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The View from Here: Mobile Money for Financial Inclusion in India

By Neel Chowdhury


Since independence in 1947
, India has made great strides in socio-economic progress. Today, India is the world’s ninth largest economy by GDP and third largest in purchasing power parity. The availability of banking services for all Indian citizens is a significant aspect of this development. It not only allows access to basic financial instruments, but also encourages savings and serves as a doorway to easy credit.

India is challenged by the vast majority of a financially excluded population. Among 1.2 billion people, banking penetration is only 54 percent, and fewer than 10 percent of 650,000 Indian villages have a bank branch. Even in urban India, fewer than 35 percent of the working population with annual earnings below 50,000 rupees own a bank account. Strong policy makers like the Reserve Bank of India (RBI) are moving to policies that help drive financial inclusion.

According to the Telecom Regulatory Authority of India (TRAI), India’s mobile phone base stands at more than 884 million, with a tele-density of more than 76 percent, far exceeding that of banking reach. The wide network and outsized subscriber base of mobile phone users can provide a solution for achieving full financial exposure with minimal capital investment. Key players in Indian banking and telecom industries are already working on the marriage of the mobile phone and financial access.

From having fewer than 9,000 bank branches in 1969, India now has more than 85,000 branches. Still, with more than 600,000 Indian villages, the government’s ‘One Bank Account per Indian’ dream would take a long time to achieve. Indians, however, have high acceptance levels for technology. Another factor to note is that in India, more than 50 percent of the population falls into the 16-30 age bracket, the biggest adopters of technology and the convenience of mobile commerce.

It is important that regulators, banks, telecom operators, industry associations, non-governmental organizations (NGOs), and communities collaborate and work towards financial inclusion. It’s also important that companies like Obopay, a global payments company, educate customers to understand the benefits of mobile banking.

Indian policy makers, too, are recognizing mobile commerce as an effective solution for achieving absolute financial inclusion for national economic strength and expansion. The Reserve Bank of India (RBI) has a pro-mobile banking stance and has brought about some policy amendments such as:

Through the RBI and the National Payments Corporation of India, a widely distributed, readily accessible, and interoperable mobile payments network is being built. This network will make the payoffs of modern financial services available to consumers and, at the same time, provide growth opportunities to the banking and telecom sectors.

In a country as diverse as India, however, success in this sector can only be achieved under certain circumstances. Given that most Indians don’t use smartphones, the technology platform for mobile banking must be universal and accessible from any kind of phone—irrespective of the service provider, handset, or bank. SMS-based services can cut across these barriers, offering an open and interoperable solution. Advanced encryption and security technologies can prevent unauthorized access to account holders’ data. With two-factor authentication, every account holder must log in with a password that is authenticated by the technology at the backend, and PIN-based authentications can reduce chances of fraud.

Building an interface to address the language barrier is essential in a country with sixty-seven official languages. Since this service is used to perform day-to-day transactions, the ecosystem for mobile banking must be mature in order to make the service complete and useful—right from banks to merchants, agents, utility companies, and neighborhood vendors. Large banks and telecom companies, such as Union Bank of India and Nokia partnering with Obopay, represent a turning point for India.

With roughly 100 million Indians living away from their hometowns in other cities across the country, there is a need for safe, timely, and cost-effective money transfer facilities, especially in remote areas. This is where mobile banking and payments will play a pivotal role. With continued support from partners, government, and RBI, mobile banking will continue to break new ground in 2012.UX

Neel Chowdhury is the CMO for Obopay Inc., a global mobile payments company that tailors solutions to help partner companies launch their own branded services.

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This article was originally printed in User Experience Magazine, Volume 11, Issue 2, 2012.
http://www.usabilityprofessionals.org/upa_publications/past_issues/2012-2.html.

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