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CHAPTER 1
INTRODUCTION
This chapter deals with the introduction of the mobile phone, and mobile phone users and
mobile banking services. This Chapter also covers problems to study some aspects of the
mobile phone, mobile phone users, mobile banking and mobile banking services, chapter
plan of the study. Basically, chapter one is a concept and growth oriented.
1.1 Introduction
The banking system of India was determined in the year 1969 when the 14 major commercial
banks were nationalized. At that time, banks were basically involved in revolving domestic
savings, raising the resources of the country for financing public deficits and providing funds to
specialized sectors of the economy. There are many technological reforms in the Indian banking
sector. It has evolved from the automation of back office to online and centralized solutions.
One could witness the rapid changes taking place in the banking industry. Developments in the
international competitive markets andeconomies haveits role in changing the banking scenario.
Technology is the main developing coerce which has led to the breaking of legal, geographical,
and industrial barriers and has helped in the formation of innovative products and services. The
transformation and merging of telecommunication sector and Indian banking services has
brought new challenges and prospects in the growth of mobile commerce (m-commerce),
specifically; mobile banking (M-banking). S.J Barnes, (2003); described mobile banking as a
medium where users can interact with a bank through cellular phones. Schurig and Pousttchi,

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(2004),alsodefined mobile banking as, “that type of executionof financial services,in the course
of which, within an electronic procedure, the customer uses mobile communication techniques
in conjunction with mobile devices.” The M - banking term has been defined for performing
various banking operations, such as, account transactions, payments, balance checks etc.,
through a device, like, cellular phones. It has become a universal method of banking that fits
well with a technologically oriented lifestyle of the users.
Table 1.1: Brief History of Mobile Phones in India
Pre-liberalization
|period
Year Historical events/History of mobile phones
1851 Beginning of telegraph service
1947
To form PTT (Post, Telephone, Telegraph), all the Foreign telecom
companies were nationalized.
1980’s In 1980-81, the teledensity was only 0.3%, beginning of public phones
and Private sector was allowed.
Post-liberalization
period
1900’s
1992
The Indian telecommunication sector was liberalized to bridge the gap
between the public and private sector through government spending.
1994
For the metropolitan cities like Mumbai, Chennai, Delhi and Kolkata,
Government of India gave license for providing mobile phone services.
In the Mobile phone service field, not more than two mobile phone
operators were allowed in each telecom circle.
1995
The first metro city was Kolkata, which provided mobile phone
network.
1997 TRAI was set up in India.
1999 (March) Announcement of National Treatment Policy (NTP).
Mobile
Network
Technology
Phase
2000 (Jan) Amendment of TRAI Act in India.
2005 FDI allowed in telecom sector up to 74%
2006
India’s growth was fastest in terms ofthe number of subscribers i.e. 45
million in 4 months.
2009
The world’s cheapest and affordable mobile phone
3rd largest mobile phone population in the world by 2007 as middle
classes went mobile.
100% FDI was allowed in the telephone equipment manufacturing
sector.
3G was introduced

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2010
2010 shift from a voice telephone device to that of a personal e-
commerce/ e - marketing, e- social networking, e- guarantee and
mobile banking and mobile ticketing etc.
Advancement in mobile phone gadgets- GPRS, UMTS, WLAN, WAP,
GSM, EDGE.
The Introduction of 4G high- quality video conferencing, streaming
video.
Recent
2011-2015
Multiple function and application
The total wireless subscribers have increased from 811 million in
December 2011 to May 969 million in 2015 respectively.
Source: Cellular Operators Authority of India (COAI)
Mobile banking has emerged as a subset of banking services as,it is allowing all effortless access
to their own banking activities via cellular phones. As stated by Sudalaimuthu (2013), “M-
banking is one of the financial inclusion media because it is providing efficient banking services
with reasonable cost to all sections of people without discrimination”. With the technological
advancement in the mobile business, the use of this wireless technology is also increasing, of
which, mobile phones are just an example, which had empowered numerous banks with the
prospects of providing their banking services anytime and anywhere to the users. Laforest and
Li (2005); Mattila, (2003); Salo and Koivumaki, (2002); Riivari, (2005); Suoranta and Mattial,
(2004) had also discovered and studied the significance of M-banking.
1.2 History of Mobile Phone in India
A report of COAI (Cellular Operators Authority of India), 2016, on the entry of cellular phones in the
Indian market is listed in Table 1.2. This shows the development in the mobile phone introduction
over the years in India.
Table 1.2: Growth of Telephones during the Years (In Million)
Year Wireless
Subscribers
Wire-line
Subscribers
Total
Subscribers
Annual Growth
%
March 2007 165.11 40.75 205.86 45
March 2008 261.07 39.42 300.49 46
March 2009 391.76 37.96 429.72 43
March 2010 584.32 36.96 621.28 45

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March 2011 811.59 34.73 846.32 36
March 2012 919.17 32.17 951.34 12
March 2013 867.80 30.21 898.01 -6
March 2014 904.52 28.50 933.02 4
March 2015 969.90 26.59 996.49 7
Source: TRAI Annual Reports from 2012- 2015, Press Releases of TRAI
The Table 1.2, shows that over the years, the count of wireless subscribers has increased, whereas
there has been a decline in the count of wire-line subscribers because of an increasing demand for
mobile phones when compared to fixed telephone lines.
1.3 The Concept of Mobile Banking
There is an immense growth in the penetration of the mobile phones globally. This is the major
social change that will impact the way individual trade in the long run and it will also contribute
to the commercial activity on a large scale. The recent development in the technology, which
has a major impact in improving banking services is; the launching of the Internet banking. It has
helped the user’s anytime access to their banking accounts. Users are able to perform banking
transactions, check their account details, get the bank statements, and pay their bills from
anywhere.
However, in the growth of internet banking, the largest impediment is the prerequisite of a
Personal Computer with a wired Internet connection. It is not a problem in many of the
developed countries, but certainly a big obstacle for many developing countries like India. M-
banking is a way out to overcome this limitation of Internet Banking.
1.3.1 Definitions of Mobile Banking
The Federal Reserve survey defines M-banking as “using a mobile phone to access your bank
account, credit card account, or other financial accounts. Mobile banking can be done either by
accessing your bank’s web page through the web browser on your mobile phone, via text
messaging, or by using an application downloaded to your mobile phone.”
M-banking is defined by Tiwari and Buse (2007) as “mobile banking refers to an ailment of
financial and banking services with the help of mobile telecommunication gadgets.” The extent

