Introduction to Mobile Banking

Mobile banking (also known as M-Banking, banking, SMS Banking etc.) is a term used for
performing balance checks, account transactions, payments etc. via a mobile device such as
a mobile phone. Mobile banking today (2007) is most often performed via SMS or
the Mobile Internet but can also use special programs, called clients, downloaded to the
mobile device. Trends in mobile banking the advent of the Internet has enabled new ways to
conduct banking business, resulting in the creation of new institutions, such as online banks,
online brokers and wealth managers. Such institutions still account for a tiny percentage of
the industry. Over the last few years, the mobile and wireless market has been one of the fastest
growing markets in the world and it is still growing at a rapid pace. According to the GSM
Association and Ovum, the number of mobile subscribers exceeded 2 billion in September
2005, and now exceeds 2.5 billion (of which more than 2 billion are GSM). With mobile
technology, banks can offer services to their customers such as doing funds transfer while
travelling, receiving online updates of stock price or even performing stock trading while
being stuck in traffic. Smart phones and 3G connectivity provide some capabilities that older
text message-only phones do not. According to a study by financial consultancy Celent, 35%
of online banking households will be using mobile banking by 2010, up from less than 1%
today. Upwards of 70% of bank centre call volume is projected to come from mobile phones.
Mobile banking will eventually allow users to make payments at the physical point of sale.
"Mobile contactless payments´ will make up 10% of the contactless market by 2010. Another
study from 2010 by Berg Insight forecasts that the number of mobile banking users in the US
will grow from 12 million in 2009 to 86 million in 2015. The same study also predicts that
the European market will grow from 7 million mobile banking users in 2009 to 115 million
users in 2015. Many believe that mobile users have just started to fully utilize the data
capabilities in their mobile phones. In Asian countries like India, China, Bangladesh,
Indonesia and Philippine s, where mobile infrastructure is comparatively better than the
fixed- register on-line. This means that the registration process is much weaker (because of
the limitations of the Internet). This is the weak link in connecting a phone to a bank account.
If the need to allow mobile banking registration on the Internet, fraudulent registrations will
occur.

The study is intended to help to raise awareness among key decision makers in the public,
private and civil society sectors about the potential importance of the use of low cost mobile
devices -- especially mobile phones -- to help benefit a variety of educational objectives. By
documenting the existing landscape of initiatives in this area and emerging 'good practice', it
is also hoped that this work will serve as a common base for further analytical work in this
area, and inform the impending explosion of development of new hardware, software and
business services occurring on mobile devices, to the benefit of these educational objectives.
This activity is one component of a larger 'mobile flagship' program at the World Bank
consisting of studies and activities related to mobile services and applications in selected
sectors, including Mobile Banking Users and Non Users Behaviour Study´; ³Extending
Mobile Applications in Africa through Social Networking"; and Mobile Applications for
Sectoral Development´.
History of mobile banking.

