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==== ====Get PAID daily, directly to your cell phone. (773) 888-6559 ====Introduction...
many players in the payment systems, the central bank is apprehensive of permitting non-financialcompanies to enter the Re...
front. The unbanked Indian Population stand to gain by blend of mobile and money transfer.Money lenders and hawala operato...
financial service providers right from its birth. On the other hand, mobiles service providers areknown to flout rules and...
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  1. 1. ==== ====Get PAID daily, directly to your cell phone. (773) 888-6559 ====IntroductionOpportunity in adversity is an old maxim. Indian Mobile Telecom companies are defying all logicand sense in competing with each other. India is the worlds fastest growing country in terms ofmobile market. With basic services almost equal and the rates fiercely at par, Mobile Telecomcompanies have to continuously innovate to stay in the market, either for market share leadership,market quality leadership, just to survive or enter the market. Innovation holds the key for IndianMobile Telecom Companies. Innovation in tariff or the services offered.The Indian Payment SystemsA secure and efficient payment system would enable the circulation of money and economicactivity. This would be the primary goal of any payment system globally. The increase in thenumber of payment systems, the participation of larger number of institutions in the financialmarket, recent financial crisis have made brought in focus the public policy makers. Over therecent yesteryears, Indian Policy makers especially on the economic and technology front havetaken some bold yet cautious forward steps. The caution has borne fruit, by the insulation thecountry had during the recent crisis.Today, there is a positive struggle between the policy makers and the market to drive the economyforward at a faster rate; the payments systems are continuously fine tuned and enhanced withnewer payments systems. Gone are the days of manual clearing. Today, the customer has abouquet of payments systems to choose from: from paper transactions to paperless transactions,from netting to gross settlements, from T+3 to real time settlement. Viz. Speed Clearing, ElectronicClearing Systems (Credit & Debit), National Electronic Funds Transfer, Real Time GrossSettlement, Internet Banking.The Payment Visions document of RBI envisages Triple-S and E standing for Safety, Security,Soundness and Efficiency. The payment systems in India reflect retails payments and large valuepayments, both paper based and electronically based.Across the globe, various type of payment systems are followed, both for paper based andelectronic. Variations in structure and delivery channels are also diverse. The ownership of thesystems varies from Central Banks, financial institutions to separate entities owned by financialinstitutions. While the large value and bulk payments taken care by RTGS and ECS (Credit andDebit), it is the retails payment that need attention. Still the consumers and bankers are dependenton paper based transactions.The Retail Payment System:The potential and growth of retail payment system has encouraged the RBI to delegate the systemto be operated by approved service providers, banking institutions. Due to the proliferation of so
  2. 2. many players in the payment systems, the central bank is apprehensive of permitting non-financialcompanies to enter the Retail Payment System. With the legal structure regarding electronic fundsrevealing inadequacies, the situation for the central bank and policy makers make it even morecomplex. The prominent and safe method traditionally perceived is the credit transfer or wiretransfer. Such transfers are done bank to bank electronically, though not necessarily by banks.The liberalized economic policies have encouraged non-banking companies to enter the RetailPayment System Market.The Retail Payment System involves high volume and low average value transactions, betweenindividuals & business and individuals & individuals. The retails payments are done for one andmany of the following:•Purchase of services and goods•Utility bill payments•Person to Person transfers•Cash withdrawalsThe above retails payments are done electronically mostly by debit and credit cards, and to anextent through the Netbanking facility offered by banking institutions. With the tremendous growthin the number of ATMS and the advancement of technology, paperless transactions of theelectronic retail payment system have outgrown the paper transactions, both in value and volume.But then, that is only the best part of the system. A deeper analysis would reveal that theelectronic retail payment system in India is highly biased towards urban population. At 72%, therural population gropes in the dark with regard to banking services. Recently the Deputy Governorquoted with disappointment that only 31,000 villages out of 7 lakh villages are serviced by a bank.A stark contrast to the sophistication banking facilities available to the urban India.In spite of the facilities available for the retail payment system, the consumer still has to walkacross to the ATM or hit the internet button on the computer screen. The under-privileged go theextra mile to the bank branch.Indian Telecommunication Industry3rd largest telecommunication network and 2nd largest wireless connections, India is the fastestgrowing market in the world, expecting to touch a billion connections in 2015, currently at 525million