Banking Services In India Marketing Essay

Published Date: 23 Mar 2015

The advent of mobile phone has revolutionised the financial services industry, empowering organizations with new business models and alternatives to offer 24X7 accessibility to their customers. Mobile Banking is a term used for performing balance checks, account transactions, payments, etc., via a mobile device such as a mobile phone. Mobile banking removes space and time limitations from banking activities such as checking account balances, or transferring money from one account to another. Mobile banking is a key element in banks' distribution channel strategies as they compete to attract and retain customers. Mobile banking also saves the time and effort of going to the bank, standing in queues, etc.

This paper analyses technologies enabling mobile banking, mobile banking services to the consumers, mobile banking in the world, awareness of mobile banking services, mobile banking in India, challenges for a mobile banking solution, suggestions for increasing mobile banking services and future of mobile banking services in the world.

Mobile is a Modern Marketing Tool - A Study with Reference to Banking Services in India

INTRODUCTION

Information technology is changing rapidly day by day. It has led to the development of more flexible services to the customer. The rapid growth in users and wider coverage of mobile phone networks have made this channel an important platform for extending banking services to customers. With the rapid growth in the number of mobile phone subscribers, banks have been exploring the feasibility of using mobile phones as an alternative channel of delivery of banking services.

Mobile banking can change our life. Today we can pay our postpaid phone bill, recharge a pre-paid phone and transfer money-the revolution has begun in a small way with a couple of operators already offering mobile banking services. Mobile phones as a delivery channel for extending banking services have off-late been attaining greater significance. It is estimated that over the next three years, there will be over 816 million mobile phone users globally accessing banking services using their mobile phones.

The biggest gainer in mobile banking is undoubtedly the customers. It provides him with a tool to manage his funds at any point of time. But for the banks it is an opportunity to access a whole new set of customers who would have other wise not entered a bank by themselves. By simply owning a mobile phone, today anyone can be a bank customer. Second, the cost of doing a financial transaction over the mobile network will be substantially lower than what it costs the banks today. As a result, these banks can cater to more people without actually opening branches in remote locations, thanks to the presence of the mobile network. It is the next step for the banks after the emergence of the ATM.

MEANING OF MOBILE BANKING

Mobile Banking (also known as M-Banking, m-banking, SMS Banking, etc.) is a term used for performing balance checks, account transactions, payments, etc., via a mobile device such as a mobile phone. It was Internet Banking, which ushered in a new era in banking convenience by bringing the entire operations to the computer, and now mobile banking promises to take it to the next level. Mobile banking today is most often performed via SMS or the Mobile Internet but can also use special programs downloaded to the mobile device.

MOBILE BANKING TECHNOLOGIES

There are four fundamental approaches to mobile banking. The first two rely on basic technologies that are standard features on almost all mobiles and second two are advanced technologies.

Technologies Enabling Mobile Banking

IVR (Interactive Voice Response)

SMS (Short Messaging Service)

WAP (Wireless Access Protocol)

Standalone Mobile Application

1. Interactive Voice Response (IVR)

IVR or Interactive Voice Response service operates through pre-specified numbers that banks advertise to their customers. Customer's make a call at the IVR number and are usually greeted by a stored electronic message followed by a menu of different options. With the activation of computer based IVR capabilities, the gamut of services that can be extended by mobile banking has increased significantly. The bank's computers are connected with a telephone and the telephone is linked with a modem. The callers or the customers are identified by a codeword/keyword and accordingly sent a suitable reply to their query.

Customers may also be provided with a Voice Mail facility with simple and limited services. Without the need to visit the bank branches, customers can access the bank services and can get a reply to all their enquiries and services requests through the mobile banking facility. IVR is the least sophisticated and the least "mobile" of all the solutions. In fact, it doesn't require a mobile phone at all. It also only allows for inquiry-based transactions, so customers can't use it for more advanced services.