The first mobile banking and payment initiatives were announced during1999 (the same year
that Fundamo deployed their first prototype). The first major deployment was made by a
company called Paybox (largely supported financially by Deutsche Bank). The company was
founded by two youngGermans (Mathias Entemann and Eckart Ortwein) and successfully
deployed the solution in Germany, Austria, Sweden, Spain and the UK. At about 2003 more
than a million people were registered on Paybox and the company were rated byGartner as
the leader in the field. Unfortunately Deutsche Bank withdraws their financial support
and the company had to reorganise quickly. All but the operations in Austria closed down.
Another early starter and also identified as a leader in the field was a Spanish initiative
(backed by BBVA and Telephonica), called Mobi Pago. The name was later changed to Mobi
Pay and all banks and mobile operators in Spain were invited to join. The product was
launched in 2003 and many retailers were acquired to accept the special USSD payment
confirmation. Because of the complex shareholding and the constant political challenges of
the different owners, the product never fulfilled the promise that it had. With no marketing
support and no compelling reason for adoption, this initiative is floundering at the moment.
Many other large players announced initiatives and ran pilots with big fanfare, but never
showed traction and all initiatives were ultimately discontinued. Some of the early examples
are the famous vending machines at the Helsinki airport supported by a system from Nokia.
Siemens made announcements in conjunction with listed and high-flyingGerman e-commerce
company, Brokat. Brokat also won the lucrative Vodafone contract in 2002, but crashed soon
afterwards when it runs out of funds. Israel (as can be expected) produced a large number of
mobile payment start-ups. Of the many, only one survived Trivnet. Others like Adamtech
(with a technically sound solution called Cellpay) and Paytt disappeared after a number of
pilots but without any successful production deployments. Initiatives in Norway, Sweden and
France never got traction. France Telecom launched an ambitious product based on a special
mobile phone with an integrated card reader. The solution worked well, but never became
popular because of the unattractive, special phone that participants needed in order to
perform these payments. Since 2004, mobile banking and payment industry has come of age.
Successful deployments with positive business cases and big strategic impact have been seen
recently.

Activity Description

Drawing on examples of the use of mobile phones and related handheld technologies
for educational purposes in advanced economies like Korea, Japan, the U.K., the United
States and Finland, and an emerging evidence base of pilot projects from countries as diverse
as Tanzania, Kenya, the Philippines, Mongolia, China and South Africa, this study proposes
to:
1. Map the existing universe of projects and initiatives exploring the use of mobile
phones in education in developing countries.
2. Map the existing and potential uses of mobile phones in this regard, comparing and
contrasting such uses with other ICT devices.

3. Document lessons learned so far from key initiatives in this area, proposing tentative
guidance for policymakers and various stakeholder groups in this fast moving area.

4. Propose a conceptual framework and way forward for further analytical work to aid in
the documentation and rigorous impact cost and impact assessment of the use of mobile
phones in education.

While the explosive use of mobile phones in developing countries is well- documented -- and
undeniable -- and evidence is emerging that phones are slowly making their way into the
hands of teens, just what this might mean for the delivery of education in developing
countries is a little less clear. Five years ago info Dev commissioned work to map out what
was known about the nascent topic of µmobile banking, and the resulting study, the first of its
kind, helped frame the issues for donor agencies, governments, NGOs and private sector
firms alike. M-banking has exploded since then, and this study proposes to do for the use of
mobile phones in education what the earlier info Dev study did for the use of mobile phones
in the financial services sector. We are at a similar point now with where we were with m-
banking five years ago, and this study will provide guidance for World Bank technical
assistance and investment activities related to the much-hyped potential for the use of mobile
phones in education. There is an opportunity here to contribute to the global knowledgebase
in the very early stages of what is poised to become a potentially massive area of investment
by ministries of education, civil society and (especially) the private sector in the decade to
come. Nascent efforts are underway to explore various aspects of the emerging phenomenon
of the use of mobile phones in education, but no institution has stepped forward to help
catalyze global collaboration and cooperation around research directions and agenda setting
in this area.

Mobile banking business models

A wide spectrum of Mobile/branchless banking models is evolving. However, no matter what

business model, if mobile banking is being used 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 can be classified into three broad categories - Bank Focused,
Bank-Led and Nonbank-Led.

Bank-focused model

The bank-focused model emerges when a traditional bank uses non-traditional low-cost
delivery channels to provide banking services to its existing customers. Examples range from
use of automatic teller machines (ATMs) to internet banking or 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. Mobile
Banking Services Mobile banking can offer services such as the following:

Account Information

1.Mini-statements and checking of account history

2.Alerts on account activity or passing of set thresholds
3.Monitoring of term deposits
4.Access to loan statements
5.Access to card statements
6.Mutual funds / equity statements
7. Insurance policy management
8.Pension plan management
9.Status on cheque, stop payment on cheque
10. Ordering check books
11. Balance checking in the account
12. Recent transactions
13. Due date of payment (functionality for stop, change and deleting of payments)
14. PIN provision, Change of PIN and reminder over the Internet
15. Blocking of (lost, stolen) cards

