 3.1. Entities 3.2. Registration 3.3. Transactions 3.4. Recharge 3.5. Payment 3.6. Redemption 3.7. Miscellaneous features 3.8. Reserve Bank of India Rules and regulations 3.9. Security 4. Advantage of M-wallet5. Limitations 6. Companies overcome with concept of M-wallet 7. Mobile Money Customer Awareness in Rural area8. Mobile phones cutting banking costs, hassles in Rural India9. Mobile phone penetration in India

10. The challenges for M-wallet in Indian Market 11 .Questionnaire 12. Conclusion

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1. INTRODUCTION M

-wallet, is referred to as mobile money, mobile banking,

mobile money transfer, and mobile wallet generally refer to

payment services operated under financial regulation and

performed from a mobile device. Mobile payment is an alternative

payment method. Instead of paying with cash, cheque or credit

cards, a consumer can use a mobile phone to pay for a wide range

of services.

Mobile phones can also offer a communications

channel for initiating and executing on-line

financial transactions. This channel may not only

reduce the cost of financial transactions for

provider and customer, but also allow new entrants

to the financial sector, and new relationships to be

formed for distributing services. These changes

hold the prospect of accelerating access to financial

services on the back of the mobile infrastructure.

Electronic payment systems like credit and debit

cards are an attractive alternative from the

perspective of cost and convenience. However, the security of

credit and debit cards depends upon the ability of the merchant to

authenticate the card by comparing signatures and the ability and

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honesty of the merchant in protection of the sensitive information

required for carrying out the transaction. The new trend in

electronic payments is mobile payment schemes – those in which

at least one part of the transaction is carried out using a mobile

device.

The number of mobile phones in use far exceeds any other

technical devices that could be used to market, sell, produce, or

deliver products and services to consumers.

Mobile commerce especially mobile banking is popular in

countries where most of their population is unbanked. By 2013, it

is estimated that there will be 1.7 billion people with a mobile

phone but not a bank account. Mobile payment is being adopted all

over the world in different ways. Combined market for all types of

mobile payments is expected to reach more than $600B globally by

2013. Some mobile payment solutions are also used in developing

countries for micro payments.

The current emerging mobile payment services are Google wallet,

Nokia’s mobile money, Airtel money and the Interbank Mobile

Payment Service (IMPS) with the latter two prevalent in India.

Google Wallet works via near-field communication (NFC) which

means it requires a NFC-enabled phone in order to use the service.

Nokia India Pvt. Ltd. has launched Mobile Money service in

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partnership with Union Bank of India and Yes Bank. But this

service works only on handsets manufactured by Nokia.

Interbank Mobile Payment Service (IMPS) is a pilot service that

allows transfer of money between bank accounts of registered

users in the participating banks. The transactions are carried out

with PIN based security.

M-Wallet provides a mobile payment system that will be available

on all mobile devices that support basic features like text

messaging, yet be secure from spoofing of mobile numbers and

replay attacks. M-Wallet transactions are totally based on text

messages and provide mobile apps only for added convenience. A

user specified PIN allows only authorized access. Mobile number

spoofing and replay attacks is eliminated as each transaction is

protected with a unique one time key sent to the user’s registered

mobile number. These developments have created a new type of

economy, which many call the ‘digital economy’. This fast

emerging economy is bringing with it rapidly changing

Technologies, increasing knowledge intensity in all areas of

business, and creating virtual supply chains and new forms of

businesses and service delivery channels. As a direct consequence

of the emergence of the ‘M-wallet’, the balance of power seems to

be shifting to the customers. Customers are increasingly

demanding more value, with goods customized to their exact

M-wallet 10

needs, at less cost, and as quickly as possible. To meet these

demands, businesses need to develop innovative ways.

1.1. Smart start of M-wallet in India

M-wallets serve as a handy tool for multiple functions—as

bank cards, credit cards, house keys, and swipe cards to enter

premises, electronic cash, train tickets and much more.

In fact, the Bank of Punjab was one of the earliest to launch an m-

wallet in 2003. The bank customer could make purchases by

sending messages through the mobile phone. The bank, in turn,

would send a message confirming the purchase, both to the

merchant and to the buyer.

Later, in 2006, the Times Group launched Wallet365.com in

association with Yes Bank. Although this was strictly not an m-

wallet service, it permitted online money transfer, payments to

businesses and shopping.

Now, the Delhi Metro Rail Corporation has started trials for m-

tickets using contact-less chips. This is via a tie-up with Citibank,

which has been providing mobile transit solutions for the New

York subway system and Singapore Metro.

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In Bangalore, train commuters can buy platform tickets just by

sending an SMS. The subscriber gets a five-digit alphanumeric

code as the e-ticket. The charge is the same as a regular platform

ticket and the amount is deducted from the customer’s monthly bill

or pre-paid account.

1.3. Now in India Money on Mobile

Offer a Simple, Smart and Secure way to

buy products from your current local retail

shops. We know that your time is precious.

