Equipping India for Mobile Banking
According to India Express, on March 3, 2017, India’s government advised all banks to link savings accounts to mobile and Aadhaar numbers. For customers with savings accounts, mobile banking would have to be available by March 31. At the time, only half of savings accounts were linked to Aadhaar numbers, India’s government-issued identification cards. Meanwhile, only 65 percent were linked to mobile numbers, and just 20 percent of accounts linked to mobile numbers were enabled for mobile transactions.
India’s Ministry of Electronics and Information Technology did not mandate mobile account enablement, but it did strongly advocate banks to go forward with the process. The ministry also advised banks to provide adequate infrastructure during this process to avoid inconveniencing customers — a tall order to complete in 28 business days.
Enabling mobile transactions and account management involves ensuring efficient payment interfaces, security and connectivity. Regardless of whether or not the banks met the deadline, their efforts to build on existing mobile payment workflows and take advantage of expanding wireless infrastructure show that ultimately, banks can get the job done.
Processing Mobile Transactions
According to Forbes, India has over 1 billion mobile subscribers but only 125 million smartphone users. This means more banking transactions occur over older device models. Near-field communication (NFC) works by phones communicating with payment terminals through radio signals. This method works well for purchases — especially purchases of mass-transit credits, which millions of Indians use every day.
Kenya’s M-Pesa system may offer a model for additional mobile banking services. To get started, M-Pesa users have to own a certain SIM card and register their mobile numbers. As Buzz Kenya explains, people using M-Pesa must enter the recipient’s mobile phone number or company code followed by a PIN whenever they make a purchase or transfer money.
Indian banks could certainly adopt and expand on M-Pesa’s functions alongside NFC to improve their mobile methods. For example, by using a light feature-phone app or texting a short code, Indian customers could easily check account balances.
Mobile Banking Security
Authentication is an important feature to consider for mobile transactions. By linking Aadhaar numbers to savings accounts, banks could establish identity for new accounts and, at least for smartphone users, add biometric authentication for mobile payments. Aadhaar numbers are similar to Social Security numbers in the U.S., with two major exceptions. First, according to India Today, getting an Aadhaar number is voluntary. Second, in addition to storing residency information, Aadhaar databases also store biometric identifiers like fingerprints or iris scans.
Banks and the Indian government could partner to use Aadhaar biometric data to authenticate mobile transactions. For those who don’t use smartphones, transactions are easily authenticated with a PIN number. Authentication, however, isn’t the only security priority for mobile transactions. Sophos says India is among a group of countries with the most end points exposed to remote attacks, and the country is becoming a frequent target for designer cyberattacks.
Through emails or text messages crafted to resemble bank communications, attackers could trick Indian customers into clicking malicious links that download ransomware onto their phones — making it impossible to conduct financial transactions. To avoid these disasters, banks, along with national and local government agencies, must improve cybersecurity and educate customers about cyberthreats.
The example of the M-Pesa shows the power of banks and telecom carriers working together to merge mobility and banking in a developing country. While India’s banks go digital, carriers are simultaneously making significant upgrades to their cellular networks. Telecom Lead reports India’s 2G subscriber base is expected to decline starting in 2017, with 3G networks covering 90 percent of India by 2021 and 4G LTE covering 45 percent. As wireless evolves, banks can roll out 2G-appropriate solutions to rural areas and save more data-heavy options for the cities.
India is moving toward a cashless economy that’s driving digitization of its financial system. Their government has set an energetic pace for going cashless, and banks have no choice but to keep up. Fortunately, mobile banking can deliver both big revenue opportunities for banks and easy payment collection options for India’s entrepreneurs. Developing mobile infrastructure may require some investment now, but the rewards will be worth it.