Mobile Banking OR Mobile Money
[ From chapter-15 of the book "Information Technology in Banking" written by Abul Kashem Md. Shirin and Nusrat Tamanna Prianka and published by Institute of Bankers, Bangladesh (IBB) ]
1. What
is m-Commerce?
Mobile Commerce,
also known as M-Commerce or mCommerce, is the ability to conduct
commerce using a mobile device, such as a mobile phone, a Personal digital
assistant (PDA), a smartphone, or other emerging mobile equipment such as
dashtop mobile devices.
Throughout
the 1990s the introduction of the internet and ecommerce reshaped the way that
businesses do business and the way that consumers interact with businesses.
Businesses took the opportunity to automate many processes that before would
have been handled manually, from ordering to customer service.
Mobile
commerce, often referred to as m-commerce, builds on the advances made by
e-commerce (such as automated, electronic processes) but makes interaction
available to a wider audience in a more personalized way.
2. History
of m-commerce:
Mobile
commerce was born in 1997 when the first two mobile-phone enabled Coca Cola
vending machines were installed in the Helsinki area in Finland. The machines
accepted payment via SMS text messages. The first mobile phone-based banking
service was launched in 1997 by Merita Bank of Finland, also using SMS.
In
1998, the first sales of digital content as downloads to mobile phones were
made possible when the first commercial downloadable ringtones were launched in
Finland by Radiolinja (now part of Elisa Oyj).
Two
major national commercial platforms for mobile commerce were launched in 1999:
Smart Money (http://smart.com.ph/money/) in the Philippines, and NTT DoCoMo's i-Mode Internet service in
Japan. i-Mode offered a revolutionary revenue-sharing plan where NTT DoCoMo
kept 9 percent of the fee users paid for content, and returned 91 percent to
the content owner.
Mobile-commerce-related
services spread rapidly in early 2000. Norway launched mobile parking payments.
Austria offered train ticketing via mobile device. Japan offered mobile
purchases of airline tickets.
The
first conference dedicated to mobile commerce was held in London in July 2001.
The
first book to cover mobile commerce was Tomi Ahonen's M-profits published
in 2002.
The
first university short course to discuss mobile commerce was held at the
University of Oxford in 2003, with Tomi Ahonen and Steve Jones lecturing. As of
2008, UCL Computer Science and Peter Bentley ran dedicated courses in mobile
commerce.
PDAs
and cellular phones have become so popular that many businesses are beginning
to use mobile commerce as a more efficient way to communicate with their
customers.
In
order to exploit the potential mobile commerce market, mobile phone
manufacturers such as Nokia, Ericsson, Motorola, and Qualcomm are working with
carriers such as AT&T Wireless and Sprint to develop WAP-enabled
smartphones. Smartphones offer fax, e-mail, and phone capabilities.
Since
the launch of the iPhone, mobile commerce has moved away from
SMS systems and into actual applications. SMS has significant security
vulnerabilities and congestion problems, even though it is widely available and
accessible. In addition, improvements in the capabilities of modern mobile
devices make it prudent to place more of the resource burden on the mobile
device.
3. Mobile
Banking
3.1. What
is Mobile Banking?
Mobile
Banking is a banking system mainly for the unbanked population using which a
registered mobile holder can deposit & withdraw money from an agent,
transfer money from his mobile account to another mobile account, receive
remittance from abroad, pay shopping bills & utility bills, receive salary
& various government allowances, and top up airtime for his mobile etc.
m-Commerce is a part of Mobile Banking activities. Payment of
shopping and utility bills, and airtime topup refers to the m-commerce activities.
3.2. Mobile
Banking activities:
Mobile
Banking covers almost all the important retail banking activities such as
account opening, cash and transfer. Other two transactions types covered by
General (retail) Banking activities of a bank such as clearing and issuance of
PO/DD is not possible under the mobile banking scenario. The Mobile Banking
activities are summarized below:
•
Customer
registration: Registration of Agents and Merchants by the bank officers and
registration of consumers by the Agents. Customer means Consumers, Agent and
Merchants.