We offer with assurity, a service with which you can Top Up

your Phone, Buy your next Meal or even conveniently pay your

utility bill all from the palm of your hand. With Money on

Mobile you can avail yourself to this service from your local

retailer friend for payments anytime, from anywhere to

anyone.

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2. Revolution of M-wallet

Conferencing: Video Conferencing is increasing with companies

cutting down their traveling to reduce costs and also for security

reasons. This trend will not only help reduce costs but also reduce

the Carbon footprint of physical travel.

Even if  Mobile advertising in India is still at a nascent stage,

Mobile as a medium has the highest reach in the country and the

potential remains extremely high. 2009 saw a dramatic rise in

Mobile advertising through the two main delivery mechanisms i.e.

Voice and SMS. Mobile SMS Advertising will likely shift from

being a mass advertising medium to selected targeting which will

be based on subscriber profiling.

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While Business and Advertising and Infotainment will be the

drivers to Mobile in times to come, but the greatest challenge

would be in terms of making M-wallet mainstream.

Experiences in rural India show that information and

communications technology can enhance poor people’s

opportunities by improving their access to markets, health care and

education.

Education: One such successful example of this is The Stanford

Learning Lab that has created a prototype SMS quiz to aid learning

of new vocabulary. The aim of this project was to provide highly

flexible, mobile learning material that users could access in very

short time-spans ranging from 30 seconds to 10 minutes. The

constraints of the 160 character limit of SMS messages turned out

to be an advantage as it forced the construction of suitably concise

chunks for such short-term learning opportunities.

Healthcare: Apollo Hospital group has set up a 50-bed

telemedicine center at Aragonda village (Andhra Pradesh, South

India). It has also set up freestanding centers at Guwahati and

Kolkata. These centers are equipped with facilities like CT- scan,

X-ray, ECG and integrated laboratory and are linked to Apollo’s

specialized hospitals at Hyderabad, Chennai, and Delhi for seeking

referral services, second opinion, post-acute care, interpretation

services and health education. The hospital group has also a web

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portal, Apollo Life that allows patients to interact with doctors via

the web, upload all their diagnostics and reports on the net. Escorts

Heart Institute and Research Centre (EHIRC), Delhi through its

Escorts Heart Alert Service (EHAS), Utilizes telemedicine in

establishing prompt contact with patients in distress. The EHAS

subscribers can record their ECG’s at the time of discomfort

through the cardiac beeper provided and transmit them through a

telephone to the “heart alert centre”. These tele-ECG”s can be

monitored 24-hours at the dedicated center and fully equipped

mobile cardiac care units from the centre can be rushed to provide

intensive care to the patients before they brought to the hospital for

medical investigation. India is a vast country and the role of

Telecommunications for realizing tele-diagnosis, tele-consultancy

and tele-education can be a boon to people who still have relatively

low access to medicine and healthcare.

Access to Opportunity: With the advent of 3G, fishermen can

negotiate prices for their catch before heading for shore by sending

in pictures of the type of fish they have on board. Similarly,

farmers and horticulturalists who have perishable produce can take

advantage of 3G services to bargain for the best prices before

harvesting, by bypassing middlemen. Services like Mobile

Banking, Mobile Money Transfers, Utility Bill Payments,

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Payments for purchase of movie tickets etc are also likely to take

off.

Giving the Indian billion an identity: Identity authentication at

banks, gas connection centres or while providing rural jobs will

just be an SMS away. The Nandan Nilekani’s project will provide

a unique identification (UID) number, not a card and the

authentication will be made by using mobile phones. Once the

numbers are issued the authentication will be done Online. The

authorities will send the UID number to the designated points

through mobile phone message. Also, the fingerprint of the person

can be sent to the central database and the authentication can be

received within minutes verifying the identity of the person. It will

help provide portability to our farmers, laborers. When they move

from state to state, this UID will help them get employment

without hassles. Banks, mobile service providers, LPG gas

connection counters and many more partner organizations can use

this UID to verify their customer. With the growing mobile phone

network, this will become an easy process for authorities to verify

people. Nandan Nilkeni’s team is likely roll out the first batch of

UIDs in 2010. They plan to issue at least 600 million UIDs over

the next 5 years.

Finally, in a country that has been Infrastructure starved for all

times, Indian companies have already laid out a 670,000

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kilometers network of optical fibres even in the remotest areas and

the progress on this front still continues. rural network based on the

extensive optical fibre network, using Internet Protocol and

offering a variety of services and the availability of open platforms

for service development, viz. the Next Generation Network,

appears not only to be an attractive proposition but a powerful one

as well. Fibre network can be easily converted to Next Generation

network and then used for delivering multiple services at cheap

cost.

A study earlier had indicated the Telecommunications sector will

increase its contribution to the India GDP from the existing 2% to

14%. That sounds a few degrees steep. But then the power that can

be generated by linked a billion people together is also

incomprehensibly powerful.

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3. How To Get Start With M-wallet ?

