Mobile Banking: Mobile Banking 3 rd Semester M-Banking Concept: M-Banking Concept Mobile Banking refers to provision and availingof banking- and financial services with the help of mobile telecommunication devices . The scope of offered services may include facilities to conduct bank and stock market transactions, to administer accounts and to access customized information." Concepts of M-Banking: Concepts of M-Banking According to this model Mobile Banking can be said to consist of three inter-related concepts: Mobile Accounting Mobile Brokerage Mobile Financial Information Services Most services in the categories designated Accounting and Brokerage are transaction-based. The non-transaction-based services of an informational nature are however essential for conducting transactions - for instance, balance inquiries might be needed before committing a money remittance. The accounting and brokerage services are therefore offered invariably in combination with information services. Information services, on the other hand, may be offered as an independent module . Mobile banking business models: Mobile banking business models A wide spectrum of Mobile/branchless banking models is evolving . To attract low-income populations in often rural locations, the business model will depend on banking agents , i.e., retail or postal outlets that process financial transactions on behalf telcos or banks . The banking agent is an important part of the mobile banking business model since customer care, service quality, and cash management will depend on them. Many telcos will work through their local airtime resellers. However, banks in Colombia, Brazil, Peru, and other markets use pharmacies, bakeries, etc. These models differ primarily on the question that who will establish the relationship (account opening, deposit taking, lending etc.) to the end customer, the Bank or the Non-Bank/Telecommunication Company (Telco ). Another difference lies in the nature of agency agreement between bank and the Non-Bank. Models of branchless banking: Models of branchless banking Models of branchless banking can be classified into three broad categories – Bank Focused, Bank-Led and Nonbank-Led . Bank Focused: Bank Focused Traditional bank uses non-traditional low-cost delivery channels to provide banking services to its existing customers. Examples ATMs to internet banking mobile phone banking to provide certain limited banking services to banks’ customers. This model is additive in nature and may be seen as a modest extension of conventional branch-based banking. Bank Led: Bank Led It is a distinct alternative to conventional branch-based banking customer conducts financial transactions at a whole range of retail agents (or through mobile phone) instead of at bank branches or through bank employees. This model promises the potential to substantially increase the financial services outreach by using a different delivery channel (retailers/ mobile phones) a different trade partner ( telco / chain store) having experience and target market distinct from traditional banks This model is significantly cheaper than the bank-based alternatives. The bank-led model may be implemented by either using correspondent arrangements or by creating a JV between Bank and Telco/non-bank . Non Bank Led Model: Non Bank Led Model Bank has a limited role in the day-to-day account management. Typically its role in this model is limited to safe-keeping of funds. Account management functions are conducted by a non-bank (e.g. telco ) who has direct contact with individual customers. Mobile Banking Services: Mobile Banking Services Account Information Payments, Deposits, Withdrawals, and Transfers Investments Support Content Services Future functionalities in Mobile Banking Account Information: Account Information Mini-statements and checking of account history Alerts on account activity or passing of set thresholds Monitoring of term deposits Access to loan statements Access to card statements Mutual funds / equity statements Insurance policy management Pension plan management Status on cheque , stop payment on cheque Ordering cheque books Balance checking in the account Recent transactions Due date of payment (functionality for stop, change and deleting of payments) PIN provision, Change of PIN and reminder over the Internet Blocking of (lost, stolen) cards Payments, Deposits, and Transfers: Payments, Deposits, and Transfers Domestic and international fund transfers Micro-payment handling Mobile recharging Commercial payment processing Bill payment processing Peer to Peer payments Withdrawal at banking agent Deposit at banking agent Payments, Deposits, and Transfers: Payments, Deposits, and Transfers Specific sequence of SMS messages enables the system to verify if the client has sufficient funds in his or her wallet and authorize a deposit or withdrawal transaction at the agent. When depositing money, the merchant receives cash and the system credits the client's bank account or mobile wallet. In the same way the client can also withdraw money at the merchant: through exchanging sms to provide authorization, the merchant hands the client cash and debits the merchant's account . Example Re-Charge of Tata Sky Investments: Investments Portfolio management services Real-time stock quotes Personalized alerts and notifications on security prices Support: Support Status of requests for credit, including mortgage approval, and insurance coverage Check ( cheque ) book and card requests Exchange of data messages and email, including complaint submission and tracking ATM Location Future functionalities: Future functionalities Based on the 'International Review of Business Research Papers' from World business Institute, Australia. Mobile Banking functionality would enable customer connect across entire customer life cycle much comprehensively than before. What does it mean?: What does it mean? Current objectives includes building relationships, reducing cost, achieving new revenue stream It will transform to enable building brand of the banking organization. Enable create new ways of lead generation, prospecting D eveloping deep customer relationship Superior customer experience with bi-directional communications. Objective based functionality:
O bjective based functionality Communication enrichment: - Video Interaction with agents, advisors. Pervasive Transactions capabilities: - Comprehensive “Mobile wallet” Customer Education: - “Test drive” for demos of banking services Connect with new customer segment: - Connect with Gen Y – Gen Z using games and
ambushed to surrogate bank’s offerings Content monetization: - Micro level revenue themes such as music, e-book download Vertical positioning: - Positioning offerings over mobile banking specific industries Horizontal positioning: - Positioning offerings over mobile banking across all the industries Personalization of corporate banking services: - Personalization experience for multiple roles and hierarchies in corporate banking as against the vanilla based segment based enhancements in the current context. Build Brand: - Built the bank’s brand while enhancing the “Mobile real estate”.
