currency, held on a mobile
phone that can be used to
store, and transfer value.
Using one’s handset as a financial tool, or the mobile wallet is
an interesting concept which is becoming increasingly popular
and integrated across consumer platforms. Not only does it
allow users on the move to access financial accounts, but also
plays an integral part in the development of digital commerce
The mobile wallet is proving especially effective in
developing countries where desktop access to the Internet
and banking opportunities are still a privilege, yet mobile
accessibility is extremely high.
Key Terms and Concepts
A scannable barcode which can be read by certain mobile
applications (by taking a photo of the barcode) and convey
information such as a URL etc.
If a transaction is disputed (e.g. goods not received) the bank or
service provider will issue a chargeback.
Stands for Electronic Fund Transfer. The movement of money online
between accounts. Often known as mobile money transfer (MMO).
Obstacles in the buying cycle which may inhibit conversion.
Key Terms and Concepts
Stands for Global System for Mobile Communications. Most widely used of
the three digital wireless telephone technologies. Uses a variation of time
division multiple access.
Stands for Location Based Services, using a physical location to target an
Stands for mobile banking.
Stands for mobile commerce, or the buying and selling of goods via mobile
The issuing and processing of digital tickets via a mobile platform.
Also known as a nano-payment, mirco-payments are transactions under a
specified amount and processed separately.
Key Terms and Concepts
Stands for Near Field Communication. A short range connection for
communicating between devices.
Stand for Radio Frequency Identification Chip. A unique device identifier.
These handsets have advanced capabilities and allow users to add
applications to their phones. They usually have a QWERTY keypad and
include 3G and wifi capabilities.
Stands for Short Message Service. Electronic messages sent on wireless
Stands for Unstructured Supplementary Service Data. Works on all existing
GSM phones. Provides session-based communication, enabling a variety of
The number of mobile payment users around the world was
estimated at 73.4 million in 2009. While this is an impressive
figure, add the many emerging technologies and crosspollinating platforms and the possibilities multiply.
Over 50 million people in the US are expected to be using
mobile devices to do their banking by 2013, and there are
many m-commerce specialists working toward better mobile
According to the National Restaurant Association, of the 25 34 year old category, 74% say they would make use of an
electronic payment system to pay for their meal if available.
Changing the face of e-commerce, mobile payments are
Direct Mobile Billing:
This system transfers money directly from the mobile account
with the service provider, using the device itself for verification
Increasingly common on e-commerce websites, the mobile
billing payment option requires that the user verify the
transaction with a PIN code and a password, which is sent to
the phone to be entered back into the website.
Mobile Web Payments:
Mobile web payments are either made via the mobile
device browser or through device software, and can be
linked to anything from direct mobile account, credit card
or virtual currency account (e.g. PayPal)
Frictionless/Contactless Near Field
Near Field Communication uses wireless
connectivity or machine scanners to transfer data
across short distances. One such method for
creating frictionless, or contactless NFC transactions
is through RFID chips, which are inserted into a
The chipped device can be easily scanned by the
merchant and the data transferred on the spot.
Easier than carrying around an extra card or hard
cash, this system not only streamlines
processes, but encourages regular transactions.
The benefits of mobile payment platforms:
Independent, or linked accounts available.
Requires little or no registration.
Easy publication and administration of vouchers and
special offers for merchants.
Much potential for Location Based Services (LBS).
Great for tracking and market analytics.
Chargeback's and refunds handled with ease.
Cheaper transactions (for both consumer and
Micro-payments and reduced charges increase
Global commerce, twenty-four-se
Online banking spawned many Internet-based financial
service providers, delivering specialized services often
out of step with traditional, brick and mortar financial
Traditional banks encompass physical branches and
ATMs, while the mobile-breed of financial service
operators use the Internet, mobile devices and
affiliations with established businesses to service the
public in new ways. Now, mobile banking, or m-banking
is opening up even more doors.
Specialized m-banking service providers can cater for anything from
balance enquiries to portfolio management and even live stock
trading. Essentially, this allows consumers to monitor and manage
transactions from anywhere.
Great for businesses processes, consumers can also receive realtime SMS alerts via their mobile devices, keeping them informed of
any anticipated or even fraudulent transactions as they happen.
Platforms can be developed using any number of GSM functions to
deliver m-banking to the community. USSD m-banking platforms, for
instance, can allow basic phone users to manage their finances
without the need for Internet access or multimedia capabilities.
