Access to basic financial services continues to be an unrealised dream for millions of people in remote parts of India. National Sample Survey data reveal that 51.4 per cent of nearly 89.3 million farmer households do not have access to any credit from either institutional or non-institutional sources.

However, the exponential growth of telecom services and improved technologies have opened the door for the mobile phone to be used as an instrument for banking operations. The number of rural mobile subscribers at about 209 million far outstrips the number of bank account holders in rural India.

In light of this, the Telecom Regulatory Authority of India (TRAI) has brought out a consultation paper, “Quality of service requirements for delivery of basic financial services using mobile phones”. Aimed at making mobile banking easily accessible and more secure for users, the paper seeks comments from operators and other industry stakeholders.

A recently constituted interministerial group (IMG) made several recommendations for the delivery of basic financial services using the mobile telephone, besides other suggestions regarding the development of quality of service (QoS)  as well as pricing of services.

IMG framework

Realising that there is a huge opportunity in providing basic financial services to unbanked citizens of the country by riding on mobile infrastructure, the government constituted the IMG in November 2009 to work out the relevant norms and modalities for the introduction of a mobile-based delivery model for basic financial services and the formation of a framework to allow financial transactions using mobile phones. In April 2010, a committee of secretaries was constituted under the chairmanship of the cabinet secretary, which accepted the report and approved the IMG framework as the basis for delivering financial services using mobile technology. It was decided that all government departments and regulatory bodies would initiate steps to implement the approved IMG framework in a time-bound manner.

The IMG framework envisages sharing of the following elements:

•           A simplified common template for the know-your-customer requirements for mobile-linked, no-frills accounts, which is acceptable to all service providers.

•           Cash-in/cash-out operations at the front end involving deposits and withdrawals into mobile-linked no-frills accounts. Business correspondents (BCs) (or the sub-agents of BCs) undertaking these operations will perform them on behalf of all banks.

•           An account mapper that provides linkages between the unique identification number, mobile number and the mobile-linked no-frills account details.

•           An interoperable central payments switch, known as REMIT (real-time micro transactions) switch, that will facilitate real-time transaction routing across BCs, banks (or associated financial institutions and outsourcing partners of banks), Unique Identification Authority of India, account mappers and mobile service providers. REMIT will follow standard banking protocols in order to ensure security of transactions. It will use industry messaging standards such as ISO 8583 that are compatible with the infrastructure already in use.

•           Interoperable repositories at the national level for hosting and managing mobile-linked no-frills accounts that may be created and managed by independent third-party service providers/organisations on behalf of the participating banks.

The IMG framework based on mobile phones and biometric-based authentication will form the core micropayment platform for the transfer of benefits under various government schemes, micropayment services and financial inclusion for the target groups of social sector programmes.

QoS requirements

A large number of mobile phones with varying capabilities are available today. Many of the low-end phones do not support Java while many support the SIM tool kit but do not support a WAP browser. However, almost all phones support SMS. Implementing a banking system through mobile phones is a challenging task. Banks would look for QoS in terms of the delivery and security of messages. It would perhaps be necessary that the service providers are able to offer service level agreements that provide guarantee and promptness of delivery, good throughput, security of messages sent over the air as also encryption of the data that will be stored in the device for later/offline analysis by the customer.

In view of this, TRAI believes that it is necessary to investigate the QoS requirements for the various options open to the implementation agencies. Through preliminary discussions with some vendors and service providers, TRAI has listed several options for mobile banking platforms/ mediums such as interactive voice response, SMS, wireless access protocol, stand-alone mobile application clients and unstructured supplementary service data.

Issues for consultation

Given the above-mentioned strategies, TRAI has sought industry views on issues like which methods of communication would be suitable for enabling financial transactions on mobile networks (both GSM and CDMA); parameters that need to be defined to ensure the timely delivery of information to support financial transactions using mobile phones; cost implications of various methods for undertaking banking transactions; security requirements; and measurable QoS parameters for such networks.