2. Short Message Service (SMS)

In some circles, mobile banking and SMS banking are synonymous. That's because SMS banking uses text messaging and the iconic activity of mobile phone use. SMS works in either a push mode or a pull mode. In pull mode, the bank sends a one-way text message to alert a mobile subscriber of a certain account situation or to promote a new bank service. In push mode, the mobile subscriber sends a text message with a predefined request code to specific number. The bank then responds with a reply SMS containing the specific information.

3. Wireless Application Protocol (WAP)

WAP is the technology architecture that makes accessing Internet pages possible from a mobile phone. Because it includes the concepts of browsers, servers, URLs and gateways, WAP provides a user experience that echoes Internet banking conducted on a home computer. This is an attractive feature to many banks, who also appreciate the fact that customers don't have to download any proprietary software to enjoy robust access to a full line of services and transactions.

4. Standalone Mobile Application

Some banks are now providing a downloadable client that mobile subscribers can use to access bank services. These mobile applications offer a reliable channel and enable users to conduct even complex transactions. They also allow banks to customize the interface and brand it accordingly. As a banking institution prepares for the mobile banking revolution, it must weigh the advantages and disadvantages of these various solutions to decide which one best meets the needs of its customers and its own technology infrastructure.

MOBILE BANKING SERVICES TO THE CONSUMERS

Simplest way to classify these services depending on the originator of a service session is the 'Push/Pull' nature. Second way to categorize the mobile banking services, by the nature of the service, gives us two kinds of services one is Transaction based and another one is Enquiry Based. So a request for bank statement is an enquiry based service and a request for fund's transfer to some other account is a transaction-based service. Transaction based services are also differentiated from enquiry based services in the sense that they require additional security across the channel from the mobile phone to the banks data servers.

Based upon the above classifications, we arrive at the following taxonomy of the services listed before.

Mobile Banking Services

Push Based

Pull Based

Transaction Based

 

Fund Transfer

Bill Payment

Other financial services like share trading

Enquiry Based

Credit/Debit Alerts

Minimum Balance Alerts

Bill Payment Alerts

Account Balance Enquiry

Account Statement Enquiry

Cheque Status Enquiry

Cheque Book Requests

Recent Transaction History

One way to classify these services depending on the originator of a service session is the 'Push / Pull' nature. 'Push' is when the bank sends out information based upon an agreed set of rules; for example, bank sends out an alert when a customer's account balance goes below a threshold level. 'Pull' is when the customer explicitly requests a service or information from the bank, so a request for last five transactions statement is a Pull-based offering.

Mobile Banking Services to the Consumers

Banks offering mobile access are mostly supporting some or all of the following services:

Account Information

Payments & Transfers

Investments

Support

Content Services

Mini-statements and checking of account history

Alerts on account activity or passing of set thresholds

Monitoring of term deposits

Access to loan statements

Access to card statements

Mutual funds / equity statements

Insurance policy management

Pension plan management

Domestic and international fund transfers

Micro-payment handling

Mobile re-charging

Commercial payment processing

Bill payment processing

Portfolio management services

Real-time stock quotes

Personalized alerts and notifications on security prices

Status of requests for credit, including mortgage approval, and insurance coverage

Check (cheque) book and card requests

Exchange of data messages and e-mail, including complaint submission and tracking

General information such as weather updates, news

Loyalty-related offers

Location-based services

BENEFITS OF MOBILE BANKING

Safety: Every debit and credit above a certain value is intimated to you. Stay updated on your account transactions anywhere in the world.

Convenience: Customer need not stand in the bank counters for various enquiries about his accounts. No more queues at the ATM to check your accounts.

Time Saving: No traveling to branches or ATMs to keep track of your account. It reduces cost and time for rendering service to the customers.

Updates: Get automatic updates on bill payments and scheduled payments on your cell.

Accessibility: Avail of this service from anywhere in the world, even on the move.