Payments, Deposits, Withdrawals, and Transfers

1.Domestic and international fund transfers

2. Micro-payment handling
3. Mobile recharging
4. Commercial payment processing
5.Bill payment processing
6.Peer to Peer payments
7. Withdrawal at banking agent
8. Deposit at banking agent

Especially for clients in remote locations, it will be important to help them deposit and
withdraw funds at banking agents, i.e., retail and postal outlets that turn cash into electronic
funds and vice versa. The feasibility of such banking agents depends on local regulation
which enables retail outlets to take deposits or not.
A specific sequence of SMS messages will enable 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.

Investments

1. Portfolio management services

2. Real-time stock quotes
3. Personalized alerts and notifications on security prices
4. Mobile banking

Support

1.Status of requests for credit, including mortgage approval, and insurance coverage
2.Check (cheque) book and card requests
3.Exchange of data messages and email, including complaint submission and tracking
4. ATM Location

Content Services

1. General information such as weather updates, news

2. Loyalty-related offers
3. Location-based services

Challenges for a Mobile Banking Solution

Key challenges in developing a sophisticated mobile banking application are:

Handset operability

There are a large number of different mobile phone devices and it is a big challenge for banks
to offer mobile banking solution on any type of device. So of these devices support Java
ME and others support SIM Application Toolkit, a WAP browser, or only SMS. Initial
interoperability issues however have been localized, with countries like India using portals
like R-World to enable the limitations of low end java based phones, while focus on areas
such as South Africa have defaulted to theUSSD as a basis of communication achievable with
any phone.
The desire for interoperability is largely dependent on the banks themselves, where installed
applications (Java based or native) provide better security, are easier to use and allow
development of more complex capabilities similar to those of internet banking while SMS
can provide the basics but becomes difficult to operate with more complex transactions.
There is a myth that there is a challenge of interoperability between mobile banking
applications due to perceived lack of common technology standards for mobile banking. In
practice it is too early in the service lifecycle for interoperability to be addressed within an
individual country, as very few countries have more than one mobile banking service
provider. In practice, banking interfaces are well defined and money movements between
banks follow the IS0- 8583 standard. As mobile banking matures, money movements
between service providers will naturally adopt the same standards as in the banking world.

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. The following aspects need to be addressed to offer
a secure infrastructure for financial transaction over wireless network:

1.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.

2.Security of any thick-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

3. Authentication of the device with service provider before initiating a transaction. This
would ensure that unauthorized devices are not connected to perform financial transactions.

4.User ID / Password authentication of banks customer.

5.Enc ryption of the data being transmitted over the air.

6.Encryption of the data that will be stored in device for later / off-line analysis by the
customer.

Scalability & Reliability

Another challenge for the CIOs and CTOs of the banks 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. Recently in 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

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

It would be expected from the mobile application to support personalization such as :

1. Preferred Language
2. Date / Time format
3. Amount format
4. Default transactions
5. Standard Beneficiary list
6. Alerts

Bank-led model

The bank-led model offers a distinct alternative to conventional branch-based banking in that
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, and may be 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. In this model customer account relationship rests with the bank
Non-bank-led model