Developing countries which have an extremely high mobile Internet
penetration, such as South Africa, are some of the most in need of
One third of the population of South Africa do not
have a bank account, but 19% of these people have
a pre-paid mobile account. A further 11% have
access to the Internet via the phones of friends and
family, leading to a high adoption rate of mbanking services.
MTN, one of South Africa’s mobile service
providers, has been at the forefront of the country’s
m-banking strides. With an MTN Mobile Money
account (available online to Ned bank, Standard
Bank and ABSA customers), users can manage their
finances from anywhere.
What is mobile ticketing, and why is it so important? Mobile
ticketing allows consumers to purchase and receive tickets
for anything from their daily commute, secure parking to
concert seats, special deal vouchers and so on, right from
Once a ticket has been purchased (via any one of the
common payment types) a barcode, password or other
identifiable piece of data is sent to the phone via SMS or
MMS, and presented at the ticketing station.
Mobile barcodes can be scanned quickly, making this
paperless administration (especially for frequent use) a lot
The Oyster Card for the bus, train and tram services in
the UK is a great example of a frictionless electronic
ticketing system. Containing an RFID chip, the card is
swiped by the commuter across a receiver, improving
the flow of both ticket queues and ultimately, the
The cards can be purchased from vending machines
around the country and topped up at the many
participating retailers, by telephone or online, but
have yet to be implemented into mobile devices.
The Osaifu-Keitai, or mobile-wallet, however, is a
mobile phone for Japan’s NTT docomo mobile
network, doubling up as an NFC tool for the country’s
Using Sony’s Celica RFID chip, Japan’s Suica card
provides a service on the East Japan Railway
Network, similar to Oyster cards in the UK, but are
currently leading in the mass-mobile ticketing arena.
The need for new payment systems online, mobile or
What are micro-payments? While the exact threshold
might differ between countries and industries, the idea is
that the processes for smaller transactions be
simplified, making online buying and selling much easier.
While these micro-payments, or nano-payments, may
have a maximum value, the platforms popping up are
allowing for advanced functions such as transaction
Boku: Designed for retail, gaming and social networking
sites, users can make use of their mobile number, rather
than a credit card number - requiring no credit card or
Spare Change: A subsidiary of PayPal, deposits into a
Spare Change account can be made from any other type
of account, and spent all over the Internet; “…think
iTunes on social networks
Micro-payments aim to increase the number of
smaller payments, promote return business and
improve total profit. Daily news broadcasts, for
instance, may soon be available with a few strokes
It is estimated that 10% of Facebook’s revenue is
micro-payments on the
iPhone, developers can create a steady income, and
not just profit from the initial sale of the application
and advertising. Elements within the applications can
be sold, such as additional stages or characters for
RBI Guidelines for Mobile
To provide a framework for the regulation and
supervision of all the entities involved in issuance of
Prepaid Payment Instruments in the country and to
ensure orderly development of this segment of the
payments and settlement system in a prudent and
customer friendly manner.
These guidelines lay down the eligibility criteria and the basic conditions for
issuance of prepaid payment instruments in the country. All entities seeking
to issue prepaid payment instruments in India shall comply with these
All non-bank entities proposing to issue such instruments, unless otherwise
specifically exempted as per the guidelines, shall seek authorization from the
Reserve Bank of India, under the Payment and Settlement System Act 2007.
Banks and Registered Non-Bank Financial Companies seeking to issue
such instruments shall seek approval from the Department of Payment and
Settlement Systems, Reserve Bank of India.
All entities currently issuing such instruments shall comply with the
guidelines within three months from the date of issuance of these guidelines.
5. Capital requirements
6. Safeguards against
7. Deployment of
8. Issuance and
reloading of prepaid
11. Fraud prevention
and Security standards
12. Customer Protection
1.1 Banks and non-bank entities have been issuing prepaid payment
instruments in the country. Hitherto only banks proposing to issue
prepaid payment instruments were approaching Reserve Bank for
Consequent to the passing of Payment and
Settlement systems, Act 2007, all non-bank entities currently issuing
prepaid payment instruments and those proposing to issue such
payment instruments would have to approach Reserve Bank for
authorization. In the emerging scenario, it is imperative to have a set
of guidelines for prepaid payment instruments that would cover both
banks and non-bank entities, to ensure orderly development and
operations of prepaid instruments in the country. Reserve Bank of
India has therefore has brought out these set of operating
guidelines. These guidelines lay down the eligibility criteria and the
basic conditions for issuance of prepaid payment instruments in the
individuals/organizations. The money collected is retained by these entities
and they make payment to the merchants who are part of the acceptance
arrangement directly or through a settlement arrangement.