3.1. Entities

An M-Wallet mobile payment involves the participation of a

consumer, merchant and the M-Wallet system. It also includes the

provision of M-Wallet outlet for recharge transactions. In the

payment scenario, the consumer intends to pay the merchant

electronically through the M-Wallet

system. In recharge transactions, the

consumer wishes to add funds to his

M-Wallet account by using the services

of the M-Wallet outlet.

A consumer is a registered user of the

M-Wallet system and intends to use it

to pay for a service or product bought

from a merchant. A merchant,

depending on whether digital content or physical goods and

services being purchased is someone or some organization that

sells products to the consumer and is the intended recipient of the

funds. The M-Wallet system is the entity responsible for the

execution of the payment process. It controls the flow of

transaction between the mobile consumer and the merchant.

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The M-Wallet outlet is a point wherein a user can add funds to

his/her virtual M-Wallet account by paying the required amount.

To understand the electronic distribution of goods and services, the

work of Rayport and Sviokla (1994; 1995) is a good starting point.

They highlight the differences between the physical market place

and the virtual market place, which they describe as an

information-defined arena. In the context of e-banking, electronic

delivery of services means a customer conducting transactions

using online electronic channels such as the Internet.

Many banks and other organizations are eager to use this channel

to deliver their services because of its relatively lower delivery

cost, higher sales and potential for offering greater convenience for

customers. But this medium offers many more benefits. A large

number of organizations from within and outside the financial

sector are currently offering e-banking which include delivering

services using Wireless Application Protocol (WAP) phones and

Interactive Television (iTV).Many people see the development of

M-wallet as a revolutionary development, but, broadly speaking, e-

banking could be seen as another step in banking evolution.

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3.2. Registration

A user can register for this service by sending

an SMS to the M-Wallet system using his

mobile number which is verified and this

mobile number acts as a unique ID for the

user.

A unique PIN is generated and sent to the user

which can be later changed by the user for

additional security. The M-Wallet then creates

a virtual account for the user with zero initial

balance. According to RBI guidelines an open

prepaid payment instrument requires

fulfillment of Know your customer (KYC)

norms. The account is fully activated only

when the KYC documents are submitted at an

M-Wallet outlet. In rural area people don’t

have Documents so there finger print will be

used In M-wallet system.

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3.3. Transactions

The transactions that take place in the M-

Wallet system are recharge, withdrawals,

payments and recurring payments. A recharge

transaction takes place when a user adds funds

into his M-Wallet account through an outlet of

the M-Wallet system or a bank using National

Electronic Funds Transfer (NEFT). A user can

withdraw funds from his M-Wallet account to

his bank by sending a withdrawal request

which is processed by the M-Wallet system

through NEFT. Also withdrawal is available at

M-Wallet outlets for users who cannot avail

banking services. A payment transaction is

consumer initiated. The payment process

verifies the consumer and gathers details of

the payment from the consumer and processes

it accordingly. Recurring payments automate

the process of payment transactions that have

to be executed according to schedule.

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3.4. Recharge:

The virtual account needs to be recharged

before it can be used for payments. The M-

Wallet system supports two types of recharges.

First one is recharge through participating

outlets which can range from a pharmacy to a

bakery. This is to facilitate consumers who do

not have access to banking services. The outlet

can recharge the accounts through their

registered mobile devices by sending an SMS to

the M-Wallet system containing the details of

the recharge. The other mode is through a bank

transfer which gives added convenience to

those who have NEFT enabled bank accounts.

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The Procedure For Recharge Your Account.

Figure 1. Recharge using NEFT.

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3.5. Payment:

Figure 3.Payment process

After the consumer has recharged his virtual account he can use

the funds in the account to make payment for various transactions.

The payment process depicted in Fig. 2 is initialized by sending an

SMS to the M-Wallet system with the PIN for the authentication.

The M-Wallet system generates a one-time random key for the

next transaction with a timeout and sends it to the consumer. The

consumer has to reply within the timeout with the key, payment

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details like the mobile number of the

merchant, the amount to be paid to the

merchant and an optional reference text that

can be used by the merchant to identify the

transaction. If successful, the consumer’s

M-Wallet account gets debited and

merchant’s M-Wallet account is credited

with the specified amount and

confirmations along with reference text are

sent to both the consumer and the merchant.

The merchant is charged a percentage of the

transaction amount as service fee which the

merchant may pass on to the customer or

bear it himself.

The merchant in payment transaction need

not be an M-Wallet user. A temporary M-

Wallet account is created for the merchant if he is not an M-Wallet

user and this account is maintained till the user registers for M-

Wallet or decides to withdraw the funds in the temporary account.

The account needs to verified by using the mobile number as

unique identity to withdraw the funds.

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3.6. Redemption:

The funds in the virtual account can be

redeemed for money by direct bank transfer or

redemption at an M-Wallet outlet. The user

can request a bank withdrawal by sending a

SMS to the system. The request will be

processed and payment will be made to the

bank account specified. The user can also use

outlet redemption to redeem funds up to a

certain maximum limit. A request needs to be

made for outlet redemption in advance.

