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The Genie is Out of the Bottle

September 20, 2008

The front pages are still preoccupied with the carnage in the investment banking world, but yesterday the RBI quietly announced something which is going to be huge three years down the line: the draft guidelines for mobile banking. There’s an Indian Express article on it here, and the original guidelines are available here (plain HTML) and here (official PDF, 18 KB). Making transactions with a mobile phone instead of a card is finally official.

First, the bad news:

Mobile banking is limited to existing bank account holders and is going to be linked to existing debit or credit card holders. The biggest advantage of mobile banking is that it’s much cheaper than transactions through debit or credit cards – the customer buys the mobile phone herself, and the merchant doesn’t need to buy a card swipe machine. This is why mobile banking is talked about as a way for banks to reach the poor, but if it’s going to be limited to existing account holders, that’s not going to happen. Score one against financial inclusion.
You can’t use your mobile phone for a transaction of more than Rs. 2500, and you can’t have transactions totaling more than Rs. 5000 a day. Oh well.

Now, the good news:

At least we finally have mobile banking guidelines for account to account transactions at all. Now that we do, banks can start pushing mobiles as a substitute for debit and credit cards instead of an addition to them. So it’ll probably take another few years given the pace at which the RBI works, but we’ll get there. It’s a shame about all the people who’ll have to wait till then though.
The guidelines include inter-bank account transfers. Sweet! This means the money transfers aren’t going to be limited to people with accounts in the same bank as you.
The RBI has told banks they can go ahead with bilateral or multilateral settlement agreements until there’s a nationwide settlement infrastructure in place. So it won’t be too long before basic services are launched.

This is going to be very interesting.