With the aim of ensuring financial inclusion through m-banking services, the Telecom Regulatory Authority of India (TRAI) has released a consultation paper, “USSD-based Mobile Banking Services for Financial Inclusion”.

Currently, m-banking services are at a nascent stage in India. As per Census 2011, only 54.4 per cent of rural households have access to banking services. Given that over 351.1 million of the country’s 873.4 million wireless subscribers are from rural areas, TRAI is of the view that the mobile handset can be leveraged to achieve the goal of financial inclusion of the unbanked population.

Prior to this, an interministerial group (IMG) was formed by the central government to prepare a framework for the delivery of basic financial services through mobile handsets. The IMG suggested that the delivery infrastructure and processes be shared by service providers and envisaged the opening of mobile-linked “no-frills” accounts. The customer would be able to undertake basic transactions including deposits, withdrawals, cash transfer and balance enquiry. The key players would be compensated for the same, after calculating the actual costs incurred.

Moreover, the IMG recommended that operators provide prioritised secure communication for m-banking services and customers be charged Re 1 for each transaction made from their mobile-linked no-frills account. Banks were not expected to pay the operator for any such transaction.

TRAI functioned as a key stakeholder and provided the required regulatory framework pertaining to the quality of service and the provisioning and pricing of mobile-based financial services. The regulator was also required to devise a mechanism to support the operation of market forces to ensure that quality mobile services were provided at reasonable tariffs.

In response to these recommendations, the National Payment Corporation of India (NPCI) launched the immediate payment service facility, an interbank electronic fund transfer service through mobile phones and other channels (the internet or an ATM). Meanwhile, the Department of Telecommunications allocated the *99# USSD code to the Department of Financial Services (DoFS) to undertake m-banking services through NPCI’s USSD gateway and requested telecom operators to connect to it as per requirement, in consultation with NPCI.

Against this background, TRAI issued the Mobile Banking (Quality of Service) Regulations, 2012, which required every bank to provide m-banking services to its customers via the SMS, USSD and interactive voice response (IVR) platforms. As a result, NPCI launched a USSD gateway to enable m-banking through this channel. However, the DoFS expressed concerns over the fact that the high price of the USSD service offered by telecom operators was a major constraint for the widespread use of this platform for m-banking. Considering that USSD was a viable platform for m-banking services, the DoFS suggested that TRAI stipulate a tariff of Re 0.25 per transaction for USSD-based m-banking transactions.

Following this, TRAI held several rounds of meetings with various stakeholders between August 2012 and June 2013 to identify a viable business model for providing m-banking services on the USSD platform.

In order to identify and address the various issues related to USSD-based m-banking for financial inclusion, TRAI has issued the consultation paper.

 Key issues for consultation 

•  Can USSD be considered an appropriate mode for m-banking to ensure financial inclusion? If not, which mode is likely to be more viable?

•  Do the Mobile Banking (Quality of Service) Regulations, 2012 require to be amended to mandate every operator (the bearer) to facilitate banks and their agents (the aggregation platform providers) to use SMS, USSD and IVR to provide banking services?

•  In the case of USSD-based m-banking transactions, should operators charge their customers?

•  Should operators generate records for all USSD-based m-banking transactions?

•  Should a ceiling of Rs 1.50 per USSD-based m-banking session be imposed? If not, what kind of tariff model would be suitable?

•  Is there any other relevant issue which should be considered in the present consultation on the use of USSD as a bearer for m-banking services?

Stakeholders were asked to submit their views by early October 2013 and counterviews by mid-October 2013.