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3.7. Miscellaneous features

Thick, Bulky, Unmanageable physical wallet.

Finding particular items is time consuming.

Evocating a lost wallet is extremely hard

managing multiple monetary and

identification implement is not easy.

Monetary implements include cash, debit and

credit cards, and stored value cards while identification includes

national or state identification cards and driver’s licenses. M-wallet

reducing the chance of theft by having only one item to manage.

What services can I avail through M-wallet?

Banking – You can withdraw money, make remittance, and

transfer money to other bank accounts all with the help of a simple

device known as mobile phone.

Electronic wallet – Shop at malls and retail stores with your

mobile money. This is really cool. I can now shop my grocery even

if I forget my wallet back home.

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E-commerce and e-trading – Access and

buy from e-commerce websites just using

your mobile phone. Trading can also be done

on the move through your phone. Buying and

selling of shares can be done anytime you

want, even when in a bus/train.

Used as a membership ID/ID Card – Now

gyms, clubs, and libraries will start using

your mobile phones for activating

membership and your phone will be used as verification ID for

office employees and students.

The M-Wallet system gives the user the facility of check his

account balance by sending a SMS. Also the user can get details of

all payments made and recurring payments scheduled over SMS.

Flexibility in registration is provided to M-Wallet consumers

where-in the consumer can update the existing M-Wallet account

to the new SIM number by registering the new number using the

SIM of the old number and the PIN. If at any point an M-Wallet

consumer believes that his account has been compromised, he can

freeze his respective account via customer service or the M-Wallet

web portal or sending an SMS.

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3.8. Reserve Bank of India Rules

and regulations:

M-Wallet falls into the category of Open

System Prepaid Payment Instruments in Reserve Bank of India’s

(RBI) draft for Draft Guidelines for issuance and operation of

Prepaid Payment Instruments in India. These payment instruments

can be used for purchase of goods and services and also permit

cash withdrawal. According to the guidelines a mobile prepaid

system like M-Wallet can be implemented by any bank which has

which have been permitted to provide Mobile Banking

Transactions by the Reserve Bank of India. The guidelines on

Know Your Customer/Anti-Money Laundering/Combating

Financing of Terrorism guidelines issued by the Reserve Bank of

India to banks, from time to time also apply to prepaid payment

instruments. Hence M-Wallet requires fulfillment of Know Your

Customer norms. It also states that all prepaid payment instruments

issuers shall disclose all important terms and conditions in clear

M-wallet 29

and simple language. The outstanding

balances of M-Wallet shall be part of the net

demand and time liabilities of the bank for

the purpose of maintenance of reserve

requirements. This position will be

computed on the basis of the balances

appearing in the books of the bank as on the date of reporting.

3.9. Security

The popular standard used for mobile communication is Global

System for Mobile communications (GSM. M-wallet rides on the

underlying infrastructure of GSM which is insecure as it does not

have a provision for mutual authentication) which make way for

attacks like man-in-the-middle-attack and replay attacks. The

default data format for SMS messages is plaintext. The only

encryption involved during transmission is the encryption between

the base transceiver station and the mobile station. End-to-end

encryption is currently not available. The encryption algorithm

used is A5 which is proven to be vulnerable. Therefore a more

secure algorithm is needed. The SMS security mechanism relies on

GSM/UMTS signaling plane security mechanism. SMS may be

eavesdropped by the man-in-the-middle attack as no encryption is

applied to SMS message transmission.

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The first step of a payment transaction in M-Wallet is

authentication by sending a PIN by SMS. The PIN is sent in

plaintext and also saved in users sent items. This poses a security

risk and hence the M-Wallet system provides an optional J2ME

application that will encrypt the PIN before sending it to the

M-Wallet system. The default java.util.Random has some

weakness and hence cannot be used for generating encryption

keys. Secure Random is required for generating random keys. The

IEEE paper on SSMS - A secure SMS messaging protocol for the

M-wallet systems provides an elliptic curve-based public key

solution that uses public keys for the secret key establishment of a

symmetric encryption. It also provides the attributes of public

verification and forward secrecy. It efficiently makes the SMS

messaging suitable for the M-wallet applications where the

security is of great concern. However J2ME may not be available

on all devices and hence text SMS can also be used wherein the

user is responsible for deleting his sent items. In this case the GSM

layer provides confidentiality.

The mobile number of the sender can also be spoofed if a direct

connection to the short message service center (SMSC) can be

made. In order to eliminate this, the user is required to reply within

a specified timeout period with a onetime random key. This one

M-wallet 31

time random key is sent to the user via SMS and hence will be

received only by the authorized user on his mobile number.

A digital wallet has software and information component. The

software provides security and encryption for the personal

information and for the actual transaction. Normally, digital

wallets are stored on the client side and are easily self-maintained

and fully compatible with most e-commerce Web sites.