The non-bank-led model is where a bank does not come into the picture (except possibly as a
safe-keeper of surplus funds) and the non-bank (e.g. telco) performs all the functions.
Mobile banking: A boon THE ADVENT of Internet has revolutionised the financial services
industry, empowering organisations with new business models and alternatives to offer
24x7 accessibility to their customers. Online financial transactions have also created new
players in the financial services industry, such as online banks, online brokers and wealth
managers who offer personalised services. People are mobile- savvy and are always ready to
try out advanced handsets and services.Mo bile banking also saves time and effort. According
to a business standard survey, one out of every three persons was ready to change his/her
banks to avail free mobile banking services. Around 50 per cent of the people who were
surveyed used cell phones to check their bank balance. Awareness of mobile banking is also
high in India. Although such players still account for a tiny percentage of the industry, it is
the latest in customer convenience in banking - to access and operate your bank account from
anywhere from your cell phone. This is available on advance technology phones. One can
access bank account through SMS or scripting languages like XML, HTML, SOAP and
WAP. Mobile banking and ATMs use the same infrastructure. In the recent past, banks across
the globe have invested billions of dollars to build sophisticated Internet banking capabilities.
As the trend is shifting to mobile banking, there is a challenge for chief information officers
(CIOs) and chief technical officers (CTOs) of these banks to decide on how to leverage their
investment in Internet banking and offer mobile banking, in the shortest possible time.
According to financial consultancy Celent study, 35 per cent of online banking households
will be using mobile banking by 2010, up from less than one per cent today. Upwards of 70
per cent of bank centre call volume is projected to come from mobile phones. Mobile
banking will eventually allow users to make payments at the physical point of sale. "Mobile
contactless payments" will make up 10 per cent of the contactless market by 2010.Mobile
banking or M-banking, m-banking, SMS banking etc are terms used for performing balance
checks, account transactions, payments etc via a mobile device such as a mobile phone.
Mobile banking today is most often performed via SMS or the mobile Internet but can also
use special programmes called clients downloaded to the mobile device. The mobile acts as a
branch of the bank by storing a database of customers. It also has a smartcard, which
biometrically stores the identity of the customer such as name, address, photograph,
fingerprint templates and relevant details of the savings or loan accounts held by the issuing
bank. Academically, mobile banking is defined as: "A provision and availment of 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 customised information." Apparently, mobile banking can
be said to consist of three inter-related concepts: mobile accounting; mobile brokerage and
mobile financial information services
Risk Associated with Mobile Banking

Many banks now offer you the option to perform various banking transactions on your cell
phone; this is called mobile banking. You can check balances and receive updates when your
funds are low. The number of mobile banking users is projected to grow to over 40 million by
2012, according to the research firm TowerGroup. But with convenience sometimes comes
risk. There are a number of vulnerabilities that may be involved when you use your phone to
process bank transactions.

No Anti-Virus Programs

Many mobile phones are like mini-computers, yet they do not have the same capability as
regular computers to host anti-virus and anti-spyware programs. The phone will not be able
to recognize a situation where your device's files and programs have been compromised by
malware. So when you perform banking activities on your mobile phone frequently, you
could be leaving yourself vulnerable to spying. Text Message Security. Some mobile banking
services text you update regarding your account. These text messages are not encrypted, so
any third party, including strangers and the people around you, can read them. If you leave
your phone unattended or lose it, someone can easily access information about your account
by reading your message inbox. However, one way to prevent this problem it to set a
password on your phone so that you are the only person who can view your text messages.
You can also delete the messages as soon as you finish reading them.

Hard to Prove Fraud

If your phone falls into the wrong hands and someone is able to process transactions using the
device, there is no telling what your bank will do. It could be difficult to prove that you were
not the person who performed the action on your phone. Because mobile banking is a
relatively new service, some banks do not yet have clear procedures to address this potential
problem.

Advantage of mobile banking

The biggest advantage that mobile banking offers to banks is that it drastically cuts down the
costs of providing service to the customers. For example an average teller or phone
transaction costs about $2.36 each, whereas an electronic transaction costs only about $0.10
each. Additionally, this new channel gives the bank ability to cross-sell up-sell their other
complex banking products and services such as vehicle loans, credit cards etc. For service
providers, Mobile banking offers the next surest way to achieve growth. Countries like Korea
where mobile penetration is nearing saturation, mobile banking is helping service providers
increase revenues from the now static subscriber base. Also service providers are increasingly
using the complexity of their supported mobile banking services to attract new customers and
retain old ones.