connections(Dec 2009) with a teledensity at 47.89%. Looking at this figure with thebackground of the population figure at 1.15 billion, the penetration of the mobile across theeconomic and geographic strata is tremendous. The growth is deep into the rural market as well,currently at 30% of the national figure. The purchasing power of rural India has definitelyincreased, and presents a potential market for the telecommunication industry. With basicinfrastructure developed across the country, and with various welfare measures implemented, therural market is waiting to be lapped. A few marketing lessons can be learnt from the FMCGmarket.The Great Indian GameCoupling the penetration of the mobile phones across the country-urban & rural and the disparityin services offered across the population, here is a market opportunity for the IndianTelecommunication Industry. The power of the mobile phone is still underutilized on the financialangle, though tremendous improvements have been witnessed on the entertainment and internet
  3. 3. front. The unbanked Indian Population stand to gain by blend of mobile and money transfer.Money lenders and hawala operators apart from non-banking finance companies thrive on thistechnology, and the masters of mobile money transfers.The government only needs the legal framework and the will to give the approval for a system thatis already in practice. For a faster growth in the economy, RBI needs to come out of its colonialculture and embrace technology the way the citizens have embraced. After all the democraticgovernment is of, by, and for the people.Mobile Money TransferA new service is in the anvil that connects the mobile service provider and the customer on afinancial platform.It is not going to be long before the mobile service provider would also be providing a serviceinvolving money transfer. Welcome to the world of Mobile Money Transfer. A Service that wouldenable a customer to transfer money from one place to another place using his mobile, withoutany financial intermediaries.With one of the largest consumer base, the telecommunication companies already know how tohandle large number of accounts. With almost 80% of its consumers having an average monthlytransaction of Rs.500/-, the mobile service providers possess the technology, which is againcontinuously upgraded, to handle large number of low value transactions, similar to the retailpayment system. Today, the operators are mature in their business dealings and which clearlyreflects their acumen to be financial dealers.It is interesting to note that the service providers are already into handling customers money byway of Pre-Paid SIM cards. These cards are stored value card which has monetary consideration.The monetary value stored in the card is used up when the subscriber uses the mobile. Aregulatory freedom is required for the service provider and the customer in using the stored valuefor any other purpose, though of late certain services are available.The transfer of money through the mobile is quite simple. In the early days of Mobile Services,recharging of pre-paid mobile SIM cards was done with scratch cards by the user. With thedevelopment of technology, the consumers mobile could be recharged electronically by a thirdparty without the consumer visiting any dealer. In simple terms, one mobile could be rechargedremotely. The charged money value is used up by the customer over a period of time i.e. themobile service provider provides a service over a period of time for the money value deposited bythe consumer by way of charging his mobile.The Service providers already run a large network of retails outlets owned and franchised. Thisnetwork can challenge the bank networks for its penetration and customer service. The mobilenetwork and retail outlets have penetrated much deeper than the banks.The ethicsThe challenges for providing such a service are equally daunting for the mobile service providers.Our financial system has developed over a period of time with strict discipline and regulatorycontrol. Even during the worst of the financial crisis, our financial system took no or little beating,basically because of our strong discipline and monitoring. Such discipline was engraved into our
  4. 4. financial service providers right from its birth. On the other hand, mobiles service providers areknown to flout rules and regulations to expand their business. The discipline that is required forfinancial transactions would be a hard thing to be taught to the mobile service providers.Shedding their competitive spirit, mobile companies need to standardize across for the purpose ofcompatibility and interoperability. Standardization should address privacy and security issues ofthe consumers. The first mover advantage should be neutralized by the government by introducingnecessary regulatory reforms.Though as of now, mobile payments do not have the legal status to be considered as legal tender,for all the ethical reasons mobile companies need to treat it as legal tender and back by promisesto pay.Most important of all, the mobile operators need to place a system wherein the Mobile MoneyPayment and Transfer system is not used for hawala operations and anti-social elements. Theregulatory authorities may duplicate the banking audit process to ensure the misuse of the system.Vijayakumar Rajarathinam,MBA, M.Phil., PGDPMIR., CAIIB.,Ph.DProf & HeadDept. of Management StudiesPPG Institute of Technology, Coimbatore 35Article Source: ====Get PAID daily, directly to your cell phone. (773) 888-6559 ====