A server side digital wallet, also known as a thin wallet, is one that

an organization creates for and about you and maintains on its

servers. Server-side digital wallets are gaining popularity among

major retailers due to the security, efficiency, and added utility it

provides to the end-user, which increases their enjoyment of their

overall purchase. The information component is basically a

database of user-inputted information.

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4. Advantage of M-wallet

M-wallet service operators are

independent of the user’s mobile

operator or bank. So, any mobile subscriber can enroll for the

service through an SMS. The user can load the device with any

amount of money, but the minimum should be  20. The virtual

money 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.M-wallet name as Money-on-Mobile was earlier

launched for the B2B market in India in 2010.

A very effective way of improving customer service could be to

inform customers better. Credit card fraud is one such area. A bank

could, through the use of mobile technology, inform owners each

time purchases above a certain value have been made on their card.

This way the owner is always informed when their card is used,

M-wallet 33

And how much money was taken for

each transaction. Similarly, the bank

could remind customers of outstanding

loan repayment dates, dates for the

payment of monthly installments or

simply tell them that a bill has been

presented and is up for payment. The

customers can then check their balance

on the phone and authorize the required

amounts for payment. The customers

can also request for additional

information. They can automatically

view deposits and withdrawals as they

occur and also pre- schedule payments

to be made or cheques to be issued.

Similarly, one could also request for

services like stop cheque or issue of a

cheque book over one’s mobile phone.

There are number of reasons that should

persuade banks in favor of mobile

phones. They are set to become a crucial part of the total banking

services experience for the customers. Also, they have the potential

to bring down costs for the bank itself. Through mobile messaging

M-wallet 34

and other such interfaces, banks provide value added services to

the customer at marginal costs. Such messages also bear the virtue

of being targeted and personal making the services offered more

effective. They will also carry better results on account of better

customer profiling. Yet another benefit is the anywhere/anytime

characteristics of mobile services. A mobile is almost always with

the customer. As such it can be used over a vast geographical area.

The customer does not have to visit the bank ATM or a branch to

avail of the bank’s services. Research indicates that the number of

footfalls at a bank’s branch has fallen down drastically after the

installation of ATMs. As such with mobile services, a bank will

need to hire even less employees as people will no longer need to

visit bank branches apart from certain occasions. With Indian

telecom operators working on offering services like money

transaction over a mobile, it may soon be possible for a bank to

offer phone based credit systems. This will make credit cards

redundant and also aid in checking credit card fraud apart from

offering enhanced customer convenience. The use of mobile

technologies is thus a win-win proposition for both the banks and

the bank’s customers. The banks add to this personalized

communication through the process of automation. For instance, if

the customer asks for his account or card balance after conducting

a transaction, the installed software can send him an automated

M-wallet 35

reply informing of the same. These automated replies thus save the

bank the need to hire additional employees for servicing customer

needs.

Relevance of Mobile Money to India: Given below is a

representation of the World Economic Pyramid and financial

service access across the three tiers of global markets.

India is a typical case of co-existence of all three markets and if at

all, the disparities are likely to be bigger and more stark compared

to any other geography in the global context. One common reason

for lack of access and reach across geographies in India is the cost

of last mile connectivity which is significantly higher than

revenue/margins accrued. That is where Mobile Money Services

M-wallet 36

can be very effective. For a banking perspective, Mobile money

services can reduce cost of transaction 500 times.

While Mobile Money/Mobile financial services pan across

different segments of usage such as Payments, Microfinance and

Mobile Banking, the real potential of financial services through

mobile is accrued when an amalgamation of services such as

Healthcare, Insurance, Access to Credit services drives efficiencies

in Survival markets.

M-wallet 37

Easy and Cost –effective access to Healthcare through a

combination of Mobile Financial services and 3G services can be

very instrumental in taking Healthcare services into rural

Hinterlands. Inspite of the best efforts by Government of India,

Healthcare services is unable to surmount the last mile given

deficiency of doctors and trained staff available for Rural

Healthcare services

M-wallet 38

5. Limitations

SMS delays and loss

The M-Wallet system is vulnerable to SMS delays and loss. Loss

of message will lead to a transaction failure while a delayed SMS

may increase the time required for the transaction to complete.

However, it is expected that this vulnerability will affect only a

small number of transactions as studies indicate only 0.4% of the

SMS deliveries fail due to lack of resources. Also the use of

delivery reports will help track the delayed and lost messages.

Surcharges

There can be different types of surcharges like the flat fee for a

type of industry, or for a type of transaction. It can also be on the

total volume of the transactions, but for a flat fee.

Critical Issues to be addressed

 The sense of security to the owner is an important part. TRAI

rules on the cap of the transactions and the RBI guidelines will

form a well-defined schema for the mobile users.

Enabling third party intermediate Devices

 For paying the bills for the retailers, there should be an

intermediate third party device which will store the e-money from

the carriers. At the end of the stipulated period, the mobile carriers

disburse the amount from its shell to the corresponding retailers via

this machine.