Challenges for a Mobile Banking: Challenges for a Mobile Banking Handset operability Security Scalability & Reliability Application distribution Personalization Handsets operability: Handsets operability Large number of mobile phone devises Different application tools, browsers, OS and SMS features Localized solutions were worked out amongst countries Banking interfaces are well defined and money movements between banks follow ISO 8583 Standard I n Jan 2009, MMA published the Mobile Banking Overview for financial institutions in which it discussed the advantages and disadvantages of Mobile Channel Platforms such as Short Message Services (SMS), Mobile Web, Mobile Client Applications, SMS with Mobile Web and Secure SMS. Security: Security Security of financial transactions, being executed from some remote location and transmission of financial information over the air, are the most complicated challenges that need to be addressed jointly by mobile application developers, wireless network service providers and the banks' IT departments. Security considerations: Security considerations The following aspects need to be addressed to offer a secure infrastructure for financial transaction over wireless network : Physical part of the hand-held device . If the bank is offering smart-card based security, the physical security of the device is more important. Security of client application running on the device. In case the device is stolen, the hacker should require at least an ID/Password to access the application. Authentication of the device with service provider before initiating a transaction. This would ensure that unauthorized devices are not connected to perform financial transactions. User ID / Password authentication of bank’s customer. Encryption of the data being transmitted over the air. Encryption of the data that will be stored in device for later / off-line analysis by the customer. OTPs: OTPs OTPs are the latest tool used by financial and banking service providers. Instead of relying on traditional memorized passwords, OTPs are requested by consumers each time they want to perform transactions using the online or mobile banking interface. When the request is received the password is sent to the consumer’s phone via SMS. The password is expired once it has been used or once its scheduled life-cycle has expired. Because of the concerns made explicit above, it is extremely important that SMS gateway providers can provide a decent quality of service for banks and financial institutions in regards to SMS services. Very important to have right SLAs Scalibility: Scalibility Another challenge is to scale-up the mobile banking infrastructure to handle exponential growth of the customer base. With mobile banking, the customer may be sitting in any part of the world (true anytime, anywhere banking) and hence banks need to ensure that the systems are up and running in a true 24 x 7 fashion. As customers will find mobile banking more and more useful, their expectations from the solution will increase. Banks unable to meet the performance and reliability expectations may lose customer confidence. There are systems such as Mobile Transaction Platform which allow quick and secure mobile enabling of various banking services. I n India, there has been a phenomenal growth in the use of Mobile Banking applications, with leading banks adopting Mobile Transaction Platform and the Central Bank publishing guidelines for mobile banking operations. Application Distribution: Application Distribution Due to the nature of the connectivity between bank and its customers, it would be impractical to expect customers to regularly visit banks or connect to a web site for regular upgrade of their mobile banking application. It will be expected that the mobile application itself check the upgrades and updates and download necessary patches (so called "Over The Air" updates ). However , there could be many issues to implement this approach such as upgrade / synchronization of other dependent components. Personalization: Personalization Preferred Language Date / Time format Amount format Default transactions Standard Beneficiary list Alerts SMS Banking: SMS Banking SMS banking services are operated using both push and pull messages. Push messages are those that the bank chooses to send out to a customer's mobile phone, without the customer initiating a request for the information. Typically 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. Push SMS: Push SMS Periodic account balance reporting (say at the end of month); Reporting of salary and other credits to the bank account; Successful or un-successful execution of a standing order; Successful payment of a cheque issued on the account; Insufficient funds; Large value withdrawals on an account; Large value withdrawals on the ATM or EFTPOS on a debit card; Large value payment on a credit card or out of country activity on a credit card. One-time password and authentication Pull Services: Pull Services Account balance enquiry; Mini statement request; Electronic bill payment; Transfers between customer's own accounts, like moving money from a savings account to a current account to fund a cheque ; Stop payment instruction on a cheque ; Requesting for an ATM card or credit card to be suspended; De-activating a credit or debit card when it is lost or the PIN is known to be compromised; Foreign currency exchange rates enquiry; Fixed deposit interest rates enquiry. Q&A: Q&A Questions