You must have watched the mobile money commercials on TV channels. These advertisements tell you that you can transfer money to your loved ones, make bill payments and even shop using your mobile phone. The noise is going to get louder in the coming days as many banks and telecom companies are betting big on mobile-based payment options.

Typically you need a bank account to avail of mobile banking services, but companies like Airtel Money, Oxigen and Obopay are offering mobile payment options for even individuals without a bank account.

 

The Mobile Wallet

Mobile-enabled payment mechanisms eliminate the need for opening a bank account, benefiting millions of individuals who wish to transfer funds or pay utility bills. Such transactions are subject to RBI's guidelines for semi-closed prepaid instruments.

Mobile wallets issued by banks and non-banking entities are subject to RBI's guidelines for prepaid instruments. Non-banking entities can issue semi-closed prepaid instruments that allow you to make payments for goods and services as well as money transfer to bank accounts. Banks, on the other hand, can issue prepaid instruments, including mobile wallets, that can be used by recipients to withdraw money via business corres- pondents appointed by banks.

The maximum value of a wallet cannot exceed Rs 50,000 and this sum can be used for purchasing goods and services. But, in case of person-to-person money transfer, the per-transaction limit is set at Rs 5,000, and Rs 25,000 per month. "The customer can use 'mobile wallets' either directly after loading cash or through authorised retailers, functioning as business correspondents to banks, who will help them execute the transactions. Airtel Money, Oxicash, UBI Money and SBI MobiCash are examples of customers transacting directly by loading cash into the 'mobile wallets' at designated outlets/branches," says Sunil Kulkarni, deputy managing director, Oxigen, a mobile payment service provider.

You need to pay a nominal initial registration fee prescribed and submit identity documents to complete the know-your-customer (KYC) procedure. Thereafter, you can use the funds to transfer money to your friends and family, pay utility bills, recharge your cell phone/TV, book railway or movie tickets, pay insurance premiums and so on. Most service providers offer mobile wallets and these services on all kinds of mobile handsets – basic (on the SMS platform), JAVA-enabled/Android/iPhone using GPRS and so on. The RBI-mandated two-factor authentication, which is applicable to mobile wallets too, ensures that your balance in the wallet cannot be misused even if you happen to lose the phone.

 

Effecting withdrawals

While paying utility bills using a mobile wallet is a fairly simple exercise, remitting money is slightly more complex. As of today, the central bank does permit withdrawals using semi-closed mobile wallets. That's the reason they are termed semi-closed instruments. While the sender need not maintain a bank account, the recipient has to have one to make withdrawals, which can be done through bank's branches or ATMs. However, in case of mobile wallets issued by banks, they can also withdraw using the services of business correspondents (BC), wherever possible.



 

Advantage unbanked individuals

Clearly, mobile wallets offer a lot of convenience to individuals without a bank account. However, given that they still have to visit the designated bank branches or retail outlets to load cash, wouldn't they be better off visiting say a utility's bill collection centre directly? "While a utility company may maintain 30 or 50 collection centres in a city, the number of retail outlets facilitating mobile wallet-based services runs into thousands.

Besides, unlike the utilities' own dedicated collection centres, such mobile payments are not bound by day/time constraints," says Kulkarni. Migrant workers sending money to their relatives through another individual or post office money order service could also find them useful. Neel Chowdhury, CMO & VP, Obopay, adds: "Since customers can use cash to load their mobile wallets, anyone can have an account. Once a sufficient amount of cash is loaded, customers save on time and travel costs as they don't have to visit outlets to pay bills or drop cheques."

 

Utility value for banked customers

Mobile payment may be a great tool for empowering unbanked individuals, but what is the significance of such services for individuals who maintain bank accounts and have access to Internet banking services? "Many banked customers do not have access to computers with Internet connections, but they do have access to mobile phones. Also, not all customers have GPRS activated on their phones and incurring Internet rental expenses only to pay bills is not cost-effective either," says Chowdhury.

Accountholders can also use mobile wallets to fund transactions of their children studying in other cities. It is a better alternative to cash as it helps you keep track of their spending pattern. Then, there are perceived security concerns that mobile wallet could put to rest. "If you are using your bank account to transact, you would be subjecting the entire balance in your account to cyber frauds, like phishing. Many people are hesitant to provide all their details on the Net as they do not wish to expose their bank balance to such perceived risks. In case of mobile wallets, such risk is limited to the value loaded, which ensures convenience and peace of mind," adds Kulkarni of Oxigen.

However, there is little doubt that bank accountholders, particularly those comfortable with Internet banking, may prefer to rely on channels and systems provided by their bank. Therefore, such instruments carry higher utility value for individuals without a bank account as these ensure that making payments become a simpler affair.

Source: Economic Times

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