A number of Indian mobile operators have been pilot-testing transferring money using mobile handsets. There are 160 million mobile subscribers in India far outnumbering the bank branches in the country (70,000). The service could potentially allow mobile users to transfer money electronically via the handset directly and instantaneously to another mobile subscriber in the country without having to use bank accounts. However, this service cannot be rolled out until the operators are given regulatory approval both from the banking regulators and telecom regulators. But a more restricted service which would still keep banks in the loop may have a higher chance of getting a quicker approval. Bharti (Airtel) is partnering with the State Bank of India (govt bank with widest coverage) for such a service.
Mobile banking is already quite widespread in Africa and also in the Philippines. In the Philippines, Smart Padala service also allows international money transfers which is a great boon to migrant workers to remit money to their families at a much lower cost than Western Union and with much less hassle. Considering the number of migrant workers within India and expatriate workers of Indian origin around the world who could benefit from such a service getting the regulatory approvals quickly will be desirable.
Mobile money transfer await Govt nod:
Hindu Businessline Feb 27, 2007
Regulation awaited [Extract]
Many of them have already developed and tested their money remittance applications, and now only need regulatory clearance for it.
“Banking regulations currently do not allow cash for exchange of another `unit’ such as `airtime’ in the case of mobiles,” said Mr Mahesh Prasad, President, Applications & Solutions Group, Reliance Communications; his company, he says, has readied and tested the application. “Only the banks and Indian Post (through money orders) are currently allowed such transfers.”
“We could do it by partnering a bank. But then the customer would have to have a bank account and go to that bank to get money. There is a multitude of issues,” said Mr Prasad. RCom is also looking at international remittance, as its Reliance India Call card has a network of distributors overseas.
In true mobile remittance, the receiver need not go to the bank but only to prepaid outlets or distributors of the mobile service provider for the cash.
Bharti Airtel recently tied up with State Bank of India for mobile remittance, and is pilot testing it at a few villages in India. “We need regulatory approvals, this is going to take some time,” said a spokesperson for the company.
Indian mobile operators face the first hurdle along the long road to obtain govt clearances necessary to provide mobile-banking services. The DoT (ministry) may consider money transferred through mobile networks in the calculation of mobile operators’ license fees. Operators currently pay between 6-10% of their revenue as license fees to the Govt. It would defy all common sense if the Ministry were to propose this. It may be reasonable to consider the transaction fees mobile operators charge clients for transferring money as part of the operators’ total revenue. However, if the money that is being transferred by the customers is also considered as mobile operators’ revenues that would be utterly bizarre! It would be as ridiculous as considering all cash flowing in and out of a bank in deposits or transfers as part of a bank’s revenues!
Mobile Money Transfer Hit Regulatory Hurdle
The Hindu Businessline, Thomas K. Thomas March 13
Senior Government officials said that the DoT has received representation from private cellular operators on how the monies transferred through mobile phones will be considered for the purpose of calculation of licence fees.
Operators currently pay 6-10 per cent of their annual revenues to the Government as licence fees.
If the funds transferred through the new service are counted as revenue of the operators, then the net outgo for the company will increase substantially.
The operators have told the DoT that they would only play the role of facilitator, as the funds are merely transferred from one person to another.
“These money transfers fully satisfy the requirement of pass-through revenues that are deducted by the Government for assessing licence fees,” said a cellular operator.
“However, if the operators levy any service charge for providing the facility, it will form part of the annual revenue for the purpose of calculating licence fee.”
The mobile money transfer project will ride on Mastercard’s global infrastructure, which already provides connectivity to 25,000 banks.
In India, Bharti Airtel and SBI are conducting the pilot of the service.