2.2 Holder: Individuals/Organizations who acquire prepaid payment
instruments for purchase of goods and services.
2.3 Prepaid Payment Instruments: Prepaid payment instruments are
payment instruments that facilitate purchase of goods and services against
the value stored on such instruments. The value stored on such instruments
represents the value paid for by the holder, by cash, by debit to a bank
account, or by credit card. The Prepaid instruments can be issued as smart
cards, magnetic stripe cards, internet accounts, internet wallets, mobile
accounts, mobile wallets, paper vouchers and any such instruments which
can be used to access the prepaid amount (collectively called Payment
The prepaid payment instruments that can be issued in the country
are classified under the four categories viz. (i) Closed system
payment instruments (ii) Semi-Closed system payment instruments
(iii) Semi-Open system payment instruments and (iv) Open system
2.4 Closed System Payment Instruments: These are payment
instruments generally issued by business establishments for use at
their respective establishment only. These instruments do not permit
cash withdrawal or redemption.
2.5 Semi-Closed System Payment Instruments: These are payment
instruments which are redeemable at a group of clearly identified
merchant locations/ establishments which contract specifically with
the issuer to accept the payment instrument. These instruments do
not permit cash withdrawal or redemption by the holder.
Semi-open System Payment Instruments:
arepayment instruments which can be used for purchase of
goods and services at any card accepting merchant locations
(Point of sale terminals). These instruments do not permit cash
withdrawal or redemption by the holder.
2.7 Open System Payment Instruments: These are payment
instruments which can be used for purchase of goods and
services and also permit cash withdrawal at ATMs
2.8 Mobile Prepaid Instruments: The prepaid talk time issued
by mobile service providers. This value of talk time can also be
used for purchase of 'value added service' from the mobile
service provider or third-party service providers.
2.9 Net Owned Funds: For the purpose of these guidelines "Net
owned Fund" (NOF) will consist of paid up equity capital, free
reserves, balance in share premium account and capital reserves
representing surplus arising out of sale proceeds of assets but not
reserves created by revaluation of assets. From the aggregate of
items will be deducted accumulated loss balance and book value of
intangible assets, if any, to arrive at net owned funds. The NOF
should be computed on the basis of last audited Balance Sheet and
any capital raised after the Balance Sheet date should not be
accounted for while computing NOF.
3.1 Banks and Non-Bank Finance Companies (NBFC), who comply with the
eligibility criteria, would be permitted issue all categories of prepaid payment
3.2 Only banks which have been permitted to provide Mobile Banking
Transactions by the Reserve Bank of India shall be permitted to launch
mobile based prepaid payment instruments (mobile wallets & mobile
3.3 Other entities would be permitted to issue only closed system prepaid
payment instruments and semi-closed system prepaid payment
3.4 Mobile Prepaid value: Mobile Service Providers are permitted to issue
mobile prepaid value. In addition to talk-value the use of such prepaid value
as a payment instrument shall be restricted to the purchase of only such
value added digital contents/services which are for use on the mobile
phones. The use of mobile prepaid value for purchase of other goods and
services shall not be permitted.
4.1 Entities issuing closed system Prepaid payment instruments are exempted from
the purview of the guidelines and need not seek authorization from Reserve Bank of
India, for issuance of such payment instruments subject to the following:
A closed system payment instrument shall have a maximum value of Rs 5000/- only.
These instruments cannot be used for purchase of another prepaid payment
Amounts collected under the scheme shall be exempt from the provisions of
paragraph 7 below, provided the value of outstanding instruments does not exceed Rs
50 lakes or 10% of the issuers' 'net owned funds', whichever is lower.
Entities issuing such instruments shall inform Reserve Bank of India when they start
operating such schemes.
half yearly audited statement shall be submitted to the Reserve Bank by such entities
indicating the total value of instruments issued during the period and the value
outstanding as at the end of the period. It shall be accompanied by a certificate from
the Statutory Auditors stating that the company complies with the provisions of
paragraph 4.1(iii) above.
5. Capital requirements
5.1 Only banks and Non-Bank Finance Companies
complying with the Capital Adequacy requirement
prescribed by Reserve Bank of India from time-totime shall be permitted to issue prepaid payment
5.2 All other entities shall have minimum net owned
funds of Rs 10 lakhs.
