Structural Modeling and Mapping of M-Banking Influencers in India

Abstract

ABSTRACT Given that government reckons mobile phone as a vehicle for financial inclusion; banks view it as a cost-effective way of reaching out and telcos see mobile banking as an emerging stream of revenue; several enablers and drivers are at play in India's m-banking space. At the same time, low adoption of mobiles as a channel for banking, even after two years of the Reserve Bank notifying the operating guidelines, points to existence of several barriers blocking/inhibiting the spread of mobile banking in India. In these circumstances, a method like Interpretive Structural Modeling (ISM), which forces the managers to consider linkages amongst issues, can provide a better insight than the conventional survey merely seeking ranking or rating of the importance of issues. ISM of enablers/drivers brings out the factors such as 'facility to get quick updates', 'time and cost saving', 'reach of telecom distribution' and 'need for telcos to improve customer retention' as the key drivers. On the other hand, 'lack of need for banking', 'quality of telecom service reach and reliability' and 'interoperability among banks and Telcos' emerge as the inhibitors likely to have highest impact on success of m-banking implementation. Finally, juxtaposition of the two outputs on a common driver-dependency grid segregates the issues to be addressed in different stages of implementation and also highlights the factors needing attention of the top levels in government, Banks and Telcos. Keywords: M-banking, drivers, barriers, ISM - Interpretive Structural Modeling, MICMAC 1. Introduction Banking and payment services constitute the central theme of many policies and regulations of the Reserve Bank of India (RBI) and have been the focus of several studies in the past. These studies have shown that RBI directives to open 'No frill Accounts' and deploy BCs (Business Correspondents - bank's agents to provide financial services on their behalf) for improving the 'reach' have not yielded much dividend and large proportion of India's population in the rural areas continues to live with no access to basic financial services. With barely 34% of population engaged in formal banking, mobile handsets could become the sole banking channel for 135 million financially excluded households in India [Boston Consulting Group 2007]. Utility of mobile phones for improving financial inclusion by 'reaching out the banking services', has been amply demonstrated by Smart Money and G-Cash in Philippines [Wishart 2006]; MTN Banking and Wizzit in South Africa [CGAP 2006; Richardson 2008] and M-Pesa in Kenya for microfinance applications [CGAP 2010]. In India, RBI issued operating guidelines for Mobile Banking Transactions [RBI 2008] and then liberalized the daily cap to INR 50,000 (USD 1,000) per customer for fund transfer and/or purchase of goods/services [RBI 2009]. Also, realizing the immense potential of mobile phones for improving financial inclusion, government constituted an Inter Ministerial Group (IMG) in 2009 and has accepted group's recommendations for implementation of mobile based delivery of financial services. Although banks in India have a limited network of 69,160 branches and 60,153 ATMs [RBI 2009-10], current m-banking guidelines of the RBI are based on a 'bank-driven' model and allow mobile banking/payment only for existing customers of banks. It is merely seen as another channel for accessing bank/card accounts and appears far away from its potential for contributing to financial inclusion. It points to several barriers, at the level of stakeholders and users, blocking/inhibiting the acceptance of mobile banking and payments. At the same time, TRAI (Telecom Regulatory Authority of India) Performance Indicators for the quarter ended September 2010 show that India has 688 million wireless subscribers with a wireless teledensity (number of subscribers per 100 population) of nearly 60%. However, Telcos (Telecom Companies) are concerned about their low ARPU (Average Revenue per User) of INR 110 and INR 73 per month from GSM and CDMA users respectively and subscriber churn in excess of 40% per annum. …

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