AWARENESS ABOUT MOBILE BANKING SERVICES

As shown in Table 1, most survey respondents are still unsure whether their bank offers mobile banking services, except those in India. The difference could be due to marketing that is more effective and promotional campaigns in India, where 71% of survey respondents know that their bank offers such services - only 13% of respondents not know. China has the second largest proportion of respondents who are aware that their bank offers mobile banking services. It is no coincidence therefore that India and China also have the highest usage rates for mobile banking services within Asia Pacific. Awareness of mobile banking is also high in India.

Conversely, a high proportion of respondents in Taiwan (68%) do not know if their bank offers mobile banking services - this region corresponds to the lowest usage rates. The situation in Singapore, meanwhile, is slightly different, with 41% of respondents believing that their bank does not offer mobile banking services - however, it is not clear whether this is an erroneous perception or if, indeed, few Singaporean banks actually offer mobile banking services. The former is most likely, given that Singapore is one of the most advanced locations in Asia Pacific in terms of infrastructure and mobile banking 'readiness'.

Table 1

Awareness about Mobile Banking Services

Awareness

Yes

No

Don't Know

Taiwan

14

18

68

China

46

7

47

India

71

17

13

Australia

23

23

54

Singapore

8

41

51

Source: SYBASE

MOBILE BANKING IN INDIA

India is one of the biggest markets for mobile banking with the global remittances. During 2007, over $318 billion was remitted and India topped the list with inward remittances of $27 billion. Over the next couple of years, quite a bit of that money would flow wirelessly on mobile networks. Thus, the mobile phone can change the face of banking in India.

With nearly 278 million mobile phone subscribers and a growth rate of about 8 million new subscribers each month, the opportunities for mobile banking seem infinite. With the rapid growth in the number of  mobile phone subscribers in India (about  278 million as at the end of March 2008 and growing at about 8 million a month), banks have been exploring the feasibility of using mobile phones as an alternative channel of delivery of banking services. India's second-ranked status among the world's top mobile phone service markets may present a sharp contrast to the penetration of services such as insurance and banking here. But, put the two together and the opportunity of delivering such services through mobile phones make the country among the biggest potential markets for banking and other financial services.

Mobile Banking is one of the popular Mobile services that are utilized by Indians. Have a look:

1 out of every 3 people in India is ready to switch to another bank if it offers them free mobile banking.

81% of Indian respondents are aware they can check bank balance on a mobile phone.

49% have used the services in the last three months.

42% of Indian consumers are able to state their bank balance at any given time.

71% consumers in India are much more aware when compared to their counter parts in the other countries on the offering from their banks on mobile phones.

50% of Indian respondents checked their bank balance on their mobile phone and 54% via the Internet.

Majority of customers expressed concern over security of data on Mobile Banking.

India's leading telecom companies started their services for Mobile Banking, they use these services as a marketing tool to advertise there services on this basis. Here are some giants of telecom industries in India who are offering Mobile Banking in various states.

Operators and Circles enabled for the Mobile Banking Service in India

List of Operators and Circles enabled for the Mobile Banking Service are as below: -

Airtel

BPL

Vodafone

Idea

R-World

Tata indicom

Airtel Cellular

BSNL

Andra Pradesh

Chennai

Delhi

Gujarat

Karnataka

Kerala

Madhya Pradesh

Mumbai

Tamilnadu

Uttarpradesh

(East)

Uttarpradesh (West)

Mumbai

Andra Pradesh

Culcutta

Chennai

Delhi

Gujarat

Haryana

Karnataka

Mumbai

Punjab

Rajasthan

Uttarpradesh

(East)

Uttarpradesh (West)

West Bengal

Andra Pradesh

Delhi

Goa

Gujarat

Haryana

Kerala

Madhyapradesh

Maharasthra

Uttarpradesh

(East)

Uttarpradesh (West)

