Mobile banking is shaping up as next big chance for Indian carriers to expand their portfolios, as growing competition between operators puts greater emphasis on the quality of value-added services.
A study on the banking habits of India’s agricultural segment commissioned by the Bill & Melinda Gates Foundation last November found 57% of respondents utilized traditional middle men to send and receive money, at a cost of roughly 4% of the transacted amount. Banks were the cheapest method for conducting financial transactions, but are inconvenient in terms of travel and waiting time.
These findings seem to indicate healthy potential for operators seeking to cash in on the as-yet-unbanked segment of the population.
“Even a highly-educated agricultural state like Kerala has a large portion of its population that is still unbanked. There are cross-selling opportunities for this segment, where financial institutions get to offer their services to an operator’s customer base. It’s a mutually beneficial relationship,” Cyrus Daruwala, managing director at IDC Financial Insights told Telecoms Europe.net
While Indian regulations require operators to tie-up with banks and financial services institutions to enter the mobile banking space, having the telco function as an enabler may not prove detrimental, says Angel Dobardziev, a practice leader at Ovum. “What many don’t realize is that mobile banking often requires a degree of personal interaction. Mobile operator’s wide networks of distributors and retailers have the potential to be trained as mobile money agents. This is more efficient than having several bank branches built in the rural areas.”
To date, Vodafone Essar and Bharti Airtel have taken this step forward. The former has tied up with ICICI Bank to offer mobile-based financial services while Bharti has partnered with the State Bank of India.
Despite the operator backing, mobile banking has yet to take off in India, Dobardziev says. “Operators are now functioning like islands. They have been busy with rolling out networks for the masses and regulators have done little to ensure a common standard. This is a significant liability on the industry.”
However, it’s still early days yet. “Operators in India definitely have an opportunity. They have a vast customer base, matured distribution channels, and have invested significantly in analytics and business intelligence tools to mine their customer bases. All of this is very useful for the financial industry,” says Dobardziev.
“We expect other players to enter due to the high potential of this space, but this will only come as the market stabilizes and operators start to look into new levels of growth,” he added.