6. Safeguards against money laundering
6.1 The guidelines on Know Your Customer/Anti-
Terrorism guidelines issued by the Reserve Bank of
India to banks, from time to time, shall apply mutatis
mutandi to all entities issuing prepaid payment
instruments. Necessary systems shall be put in
place to ensure compliance with these guidelines.
6.2 The maximum value of any prepaid payment
instrument (where specific limits have not been
prescribed) shall not exceed Rs 50,000/12/31/2013
6.4 Exemption/relaxation form the provision of KYC requirements are available only in
the following cases: Semi-Closed System Payment Instruments up to Rs 1000/- may be issued without
any KYC subject to reporting of annual turnover/suspicious transactions. The issuer
should ensure that, under no circumstance, more than one card is issued to the same
Prepaid payment instruments up to Rs 5000/- can be issued by accepting any
'Government issued Identity Cards' as proof of identity. Such instruments shall not
permit cash withdrawal.
Semi-closed Prepaid payment instruments which permit only payment of utility bills/
essential services up to a limit of Rs 10,000/- can be issued without any KYC being
undertaken by the issuer. The entities issuing such instrument may ensure that these
instruments are made acceptable only at institutions which maintain the identity of the
customers. The utility bills/ essential services shall include only Electricity bills, water
bills, telephone/mobile phone bills, and insurance premium, cooking gas
payments, ISP for Internet/Broadband Connections, Cable/DTH subscriptions and
Citizen Services by Government or Government bodies.
Entities issuing prepaid payment instruments to institutions/companies for further
issuance by these institutions/companies to their employees or other beneficiaries
6.5 Entities issuing prepaid payment instruments
shall maintain a log of all the transaction undertaken
using these instruments. These data should be
available for scrutiny by the Reserve Bank or any
other agency / agencies as may be advised by the
Reserve Bank. These entities should also file
Suspicious Transaction Report (STR) to Financial
Intelligence Unit – India (FIU-IND).
7. Deployment of Money
7.1 The outstanding amount (float money) at a point
of time could be substantial. Further, the turnover of
funds may also be rapid. The confidence of public
and merchant establishments on prepaid instrument
schemes depends on the timely settlement of claims
arising from use of such instruments. To ensure
timely settlement, the issuers shall invest the funds
collected only as provided here-in.
7.3 Other entities issuing payment instruments (except those
exempted from the purview of the guidelines) are permitted to
maintain their outstanding balance in an escrow account with any
scheduled commercial bank subject to the following conditions:
NO interest is payable by the bank on such balances.
A quarterly certificate from the auditors shall be submitted
certifying, the entity has been maintaining adequate balances in the
account to cover the outstanding volume of payment instruments
The entity shall also submit an annual certificate, as
above, coinciding with the accounting year of the entity to the
Reserve Bank of India.
Adequate records indicating the daily position of the value of
instruments outstanding vis-à-vis balances maintained with the
banks in the escrow accounts shall be made available for the
scrutiny to the Reserve Bank or the bank where the account is
maintained on demand
7.4 As an exception to the above, an entity can enter into agreement
with the bank where escrow account is maintained, to transfer "core
portion", of the amount in the escrow account to separate account on
which interest is payable, subject to the following:The bank shall satisfy itself that the amount deposited represents the
"core portion" after due verification of necessary documents.
The amount shall be linked to the escrow account, i.e. the amounts
held in the interest bearing account shall be available to the bank, to
meet payment requirements of the entity, in case of any shortfall in
the escrow account.
This facility is permissible to entities who have been in business for
at least ONE YEAR and whose accounts have been duly audited for
the full accounting year.
NO LOAN is permissible against such deposits. Banks shall not
issue any deposit receipts or mark any lien for the amount held in
such form of deposits
8. Issuance and reloading of Prepaid Payment
8.1 All entities issuing prepaid payment instruments are
permitted to issue reloadable or non-reloadable prepaid
8.2 Reloading of closed system payment instruments would be
permitted at the retail agents and issuers outlets against
cash/debit cards/credit card.
8.3 Banks and NBFCs are permitted to issue and reload such
payment instrument at their branches against payment by
cash/debit to bank account/credit card. Banks are permitted to
issue and reload of such payment instruments through their
business correspondents appointed as per the guidelines in
this regard issued by the Reserve Bank.
9.1 All prepaid payment instrument issued in the country shall
have a minimum validity period of six months from the date of
activation/issuance to the holder.