•
Cash :
Cash-in/Cash-out through Cash Point (Agent), Bank Branch and ATM
•
P2P (Person to
Person): Fund Transfer from one customer’s mobile account to the mobile account
of another customer (domestic remittance). Fund transfer between bank account
and mobile account of the same customer is also possible.
•
P2B (Person to
Business): Utility Bill payment, Educational fee payment, Mobile TopUp,
Merchant payment, purchase of Bus/Railway/Airline ticket and Cinema Ticket
•
B2P (Business to
Person): Salary disbursement by corporate bodies / Industries / Office etc. and
sending foreign remittance to the mobile accounts by the foreign exchange
houses.
•
P2G (Person to
Government): Payment of income tax, city corporation tax etc.
•
G2P (Government
to Person): Disbursement of salary of the primary teachers, elderly allowance
and freedom fighters’ allowances etc.
3.2.1. Agent
and Merchant registration:
There
are three types of mobile banking account with three different features. If an
account is registered as agent, he will get a menu with three items: Customer
registration, Cash-in and Cash-out. If an account is registered as Merchant, he
will get only one menu item: Merchant Payment. If an account is registered as Customer
he will get menu with several items like: Fund Transfer, Payment of Utility
Bills, Payment of Educational fees & charges, Airtime Topup, Purchase a
ticket (Bus / Train / Airline / Cinema etc). Some common transactions are: Balance
Check, Transaction Inquiry and Change PIN.
Only
the designated bank officers can register Agent and Merchant. Bank can nominate
and register small shops, Mobile Operator’s Retailers, NGO offices and Post
Offices at different parts of the country as its agent. These agents are also
called as “Cash Point” because customer can deposit money to the Bank or
withdraw money from the Bank through these agents.
The
Agents can register a Consumer.
3.2.2. Consumer
Registration:
A
consumer fills-up a KYC (Know Your Customer) form and registers for m-Commerce
services at any selected agent of the Bank.
The
consumer hands over the registration (KYC) form at the agent. The agent invoke
the mobile banking menu by sending *<Short Code of the Bank># such as
*16216# from his mobile device. The agent then selects ‘Registration’ from the
menu and type the mobile number of the consumer and press send. The Mobile
Banking System receives the consumer’s cell number. The system then generates a
voice call to the consumer’s mobile through IVR and informs that he is going to
open a mobile account and if he really wants to continue, he should provide a
PIN. The consumer (who is in front of agent now) will type his desired PIN at
his Mobile device and continue to listen. In this way the step-1 of the registration
process ends. A sms will be sent to the customer informing his account number.
The mobile account number is the combination of customer’s mobile number and
one check digit. If the mobile number is 01233445566 and the check digit is
calculated to 8, the mobile account number will be 012334455668.
A
mobile number is public and may be known to many people. A check digit prevents
sending unwanted money by an unknown person. The customer will share the check
digit with only the persons with whom he want to transact. On the other hand
the check digit prevents typing mistake and thus depositing pr transferring
money to a wrong account.
After
completion of step-1 of the registration, the consumer can deposit money to his
mobile account, but can’t withdraw money from it unless the account is fully
authorized. The agents now send the registration forms to the nearby mobile
banking office of the bank.
Step-2
of the registration is the data entry by the bank officials or 3rd
party agents. Step-3 is checking the consumer’s existence and his personal
information mentioned in the registration (KYC) form including photograph and
signature by a bank officer or 3rd party agent, and authorizing the
mobile account in the system. This makes the mobile account fully authorized.
The consumer gets a confirmation sms instantly.
3.2.3. Cash-in:
Cash-in
is the process of depositing money in the mobile account of the consumer.
Anybody can deposit cash in a mobile account if he knows the beneficiary’s full
account number. The agent will issue a deposit slip to the depositor. The
account holder will get an instant sms regarding the deposit made into this
mobile account.
The
consumer hands over money to the agent. The agent invokes the mobile banking menu
and selects ‘cash-in’ from the menu at his mobile device. He types consumer’s mobile
account number, amount to be deposited and his PIN, and sends to the short code
of the bank. The system in the bank’s data center will transfer an equivalent amount
of money from the mobile account of the agent to the mobile account of the consumer.
Therefore the agent can only perform this operation (i.e. receives cash from consumer)
if he has sufficient fund in his account. He can re-fill fund into his mobile
account from a bank branch or another agent. His mobile account will also be
re-filled if he performs cash-out transactions.
