Mobile banking services were introduced in the global market in 1999, when the Finland-based MeritaNordbanken Group launched wireless application protocol-based banking services. The facility enabled customers to access information pertaining to their account, monitor credit card transactions, account-to-account transfers and bill payments.

M-commerce services have been witnessing significant uptake since then. According to BI Intelligence, in January 2013, 29 per cent of global mobile subscribers used their handsets to carry out a financial transaction.

However, in India, the service is at a nascent stage. According to the eBay India Mobile Commerce Report (based on responses from 4,500 eBay India users in May 2012), over 94 per cent of smartphone users access the internet on their mobile device. In terms of customer usage patterns, emails and social networking are the most popular services, followed by online retail transactions. Interestingly, according to a survey carried out by Octane Marketing, 76 per cent of respondents use their mobile handsets to update Facebook, while 64 per cent access email through their device.

Current status

According to the Internet and Mobile Association of India, and IMRB, India is expected to have about 165 million mobile internet users by March 2014, up from 87.1 million in December 2012. This can be attributed to the increasing number of consumers accessing the web through mobile devices and dongles.

This is a positive trend for the uptake of m-commerce in India. Besides, enhanced 3G penetration and availability of affordable smartphones are expected to provide a fillip to these services. At present, the country has 60 million-70 million smartphone users and this base is growing at about 150 per cent year on year.

Meanwhile, the Reserve Bank of India (RBI) has framed guidelines for mobile banking and m-commerce services. The Mobile Banking Quality of Service Regulations, 2012 define a set of guidelines for operators to offer these services in a secure manner.

As per the guidelines, telecom operators are required to provide banks and customers with the option of undertaking transactions using several modes – SMS, the interactive voice response (IVR) system, and unstructured supplementary service data (USSD).

If users opt for SMS services, operators must ensure that a report confirming the delivery of the message is sent to the customers or banks. Further, if an SMS sent by the bank is not delivered (within 72 hours) to the customer due to network congestion or handset-related issues, USSD communication confirming the completion of the transaction should be sent. The regulator has made it mandatory for operators to ensure that a customer is able to complete any banking transaction within two stages. These transactions could be of various types including cash deposits, cash withdrawals, transfer of funds and balance enquiries. The upper limit set by RBI for such transactions is Rs 50,000.

Offerings and solutions

Currently, the Indian m-commerce market is driven by m-payments and m-banking services. The scope of these services includes paying utility bills to transferring funds across the country.

To capitalise on opportunities offered by these services, several telecom operators have partnered with banks to launch mobile wallet services. This service provides consumers a single window to pay their utility bills through an SMS, a website or an IVR platform.

Another upcoming facility is the “mCheck” service, which allows users to carry out various transactions through their mobile handset.

Meanwhile, various e-commerce players are promoting service uptake. HomeShop18 has introduced two mobile applications for Android-based smartphones and the iPhone. The company has also launched the “Scan N Shop” virtual shopping wall at the T3 Terminal in Delhi.

Banks as service facilitators

Over the past few years, banks have been partnering with service providers to offer m-banking services in rural and remote areas. Today, leading banks including Axis Bank, HDFC Bank and the State Bank of India (SBI) provide banking services like cash withdrawal and transfer online and through mobile handsets.

Despite these efforts, this service segment has a long way to go in terms of customer reach. According to the Boston Consulting Group, there is significant scope for the growth of m-commerce in India. At present, the country has over 800 million mobile subscribers, including 240 million with bank accounts, and 20 million with credit cards; 88,000 bank branches; and 70,000 cash points. However, as per the consultancy firm, half of the country’s households are still unbanked, with 42 per cent having at least one mobile phone each. The Boston Consulting Group expects fee-based revenues from m-commerce to cross $4.5 billion by 2015 in India. The financial inclusion of these unbanked users will pave the way for the adoption of m-banking and m-payment services.

Key hurdles in uptake

Lack of awareness and security-related concerns are two major issues impacting the growth of m-commerce in the country. The majority of the population is unaware of how to utilise their mobile handset to avail of these services. Operators and retailers need to educate users about the services available in the market. Also, users are wary of using their mobile phones for making payments due to security concerns. Since m-commerce involves monetary transactions, operators must emphasise on reliability and security for mobile-based transactions.

Several companies are working towards providing solutions for ensuring secure transactions through mobile phones. For example, eMudhra offers a digital signature-based authentication solution to strengthen and secure mobile and internet banking mediums. The solution enables banks to have a digital signature certificate to authenticate and digitally sign online transactions in line with RBI’s m-banking and m-commerce directives. Further, the company has introduced the Xygle mobile platform, which enables consumers to pay for products by scanning a quick response code tagged to them using their mobile phones.

Interestingly, several global players have entered this space and are offering m-commerce solutions. Sweden-based Mobill has established a development centre in India, and has partnered with Sterna Security to offer its mobile payment solutions in the country. Mobill’s m-commerce solution portfolio includes a mobile payment solution, M-Payment; a mobile parking fee solution, M-Parking; a public transportation ticketing solution, M-Ticket; and a mobile message broadcast and customer support solution, M-Gateway.

The way forward

This industry is expected to gain momentum going forward. According to HomeShop18, m-commerce is expected to contribute over 25 per cent of the total e-commerce traffic by 2015.

Apart from the increasing adoption of smartphones coupled with affordable broadband plans, the availability of innovative applications will drive growth in this space. According to a study released at the Mobile Application Summit 2012 in Bengaluru, 100 million applications for mobile services are being downloaded in India every month. Innovative mobile applications enhance the mobile internet experience and significantly increase the time consumers spend on mobile internet. Operators are required to work closely with valued-added service providers and retailers to offer simple applications to consumers.

With people increasingly using their mobile phones on the go, m-commerce offers huge business opportunities to companies in categories like e-commerce, online ticketing, banking and gaming. A more cooperative approach between operators and other ecosystem partners like banks and retailers will drive m-commerce service adoption over the next few years.