In the case of non-reloadable prepaid payment
instruments, the transfer of outstanding amount at the expiry
of the payment instrument to a new similar payment
instrument of the same issuer, purchased by the holder may
9.3 The outstanding balances in any payment instrument shall
not be terminated immediately at expiration, of the instrument.
The value may be depleted at the rate of 10 percent of the
outstanding value per month. The holders may also be
adequately cautioned in advance as regards the expiry of the
validity of the payment instrument.
10.1 The issuers of such instruments shall not dishonor
customer instructions for payments/transfers of money, at
approved locations, if there is sufficient balance outstanding
against the instrument.
10.2 The holders of prepaid payment systems other than
open-system payment instruments shall also be permitted to
redeem the balance outstanding within the expiry date, if for
any reason, the scheme is being wound-up or directed by the
Reserve Bank to be discontinued.
10.3 Where redemption is provided as at 10.2 above, the
redemption value shall not be in excess of the amount
outstanding or the face value (loading limit) for the instrument.
11. Fraud prevention and Security standards
11.1 The prepaid payment instruments issuers shall
put in place adequate information and data security
infrastructure, and systems for prevention and
detection of frauds. It is advisable to build a
centralized database to prevent multiple purchase of
payment instruments at different locations, leading to
circumvention of limits if any prescribed for such
12. Customer Protection
12.1 All Prepaid payment instruments issuers shall
disclose all important terms and conditions in clear and
simple language (preferably in English, Hindi and the
local language) comprehensible to the instrument holder
while issuing the instruments. These disclosures shall
All charges and fees associated with the use of the
The expiry period and the terms and conditions
pertaining to expiration of the instrument.
The customer service telephone number and website
12.2 A effective mechanism for redressed of customer
complaints shall be put in place by the entity issuing
Problems With Mobile Wallet in India
Mobile wallets have grown in popularity in recent
years. Today, mobile wallets account for a great deal
of transactions made around the world. In
fact, mobile wallets are estimated to complete
hundreds of billions of dollars in transactions around
the world by the end of 2013. The ease of carrying
money to use on a mobile device further increases
their value. However, mobile wallets are not without
fault. There are mobile wallet mistakes you want to
watch out for to avoid problems with using this
The four models for mobile payments include direct
communication, mobile web payments, and premium
merchants are opting to expand payment methods to
allow mobile wallets as a way to complete a
transaction. As you join in on the trend of using
mobile wallets, be careful to avoid the following
Linking a payment option to a checking account
with a low balance
Avoid linking a mobile wallet to a checking account with a
low balance. You might spend a great deal of money
before you realize you have depleted all of your funds, or
worse, overdrawn your account. It's very easy to spend
and to see money disappear right before your very eyes.
If you have a checking account specifically designed for
leisure expenses, then you may want to link it to your
mobile wallet when you go shopping. Monitor any
account linked to track your spending habits.
Putting your information on another person's
Never log into a third party service on a friend's mobile
device. A friend could accidentally ring up charges on
your account without even knowing, as it is easy to forget
you put your payment information on their phone. When
you feel the need to pay for something, do it with your
own mobile wallet.
Completing a transaction with an non-reputable
Keep a receipt of every transaction you complete. For
every location you use your mobile wallet in person you
want to feel comfortable with making a payment. There
are some retail shops or small vendors at the mall, for
example, that accept this form of payment, but then take
the information from your mobile wallet and use it to
create a fake credit card with your information. These
places are clever, as they wait months before they use
your information to start making charges on your
account. They usually pack up shop when they get this
scheme going, so it may be very difficult to track them
Not closing out.
There are hackers out there that like to fish around for
data in order to collect bank account, credit card, and
other sensitive information people carry in their mobile
wallet. This has happened to people using Google
Wallet and other similar mobile wallet services.
Log out of any accounts you have signed in to and close
the program as soon as you are done completing a
transaction. Be weary of leaving your account open after
making mobile wallet payments because you could give
criminals a chance to download your bank information
and make fraudulent charges on your credit or debit card.
Although these programs have safeguards to prevent
your information from being at risk, there are still people
that have the ability to steal it.
Forgetting to check your account balances.
Preventing fraud is easier the sooner you realize
someone has stolen your identity. Having a credit
card linked to your virtual wallet could make you
forget to check the activity on your actual bank
account. It is suggested to at least review your credit
card statement once a month. Monitor all of your
accounts to ensure no one has stolen any
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