Andra Pradesh

Bihar

Jharkhand

Chennai

Chattisgarh

Delhi

Gujarat

Haryana

Himachal Pradesh

Karnataka

Kerala

Kolkata

Madhya Pradesh

Maharashtra

Goa

Mumbai

Orissa

Punjab

Rajasthan

Tamilnadu

Uttarpradesh (East) &West

Andra Pradesh

Bihar

Chennai

Delhi

Gujarat

Haryana

Himachal Pradesh

Karnataka

Kerala

Kolkata

Madhya Pradesh

Maharashtra

Mumbai

Orissa

Punjab

Rajasthan

Tamilnadu

Uttarpradesh (East)

Uttarpradesh (West)

Chennai

Rest of Tamilnadu

Chattisgarh

Gujarat

Madhya Pradesh

Maharashtra

GUIDELINES FOR MOBILE BANKING TRANSACTIONS IN INDIA

Guidelines for mobile banking services are as follows:

Operative Guidelines

Transaction limit as daily cap of Rs 5,000 per customer for funds transfer and Rs 10,000 per customer for transactions involving purchase of goods/services

Banks may put in place a monthly transaction limit depending on banks risk perception of the customer

Authentication Guidelines

One time approval of the RBI; approval of the banks Board of Directors

Document-based registration with mandatory physical presence of the customers

Allowing only Indian Rupee based domestic services with strict prohibition on cross-border inward and outward transfers

Only banks, that are licensed and supervised in India, and have a physical presence in the country will be permitted to offer mobile banking services

Banks that have implemented core banking solutions would be permitted to provide mobile banking services

Services shall also be restricted only to customers of banks and/or holders of debit/credit cards issued as per the RBI guidelines

Interoperability Guidelines

Banks must ensure services to customers irrespective of the network operator they have subscribed to. The leeway is limited to a maximum period of six months

To enable real time fund transfer guidelines stipulate that banks adopt message formats like ISO 8583, with suitable modification to address specific needs

Security Guidelines

All mobile banking shall be permitted only by validation through a two factor authentication

One of the factors of authentication shall be mPIN or any higher standard

End-to-end encryption of the mPIN is desirable where mPIN is used,

For mobile banking facilities that do not contain the phone number as identity require a separate login ID and password to ensure proper authentication

It is necessary that the mobile banking servers at the banks end or at the mobile banking service providers end to be certified by an accredited external agency

There must be appropriate level of encryption and security at all stages of the transaction processing with an endeavor to ensure end-to-end encryption of the mobile banking transaction

Banking regulations require implementation of application level encryption over network and transport layer encryption wherever possible

Establish proper firewalls, IDS, data file and system integrity checking, surveillance and incident response procedures and containment procedures; implementing physical security measures, conducting periodic risk management analysis, regular audits on the mobile banking systems, etc.

CHALLENGES FOR MOBILE BANKING SOLUTION

The challenges in developing a sophisticated mobile banking application are:

Challenges for Mobile Banking

Interoperability

Security

Scalability & Reliability

Application distribution

Personalization

Key challenges in developing a sophisticated mobile banking application are:

Interoperability

The desire for interoperability is largely dependent on the banks themselves, where installed applications provide better security, are easier to use and allow development of more complex capabilities similar to those of internet banking while SMS can provide the basics but becomes difficult to operate with more complex transactions.

There is a myth that there is a challenge of interoperability between mobile banking applications due to perceived lack of common technology standards for mobile banking. In practice it is too early in the service lifecycle for interoperability to be addressed within an individual country, as very few countries have more than one mobile banking service provider. As mobile banking matures, money movements between service providers will naturally adopt the same standards as in the banking world.

Security

Security of financial transactions, being executed from some remote location and transmission of financial information over the air, are the most complicated challenges that need to be addressed jointly by mobile application developers, wireless network service providers and the banks' IT departments.

Scalability & Reliability

Another challenge of banks is to scale-up the mobile banking infrastructure to handle exponential growth of the customer base. With mobile banking, the customer may be sitting in any part of the world (true anytime, anywhere banking) and hence banks need to ensure that the systems are up and running in a true 24 x 7 fashion. As customers will find mobile banking more and more useful, their expectations from the solution will increase. Banks unable to meet the performance and reliability expectations may lose customer confidence. There are systems such as Mobile Transaction Platform which allow quick and secure mobile enabling of various banking services. Recently in India there has been a phenomenal growth in the use of Mobile Banking applications, with leading banks adopting Mobile Transaction Platform and the Central Bank publishing guidelines for mobile banking operations.