M-wallet 39

Risks and Mitigation Strategy

Hacking is an important factor. It can be mitigated through proper

security testing. A competition for the hackers might be a good

way to the stabilization of the product. Security enabling bio-

metrics or master recognition software should be used.

Success Factors

The success factors depend on the words of the masses. A pilot

project can be used to devise new methods and methodologies for

the correction of errors in the process. India can be able to embrace

it fully within 10 years’ time.

M-wallet 40

6. COMPANIES OVERCOME WITH CONCEPT OF

M-WALLET

Safaricom, the leading mobile operator in Kenya, launched one of

the most successful implementations of a mobile money transfer

service, M-PESA. M-PESA is a SMS-based system that enables

users to deposit, send, and withdraw funds using their mobile

phone. Safaricom accepts deposits of cash from customers with a

Safaricom cell phone SIM card and who have registered as M‐

PESA users. Formally, in exchange for cash deposits, Safaricom

issues a commodity known as “e-float”, measured in the same

units as money, which is held in an account under the user’s name.

This account is operated and managed by M-PESA, and records

the quantity of e-float owned by a customer at a given time.

The choice of bearer channel used to deliver mobile money

transaction receipts in an important decision in the launch of the

service since it impacts usability and security. Safaricom chose to

use the SIM Toolkit (STK) with SMS delivery. With STK the user

has an application on the SIM card which is accessed from the

M-wallet 41

phone’s menu. This offers very high levels of security and

usability. However M-PESA is dependent on the Safaricom

network and requires a SIM change as the M-PESA application is

programmed using the STK.

M-wallet 42

Airtel has been one of the pioneers of m-wallets in India & has

worked relentlessly since its pilot launch in Delhi & NCR last year.

Airtel Money claims to be an easiest to operate Mobile Payments

system that enables payments across a wide range of services like

Utility bills, mobile & DTH recharges etc. Airtel Money works on

the simple mechanism of Load & Use. Airtel subscribers who wish

to avail the service have to fist open an “Account” by either self-

M-wallet 43

registering through the mobile or visiting Airtel Galleries or even

online at AirtelMoney.in. Once that is done successfully, user

need to load the m-wallet with money from either online Bank

Transaction or visiting Airtel galleries.

While this appears to be a great initiative with ability to pay at over

7000 merchant outlets & cashless transactions and all, we wonder

how effective is the method in today’s world where Debit Cards &

Credit Cards are so very commonly accessible.

We had predicted a revival of payments through mobiles, but the

field has yet to see wide adoption. Once this method receives a

thumbs-up from the common man, the services should see an

upswing in regular use. Speaking of adoption, even Vodafone has

yet to release an update on it ‘m-paisa’.

The government too seems supportive of this method, having lifted

the Rs. 50,000 cap as a New Year’s gift! For Airtel users, presently

there are two options; Express account or Power account. The

Express accounts has a daily spending limit of Rs.10, 000 and is

applicable to utility and recharge bills, while Power account has

daily spending limit of Rs. 50,000 and can be used for utility and

recharge bills and also merchant outlets, online shops and

transfers.

M-wallet 44

Obopay marked its India foray by launching instant money transfer

services in Indiathrough a partnership between its subsidiary

Obopay India and Yes bank.

The deal will enable Yes Bank customers to transfer money to and

from any mobile phone number with Obopay’s mobile application,

text message or mobile web. Also the customers can withdraw

cash received by using their Yes Bank debit card.

Obopay and Yes Bank give Indian mobile consumer power over

their money. This service is built for today’s mobile lifestyle,

making funds available to consumers anytime, anywher.

The customers of Yes Bank can sign up for Obiopay through forms

available at the bank’s branches and ATMs in Mumbai and the

National Capital Region.

M-wallet 45

7. Mobile Money Customer Awareness in Rural area

As aforesaid, mobile money is at its nascent stage and so is the

awareness of mobile money. It is being accepted in urban cities,

but may still be a matter of concern for mini metros and rural

areas. Several people are hesitant about payments made via other

modes not involving cards or cash; it's time

we gotten over our reservations of making

online transactions, but the concern still

bothers many. We asked the major mobile

money companies what kind of response they

have received so far. Users are concerned

about security and the mobile money transfers

come with security pins and also demand

KYC documents. Technologies have touched

India and made it possible for the country to think of becoming a

world power. But the same technology has been inaccessible to the

rural India since its advent. Here, what we need to look at is that, it

is only 30% of India’s population which is reaping benefits from

such technologies. The rest 70% live in oblivion. This amounts to a

huge difference in the rural India; economically as well as socially.

This difference seemed to be leveled down a bit after the

introduction of M-wallet in villages.

M-wallet 46

8. Mobile phones cutting banking costs, hassles in

Rural India

Mobile technology is starting to make an impact on the lives of

people in India’s hinterlands. Not only do these devices eliminate

the need for rural people to walk kilometers to reach public

phones, they are also increasingly being used by these people for

mobile banking. This practice might also save the government and

banks money and reduce.

