Mobile Banking– could this be a possible pain-reliever for telcos in India ?

In a recent article MasterCard”s India-born President and CEO Ajay Banga said, India presents much more exciting opportunity than China in terms of growth of the credit card business. Read the complete article here.

He argues ..”that cash is expensive for an economy to print, distribute and secure, costing between 0.6 to 1.5 per cent of the country”s GDP“. However, another reader (Satheesh S) has put up a valuable where he says “Nearly 80% people in the village didn’t know how to use debit card,Because lack of awareness and they are illiterate, so we need to convert the all the people in our country in to literate.Then only we Exciting in these matter“. 

What is significant to note here is that there is an opportunity for the telecom operators in India. With the ever dwindling ARPUs, increasing cost of operations, lack of bandwidth for matured operators and lack of subscribers for new incumbents, being the few challenges being faced, the vast rural market is almost not utilized as significantly as it should/could have been. DoT, in a first ever forecast of mobile penetration across India for the next six years, has projected a billion mobile phones by 2014.  It has been said that in 2014, India’s population is expected to be 1.26 billion, with mobile penetration of 1.01 billion the mobile teledensity would be 80% above. It would mean 8 out of every 10 Indians will have access to a mobile device. (read a related article here).

In such a situation, operators in this era of telecom commoditization could be looking at leveraging on mobile banking as a possible solution of increasing the revenue of the business. This could be a significant advantage even for businesses like MasterCard who would look at improving businesses in India and China and such growing markets.

What is required is therefore a business model which :
1. makes operators provide the backbone for service provisioning and availability, 
2. MasterCards and banking systems to become the gateways for validations, verifications and authorizations of transactions over the mobile phone where the device acts as the ‘wallet’ for the consumer,
3. businesses to leverage on the gateways and telecom backbone and have direct interactions with the consumers.
In such a model, for every transaction, the telecom operator and the MasterCards get a percentage– as part of service charges. 

However this model would fail if in markets like India, operators start competing for such services instead of working in a hand-shale mode. India has seen the fall of telecom revenues and the near collapse of an economy due to competition where incumbents brought the house down by reducing tariffs in order to compete– end of day bleeding to death themselves.

It may be a good time to have the business houses sit together to understand and consolidate the business for sustained growth and stabilizing the economies. Of course what really needs to be worked out first are the set of compliance required and changes to regulations that may be necessary for India. These act as significant blockers for rolling out of operations like mobile banking in India.

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