Application Distribution

Due to the nature of the connectivity between bank and its customers, it would be impractical to expect customers to regularly visit banks or connect to a web site for regular upgrade of their mobile banking application. It will be expected that the mobile application itself check the upgrades and updates and download necessary patches. However, there could be many issues to implement this approach such as upgrade / synchronization of other dependent components.

Personalization

It would be expected from the mobile application to support personalization such as :

Preferred Language

Date / Time format

Amount format

Default transactions

Standard Beneficiary list

Alerts

SUGGESTIONS FOR INCREASING MOBILE BANKING SERVICES

The impetus now is for mobile and banking sectors to encourage mobile banking services and to highlight the benefits of mobile banking to an audience who are likely to be open to using another tool to support their enthusiasm for personal financial services in a more immediate manner than the Internet can offer.

For example, there is a considerable interest in mobile banking services across these huge populations and, in some areas, encouraging levels of service awareness to adoption ratios. Awareness is key if banking is to realise the opportunities presented by mobile services. Most of the Asia Pacific mobile user base is a largely untapped market in terms of mobile banking and there appears to be evident potential to expand existing efforts in helping consumers link to their banks via mobile data.

In response to the findings, it has developed five key considerations for evolving mobile services and adoption in the banking sector.

Increase awareness of mobile banking services amongst customer base

Develop more sophisticated mobile data services beyond balance and payment updates

Establish the enthusiasm for mobile banking services with different aspects of the customer demographic

Evaluate operational savings of text 'push' services to replace aspects of customer service proposition

Use flexibility of mobile data projects to validate wider strategy mobile services expansion

Mobile banking is not necessarily a panacea for all customer needs. Like any technology format, a tool can enhance existing services. Customers are keen to be kept abreast of any changes to the nano-economy and it appears that existing mobile provisioning could capitalise on this opportunity and better capture the imagination of mobile users. Innovation and cost management are critical tenets for commercial success in the financial sector and mobile banking services are capable of delivering against both of these objectives if appropriately executed.

FUTURE OF MOBILE BANKING SERVICES

India offer huge potential for mobile banking, as the mobile infrastructure is much better than fixed line infrastructure, and much more evolved. Further, India is also witnessing exponential growth in the mobile industry. For instance, the Indian telecom market is galloping with 162.3 million mobile users as on March 2006 and an average of 5-6 million mobile users being added every month. However, currently, in India mobile banking is mushrooming and gaining momentum.

Mobile banking is the evolutionary step after Internet banking. It is an additional service bolted on top of an existing solution, making access to services more immediate and reducing customer reliance on branch infrastructure or access to the Internet. A mobile bank is by definition a new offering and thus unconstrained by existing infrastructure, pricing structures and product rules, allowing it to be optimized for a totally mobile experience.

Major steps are being taken by each bank as well as the mobile operators to proactively promote the new payment schemes. The suggested advantages financial institutions have over mobile operators are their brand names. In fact, consumers trust and are loyal to classic payment schemes. If banks decided to extend the use of their payment systems to mobile payments, they would have instant recognition from the consumers since they already know the brand and they have been using other kind of transaction facilities on many occasions without any problems.

CONCLUSION

Mobile banking is getting wider acceptance, but the convenience it offers has its own share of risk. It is therefore even more important to be aware of the safeguards for the secure usage of this medium for financial transactions. Mobile phones as a medium for extending banking services have off-late been attaining greater significance. The rapid growth in users and wider coverage of mobile phone networks have made this medium an important platform for extending banking services to customers. With the rapid growth in the number of mobile phone subscribers, banks have been exploring the feasibility of using mobile phones as an alternative channel of delivery of banking services.