3.2.4. Cash-out:
Cash-out
is the process of withdrawing money from the mobile account by the consumers.
Only the account holder can withdraw money from his account. He along with his
mobile phone device should physically be present in front of the agent.
The
agent invokes the mobile banking menu and selects ‘cash-out’ from the menu at
his mobile device. He types mobile account number and amount to be withdrawn and
press the send button. The system in the bank’s data center will initiate a
voice call to the mobile number of the consumer and inform that he is going to
withdraw taka xxxxx from this mobile account and if he wants to continue, he
should insert his PIN now. The consumer types his PIN in the keypad of the
mobile device. The system checks the PIN and if found correct, it transfers an
equivalent amount of money from the consumer‘s mobile account to the agent’s
mobile account. Instant sms will be send to both the parties. Then the consumer
receives his money from the Agent.
3.2.5. Merchant
Payment:
Customer
buys some items from a merchant and wants to pay from his mobile account. The
transaction will be initiated by the merchant from his registered mobile
device. He invokes the menu and selects ‘Merchant Payment’ from the menu
options. He types the mobile account number of the consumer and the amount to
be paid and press send button. The system in the bank’s data center will
initiate a voice call to the mobile number of the consumer and inform that he
is going to pay taka xxxxx from this mobile account to the merchant yyyy and if
he wants to continue, he should insert his PIN code now. The consumer types his
PIN code in the keypad of the mobile device and press send button. The system
checks the PIN and if found correct, it transfers an equivalent amount of money
from the consumer‘s mobile account to the merchant’s mobile account. Instant
sms will be send to both the parties. Then the merchant will hands over goods
to the consumer.
3.2.6. Fund
Transfer:
This
activity is initiated by the consumer who wants to transfer fund from his
mobile account to another mobile account. The consumer invokes the mobile
banking menu by sending *<Short Code of the Bank># such as *16216# from
his mobile device. The consumer then selects the Fund Transfer menu, types the
beneficiary’s mobile account number, amount and his PIN code. The system will
receive this command and transfer fund from the initiators mobile account to
the beneficiary’s mobile account. Instant sms will be send to both the parties.
If
the consumer selects the ‘Fund Transfer to/from Bank account’ menu, he will be
able to transfer fund between his bank account and the mobile account.
Conditions: The consumer must have a bank account and is pre-registered for
this service.
3.2.7. Other
services available to Consumers:
1. A
consumer can pay utility bills (electricity, gas, water, telephone etc) and
educational fees by transferring money from his mobile account to utility
company /educational institution’s mobile account.
2. A
consumer can buy ticket for bus, train, airplane, cinema and drama by
transferring money from his mobile account.
3. A
consumer can buy airtime by paying price from his mobile account to the Mobile
Operator’s account with the bank.
4. Offices,
Companies and Industries can disburse salary to their employee’s individual
mobile account using mobile banking platform.
5. Government
authorities can also disburse salary to the primary teachers, disburse elderly
allowances, freedom fighter’s allowances to the beneficiaries’ mobile account
using mobile banking platform of a Bank.
6. The
Bangladeshi expatriate can send money to mobile banking account of their near
and dear ones. The receiver (beneficiary) can withdraw the money from any of
the agents, ATMs or branches. This will widen the last mile delivery of
remittance.
3.3. Who
will provide PIN?
The
account holder whose account will be debited will provide his PIN to authorize
the transaction.
3.4. Transaction
Limits in Mobile Banking:
Mobile
banking can’t be used for transacting a large amount of money. Bank will set a
limit for deposit and withdrawal of money through Agents. Bank will also set
the maximum number of transactions that can be performed by a consumer in a day
and month. For example an customer may be allowed to withdraw or deposit a
maximum of Tk.5,000/- at a time and 5 such transactions in a day but not more
than 20 transactions in a month. By setting such limits the bank can reduce
risk that may be associated in mobile banking. As the communication using the mobile
platform is not 100% secure, the banks do not allow big amount and large number
of transactions using mobile channels.
