As competition between operators heats up and prices fall within margins of each other, the quality of value-added services is a crucial factor in deciding what sets one operator apart from the next. Mobile banking might just be the next big chance for carriers in India to expand their portfolios
A study on the banking habits of India’s agricultural segment commissioned by the Bill & Melinda Gates Foundation last November found 57% of respondents utilized traditional middle men to send and receive money, at a cost of roughly 4% of the transacted amount. Banks were found to cheapest method for conducting financial transactions but signified major inconveniences in terms of travel and waiting time. These findings seem to indicate healthy potential for operators seeking to cash in on as-yet-unbanked segment of the populace.
“Even a highly-educated agricultural state like Kerala has a large portion of its population that is still un-banked. There are cross-selling opportunities for this segment, where financial institutions get to offer their services to an operator’s customer base. It’s a mutually beneficial relationship,” Cyrus Daruwala, managing director at IDC Financial Insights, told Telecom Asia.
While regulations in India dictate telecom operators require tie-ups with banks and financial services institutions in order to enter the mobile banking space, having the telco function as an enabler may not prove detrimental, Angel Dobardziev, a practice leader at Ovum, told Telecom Asia. “What many don’t realize is that mobile banking often requires a degree of personal interaction. Mobile operators’ wide networks of distributors and retailers have the potential to be trained as mobile money agents. This is more efficient than having several bank branches built in the rural areas.”
To date, Vodafone Essar and Bharti Airtel have taken this step forward. The former has tied up with ICICI Bank to offer mobile-based financial services, while the latter has partnered the State Bank of India.
Mobile banking has yet to take off in India, says Dobardziev. Issues now facing the industry concern interoperability. “Operators are now functioning like islands. They have been busy with rolling out networks for the masses and regulators have done little to ensure a common standard. This is a significant liability on the industry.”
However, it’s still early days yet. “Operators in India definitely have an opportunity. They have a vast customer base, matured distribution channels, and have invested significantly in analytics and business intelligence tools to mine their customer bases. All of this is very useful for the financial industry,” says Dobarziev.
As the world’s second largest wireless phone market, India is brimming with potential and steeped in competition caused by a large number of players and the recent implementation of mobile number portability. “We expect other players to enter due to the high potential of this space, but this will only come as the market stabilizes and operators start to look into new levels of growth,” says Dobardziev.