In India, more and more rural people who did not have access to

home phones, are now getting ownership of the mobile version of

the phone – an essential tool for buying and selling goods based on

the latest market data, getting credit from lenders and other

commonplace activities. So far, most of the benefits have come

from one of the phone's simplest features: voice calls.

With more than 250 million mobile users and 6 million new ones

added each month. India now has the "teledensity" to support

more-sophisticated mobile technologies, which could have a big

impact on Indian society and the economy in the next few years.

(An extra 10 mobile phones per 100 people in a typical developing

country leads to an additional 0.59 percentage points of growth in

GDP per person, according to a London Business School study.)

These include "voice broadcast" services that would let a truck

M-wallet 47

owner inform residents of a village about a scheduled trip to the

city, or doctors announce the availability of polio vaccinations. A

more complex system would allow a small business, say, to keep

track of shipments. What's holding up these services is the lack of

mobile banking.

According to the article in Newsweek.com, several small

companies are at work on mobile banking for small businesses.

“New Delhi-based ekgaon technologies has developed a system for

tracking transactions made by so-called Self Help Groups,which

pool members' money and offer small loans to poor people. The

system uses a camera-equipped mobile phone to scan forms and a

voice-recognition system.

A.Little World, a mobile software business in Mumbai, has

developed a microfinance and payment system that lets customers

perform banking transactions through a local agent affiliated with a

bank (a practice allowed for the first time in January 2006).

Customers get a secure electronic identity via phone or smart card;

agents take deposits and dispense cash. Biometric data, such as

fingerprints, make the phones and smart cards more secure than

paper-based banking.” “Mobile banking services can reduce the

cost of transactions for loans and other services—the main obstacle

to providing banking for the poor. Mobile transactions could have

an even broader effect applied to India's social-security payments

M-wallet 48

and public-distribution system, which sells essential goods to the

poor at subsidized rates. By March 2008, people in 8,000 villages

in Andhra Pradesh will get their benefits zapped via mobile phone

to their smart cards, which they may eventually use instead of cash

to buy goods at the ration shop. A.Little.World, which is building

the system, says a nationwide service could help reduce fraud in

the public-distribution system. It would also mean going from a

bank less world to a cashless one, maybe even faster than America

or Europe.”

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9. Mobile phone penetration in India

A combination of nearly 100% mobile

penetration in India and spiraling mobile

customer base makes mobile phones the

perfect medium to enable non-cash retail

transactions in India.

Critical Success Factors

Any mobile phone solution for non-cash

retail transactions needs to have certain basic

characteristics to succeed, such as:

• Mass Reach: The solution must be adopted

by small Traders, delivery agents etc. for

whom transaction Volumes or values are low

for supporting credit card and similar non-

cash payment mechanisms

• Secure: Must be compliant with RBI

guidelines for End-to-end encryption, fraud protection, etc.

• Service Provider Agnostic: Solution must not be linked to a

particular service provider

• Convenient/Easy: Payment through mobile phones must be

convenient, easy, and faster compared to Cash and other non-cash

payment mechanisms

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• Low set-up costs & time: Effort required and the cost Of set-up

has to be much lower compared to Traditional PoS

• No/little requirement of additional infrastructure:

Ecosystem required should be primarily set-up based on the

existing wireless telecom infrastructure and

• Competitive pricing with existing methods: Pricing needs to be

competitive with other non-cash payment mechanisms

Given the specific conditions and critical success factors required

for the success of mobile payments in India,there is a need for a

customized mobile payment solution which does not just ape the

West or is extremely influenced from any other country based on

its intial success outside India.

Multiple models of mobile payments that can be adopted are

prepaid instruments where the balance is credited before the

purchase by a top-up transaction, direct debit where the bank

account is directly debited for the purchase, and the post-paid

wallet where it is either linked to a credit card or a mobile account

and the cutomer has to pay for the purchase at the time of

settlement with the credit provider.

A comparison of these three mobile payment modes indicates that

the prepaid option is the best suited for Indian conditions.

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A solution which meets the above critical success factors has the

potential for succeeding as an effective mobile payment instrument

in India.

COMPARISON BETWEEN

Parameters Credit and Airtel Money / M-Wallet

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Debit Cards Online / Offline

Nokia Money

Security CVV and CCV Relies on USSD which may be insecure

one time random key

Convenience Requires credit card terminal

Registration Required

No registration or device

Time less for offline and more for online

Fast since it uses USSD

Usually 15-20 seconds. Delays possible due to SMS

Verification process

signature on the card

PIN PIN and one time key

Bank account Required Not Required / Required

Not Required

Dependence on network provider/ bank/ mobile manufacturer

Independent Dependent Independent

Ease of Use Easy / Not Easy Easy Easy ,only sending and receiving of SMS

Requirement for Payee

Card terminal /merchant a/c, SSL

Registration No requirement

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10. The challenges for M-wallet in

Indian Market

In India, the challenge is one of successfully

handling large volumes. "Marketing these

services and creating a brand would need huge investments.

Customers have to accept cell phones as a valid form of payment.