Limits
can also be set for agents such as he can’t perform 200 cash-in/out
transactions in a day and 4000 transactions in a month. Transactions limit will
be set for merchants also.
The
other limits on consumers may include limitations on amount and number of
transactions (in a day and month) for different services like P2P fund
transfer, merchant payment, utility bill payment, airtime top up, buying
tickets, fund transfer between bank account and mobile account.
3.5. Mobile
Banking is costly:
The
customers don’t get interest on his deposit in the mobile account. On the other
hand the customer needs to pay a fee to the Agents or Bank for transactions in
his mobile account. As such the mobile banking is not cheap for the customers.
Setup
and maintaining Mobile Banking is costly for Banks. The initial cost is very
high due to high cost of necessary software and hardware. Managing a large
group of Agents throughout the country is very costly. Bank also needs to
engage a large number of employees for verification of KYC physically
throughout the country.
3.6. Models
in Mobile Banking – Bank-led and Telco-led:
There
are two models of mobile banking – Bank led and Telco led.
In
a bank-led model, the bank is responsible for its customers, known as KYC (Know
Your Customer), and is the custodian of each customer’s money and customer’s
information. It is established true that the banks are experienced in ensuring
proper KYC of the customer. Internal auditors and auditors from the central
bank periodically check the complacence of KYC requirement.
For
hundreds of years, banks are very much trusted as custodian of the deposits.
Central bank has many mechanisms and regulation to ensure that, as and when the
customers will ask, a bank will be able to pay the customer’s money back. Such
mechanisms include maintaining proper liquidity, CAR (Capital Adequacy Ratio),
CRR (Cash Reserve Requirements) and SLR (Statutory Liquidity Ratio) by the
respective banks. These requirements of the Central Bank help to keep the
health of a Bank in good condition and to protect the depositor’s interest.
Maintaining
secrecy of the customer’s information, nature of transactions and balance in
the account, is a mandatory requirement of a Bank. This is why no bank can
afford to keep its customer database in a shared software or a software system
installed and maintained by a third party. All western countries, and our
neighbors India and Pakistan, follow some type of bank led model for mobile
banking.
On
the other hand, in a telco-led model, mobile company is responsible for KYC of
the customer, and custodian of the depositor’s money and information. However,
they should keep an equivalent amount of deposited money with one or more banks
(at a negotiated rate of interest). Kenya, Philippines and some other similar
countries adopted telco-led model.
In
a Bank led model, to protect the customer’s deposit and information, the Bank
shall ensure the following:
a) The KYC of the customers shall be verified by the bank
at its own responsibility before a mobile account is active so that as and when
the authority tells the Bank to identify a customer, the bank can do so without
fail.
b) The software and hardware system shall be maintained
by the Bank to ensure that as and when the authority tells the bank to stop
transaction in a particular mobile account, the bank can do so without any
dependency on other party, and as and when the authority ask the Bank to submit
transaction history of a particular mobile account, the Bank can submit the
same immediately. This is also needed for the safety of the customer data, and confidentiality
and security of customer’s account.
c) The bank should show total deposit amount of all the
mobile accounts in the Balance Sheet of the Bank and thus maintain required CRR
(Cash Reserve Ratio) and SLR (Statutory Liquidity Ratio) with Central Bank,
maintain required Capital, CAR (Capital Adequacy Ratio) and take such other
customer protection measures as per the guideline of the Central Bank.
3.7. Connectivity - sms VS USSD:
For connectivity between the
mobile banking system at the bank and the mobile device with the agent/merchant/consumer,
sms (short messaging system) or USSD (unstructured supplimentary service data)
may be used. Sms is not a secured media of comunication, however the USSD is
resonably secured. A comparision between sms and USSD channels is given below:
Items
|
sms
|
USSD
|
Data
Format
|
The
default data format for SMS messages is in simple plaintext
|
The
default data format is unstructured
|
Encription
|
There
is no end-to-end encryption between client and bank server
|
End-to-end
encryption presents between client and bank server
|
Data
Storage
|
SMS is
first store data and forward to service
|
USSD
does not store data anywhere
|
Session
|
SMS
Banking is not session-oriented
|
Mobile
banking is session-oriented such that when a user accesses a USSD service, a
session is established, stay connected until customer closes the application
|
