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Mobile Banking



Mobile banking is a term used for performing balance checks, account transactions, payments etc. through a mobile phone. Nowadays Mobile banking is most often performed by way of SMS or Mobile Internet. It can also use special programs by downloading to the mobile device.

The quick growth in users and wider coverage of mobile phone networks have made this medium an important platform for extending banking services to customers. With the rapid growth in the number of mobile phone subscribers in India, banks have been exploring the possibility of using mobile phones as an alternative channel of delivery of banking services. Some banks have started offering information based services like balance enquiry, transactions enquiry, stop payment instruction of cheques, location of the nearest ATM/branch etc. Acceptance of transfer of funds instruction for credit to beneficiaries of same/or another bank in favor of pre-registered beneficiaries have also started in a few banks.

Mobile Banking is the most recent area of development in the banking segment and is expected to replace the credit/debit card system in the future. In the past two years, mobile banking users have increased three times if we compare the use of either debit card or credit card. With mobile banking facilities, one can bank from anywhere, at anytime and in any condition. The system uses either SMS or WAP (Wireless Application Protocol) for its functioning.

Regulatory & Supervisory Issues

In order to ensure a level playing field and considering that the technology is comparatively new, Reserve Bank has brought out a set of operating guidelines for adoption by banks they are :

  • Only banks which are licensed and supervised in India and have a physical presence in India are permitted to offer mobile banking services.
  • The services shall be limited only to customers of banks and/or holders of debit/credit card issued as per the existing Reserve Bank of India guidelines.
  • Only Indian Rupee based domestic services shall be provided. Use of mobile banking services for cross border inward and outward transfers is strictly forbidden.
  • Banks may also use the services of Business Correspondent appointed in compliance with RBI guidelines, for extending the facility to their customers.
  • The guidelines issued by the Reserve Bank on ‘Risks and Controls in Computers and Telecommunications’ will apply to mobile banking.
  • The guidelines issued by Reserve Bank (RBI) on "Know Your Customer (KYC)", "Anti Money Laundering (AML)" and combating the Financing of Terrorism (CFT) from time to time would be applicable to mobile based banking services also.
  • Only banks who have implemented core banking solutions would be allowed to provide mobile banking services.
  • Banks should file Suspicious Transaction Report (STR) to Financial Intelligence Unit – India (FIUIND) for mobile banking transactions as in the case of normal banking transactions.

Registration of customers for mobile service

  • Banks must put in place a system of document based registration with mandatory physical presence of their customers, before commencing mobile banking service. RBI would consider relaxation in specific cases while approving the proposals of banks.
  • While registering the customer, the full details of the Terms and Conditions of the service offered should be communicated to the customer.

Technology and Security Standards

Information Security is most critical to the business of mobile banking services and its fundamental operations. Therefore, technology used for mobile banking must be secure and should ensure confidentiality, integrity, and authenticity.

Inter-operability

  • Banks offering mobile banking service should ensure that customers having mobile phones of any network operator is in a position to avail of the service. Restriction, if any, to the customers of particular mobile operator(s) is allowable only during the initial stages of offering the service, up to a maximum period of six months subject to review.
  • The long term goal of mobile banking framework in India would be to facilitate funds transfer from account in one bank to any other account in the same or any other bank on a real time basis irrespective of the mobile network a customer has subscribed to. This would necessitate interoperability between mobile banking service providers and banks and development of a host of message formats. To ensure inter-operability between banks, and among their mobile banking service providers, banks shall adopt the message formats like ISO 8583, with suitable modification to address specific needs.

Clearing and Settlement for inter-bank funds transfer transactions

To meet the intention of a nation-wide mobile banking framework, facilitating inter-bank settlement, a healthy clearing and settlement infrastructure operating on a 24x7 basis would be necessary. Pending creation of such a national infrastructure, banks may enter into bilateral or multilateral arrangement for inter-bank settlements, with express authorization from Reserve Bank of India (RBI), unless such arrangements have been authorized by the RBI under the Payment and Settlement System Act, 2007.

Customer Complaints and Grievance Redressal Mechanism

The customer /consumer protection issues assume a special importance in view of the fact that the delivery of banking services through mobile phones is relatively new.

Transaction limit

  • Presently, banks are permitted to offer this facility to their customers subject to a daily cap of Rs. 5000/- per customer for funds transfer and Rs.10, 000/- per customer for transactions involving purchase of goods/services.
  • Banks may also put in place monthly transaction limit depending on the bank’s own risk perception of the customer.

Board approval

Approval of the Board of Directors (Local Board in case of foreign banks) for the product, as also the perceived risks and mitigation measures proposed to be adopted should be obtained before launching the scheme.

Approval of Reserve Bank of India

Banks wishing to provide mobile banking services shall request prior one time approval of the Reserve Bank of India, by providing full details of the proposal.

SMS banking

SMS banking services are operated using push and pull messages. Push messages are those that the bank uses to send out to a customer's mobile phone, without the customer initiating a request for the information. Pull messages are those that are initiated by the customer, using a mobile phone, for getting information or performing a transaction in the bank account. Normally push messages could be either Mobile marketing messages or messages alerting an event which happens in the customer's bank account, such as a large withdrawal of funds from the ATM or a large payment using the customer's credit card, etc. We may have to thank the banks which are providing banking at the send-of-our-SMS. The technology is at its uppermost level to move our money while we are on the move. If you are having non-WAP enabled mobile handset, you can use the facility of SMS services. The following operations can be easily done by the customer :

  • Balance enquiry
  • Last three transactions
  • Cheque payment status
  • Cheque book request
  • Statement request
  • Demat - Free Balance Holding
  • Demat - Last two Transactions
  • Bill Payment, etc.

The SMS facility brings peace of mind to customers and opens doors to many more technological potentials and innovative services. It is very similar to how an ATM works. To use ATM, a card is required and to use SMS service, a mobile phone is needed. In both the cases, secret number is compulsory to access.
SMS banking is also very safe because ;

  • One confirms the mobile number with the authentications key
  • The customer uses secret Mobile Personal Identification Number (MPIN).

A new concept has been developed by the Bank of Punjab; they call it as "Mobile Wallet". With the support of this technology, a customer can make payments and receive payments of account of buy/sell (merchants) through SMS. In this system, a buyer sends a message for buying and the bank in return sends a message verifying the purchase both to the merchant as well as to the buyer. Debit card number is the key field which is used for the genuineness of the customer.

Deposits and Bank Accounts
Fixed deposits