The low average revenue of the Indian cell phone user is another

issue. Today, almost 85% of the mobile services market is pre-

paid. That makes it unviable for high-value transactions. With less

than $7 as the ARPU, it would be impractical to put airline

ticketing on the pre-paid phone account. While post-paid bills are

paid at the end of the month, most of the billers want immediate

settlement. This makes the process unviable.

The fear of misuse is also likely to limit the value of m-wallet

transactions. Typically, these transactions could be limited to one-

tenth of the credit card limit. Market estimates show that, on

average, for every one rupee worth of transactions, the

stakeholders get less than 2 paise as revenue. This means either the

volumes should be really huge or customers should start using their

cell phones for high-value deals to make it a profitable venture.

"Any transaction that ranges between Rs 500 and Rs 2,000 is

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decent enough to support the entire chain. If we get even 0.1% of

the $28 billion money transfer market, it would be a sizeable

amount.

The concept of paying bills using the m-wallet sounds good, but

the question is whether the newspaper vendor, the paanwala or

milk-man would be ready to accept virtual money instead of cash.

An entire ecosystem that includes these small billers has to be

created before the idea of m-wallets can take off in India.

However, the concept itself holds promise.

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11. CONCLUSION

The world is on its way to 100% mobile

penetration. With the mobile becoming an

important part of their daily lives, consumers are

seeking to do more and more using their handheld

devices, setting a solid foundation for the growth

of mobile commerce.

As the costs of mobile phone technology have

fallen and as the technology have been adapted to

support financial services, mobile banking

innovations have begun to spread across and

within poor countries. The low cost and the

widespread unmet demand for financial services

as captured by low rates of bank access means

that mobile banking has the potential to reach remote corners of

the socio economic, as well as geographic spectrum.

This potential can be realized, through M-Wallet, the SMS based

mobile payment system. M Wallet is an innovation that clearly

dominates its money transfer predecessors on virtually all

dimensions. It is faster, safer and network independent. It has been

designed in adherence to all the guidelines laid down by the RBI.

In developing markets, M-Wallet will allow people to use financial

services in a more efficient way and sometimes the only way - at

M-wallet 56

more affordable costs, and can greatly improve standards of living.

In developed markets, M-Wallet will be more of an extension of

the existing payment infrastructure that allows people to deal with

their financial needs in a timely and convenient way.

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 Questionnaire 

1. Age Group:

18-25

26-30

31-45

46 and above3. Occupation:

Salaried

Self Employed

Student

Homemaker3. Do you have savings account with Bank?

Yes

No4. How do you prefer to do banking transactions? Please rank

  1 2 3 4Over internet

Over mobile internet

Over mobile banking

Visiting bank

5. Have you heard of mobile banking?

Yes

No6. Have you used mobile banking in the recent past?

Yes

No7. How frequently do you use mobile banking for banking transactions?

Never

Sometimes

Most times

Always

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8. Do you feel that doing transactions on mobile banking is complicated?

You bet, it’s difficult to understand.

Its not that difficult

It's easy to use

It can't get easier9. How did you come to know of mobile banking?

Friends

Colleagues at work

Through internet

Bank promotions

Accidentally10. What do you use the mobile banking for?

Check Bank Balance

Do Funds Transfer

Bill Payments

Trading

Mobile Recharge

Other11. Do you use the mobile banking service of:

Public Banks

Private Banks

Public and Private Banks

I do not use mobile banking 

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REFERENCES [1] http://en.wikipedia.org / wiki / Mobile commerce

[2] Consultative Group to Assist the Poor. Mobile Banking: at

http://www.cgap.org/p/site/c/template.rc/1.11.14910/.

[3] Wirelessintelligence.com.

[4] Howard Wilcox. 2008. Press Release: Juniper Research

Forecasts Total Mobile Payments to Grow Nearly Ten Fold by

2013.

[5] Bonsoni.com. Research shows mobile phone payment double

by 2013.

www.bonsoni.com/blog/research-shows-mobile-phone-payment-

double-by-2013/.

[6] Howard Wilcox. 2008. Press Release: Mobile Payment

Transaction Values for Digital and Physical Goods to Exceed

$300bn Globally Within 5 Years, According to Juniper Research.

[7] National Payments Corporation of India. 2011. Interbank

Mobile Payment Service. [ONLINE] Available at:

http://www.npci.org.in/aboutimps.aspx.

[8] Reserve Bank of India. 2009. Draft Guidelines for issuance and

operation of Prepaid Payment Instruments in India.

http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=1903.

[9] Agarwal S., Khapra M., Menezes B. and Uchat N. (2007),

Security Issues in Mobile Payment Systems.

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[10] International Finance Corporation (2009, March). M-Money

Channel Distribution Case – Kenya [Online] Available at:

http://www.ifc.org/ifcext/gfm.nsf/AttachmentsByTitle/Tool6.7.Cas

eStudy-M-PESAKenya+/$FILE/Tool+6.7.+Case+Study+-+M-

PESA+Kenya+.pdf.

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