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of services offered by the M-banking applications include facilities to deal in the stock market
and to conduct banking transactions, to access customized information and to administer
accounts.
According to the researcher M-banking consist of three interrelated concepts:
 Accounting services on Mobile Phones
 Brokerage services on Mobile Phones
 Financial information services on Mobile Phones
The majority of the services that are classified as accounting services and brokerage services
are transaction-based services. However, for conducting the transactions, there are several
non –transactional based banking services that are informational in nature and are vital, such
as, before conducting any kind of financial transactions, users might need to inquire about
their balance in the accounts. The accounting and brokerage services are hence offered
perpetually in association with information services. On the other hand, Information services
may be offered as an autonomous module.
According to Reserve Bank of India (RBI) guidelines, u/s 18 of payments and the settlements
system Act, 2007; RBI defines mobile banking as – “Undertaking banking transactions using
mobile phones by bank customers that involve credit/debit to their accounts.” It also involves
the non-monetary banking transactions, such as, inquiry regarding the balance in the account
etc. (Reserve Bank of India, 2014).
In today’s scenario, Mobile Banking is a very popular term. It basically means, conducting any
kind of financial and non- financial transactions, which are conducted by signing into a website
of a bank, using a mobile phone, like, transactions of transfers between different accounts,
checking account balances, or paying the bills.
In the recent time, M-banking is mostly conducted through the internet on the mobile phones
or SMS, but, can also be used by some special programs, known as, clients downloaded to the
mobile phones. Latest novelties in the telecommunication sector have empowered the banks
to introduce innovative procedures for the access of banking services, out of all one is mobile
banking (Barnes and Corbitt, 2003).

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The acute diffusion of cellular phones in India is the most important driver for mobile banking
in India. Interactive voice response, SMS and wireless internet protocol are few methods
available to Indian users for M-banking. The cellular phone is an important communication tool
that has enormous potentials to aid other Value Added Services (VAS), especially, financial
services.
1.3.2 Services Offered by Banks on Mobile Phones
Banks offer mobile access for the following services:
1. Account Statement Enquiries
2. Account Balance Enquiry
3. Cheque Book Requests
4. Cheque Status Enquiry
5. Fund Transfer between Accounts
6. Minimum Balance Alerts
7. Credit/Debit Alerts
8. Bill Payment
9. Recent Transaction History Requests
10. Bill Payment Alerts
11. Information Requests, like, Interest Rates/Exchange Rates
12. Recharge facilities
13. UPI - Unified Payment Interface
The Unified Payment Interface (UPI) can be thought of like an email ID for one’s money. It will
be a unique identifier thatyour bank uses to transfer money and make payments using the IMPS
(Immediate Payments Service). IMPS is faster than NEFT and lets one transfer money
immediately, it works 24×7. This means that the online payments will become much easier
without requiring a digital wallet or credit or debit card.
1.3.3 Characteristics and Features of Mobile Banking
Mobile banking has transformed over the years. Banks not only offer mobile banking services to
their customers as a convenience but also help the banking institutions to save money. Some
characteristics/features with mobile banking services are:

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1. Saving money: Many banks use the savings initiated from online transactions to offer
customers better interest rates or rewards for maintaining their online accounts.
2. Saving the environment: Mobile banking reduces the paperwork that would normally
occur if a customer walked into a bank. So, it helps in saving the natural resources.
3. Cross-selling: Banks frequently use M-banking as a platform for cross-selling or up-selling
other financial services, suchas,vehicle loans, creditcards,etc. as itdoesn’t create burden
on customers to consider such services.
4. Convenience: Mobile banking is definitely more convenient as compared to physically
visiting the bank. Financial transactions can be carried out at any time and even during
holidays.
5. Larger client base: Since mobile banking can be performed anywhere and anytime,
customers that would otherwise need to locate a more local bank are no more required
to do so. Hence, this encourages the customers to use M-banking and thus helps in
increasing customer base.
6. Security: Mobile Banking can be set with security concerns. In spite of the fact that it is
uncommon, hackers have been known to have access to customer accounts. Banks are
becoming more vigilant about safeguarding mobile banking access points and requires
additional passwords or answers to personal security questions.
7. Information: Customers who use mobile banking, have a better awareness of their day-
to-day financial transactions. They are more likely to catch erroneous or fraudulent
transactions.
8. Simplicity: Customers can set up instant bill payment services and mechanize other tasks
via mobile banking. It frees the customer from wasting time on writing checks and mailing
envelopes. Automated bill payment is additionally invaluable when the customer is out of
the country.
9. Account notification: Most banks will e-mail notices to their customers whenever their
bill is due. This helps the customer to pay their bill on time and other such items before
they are overdue.

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1.4 Development of M-banking and M-banking Services
The primary M-banking services and payment schemes were reported during 1999. The first
notable setup was created by a company named Paybox (that was financially assisted by The
Deutsche Bank). Paybox was established by two young German’s named Mathias Entenmann
and Eckart Ortwein who successfully started their operations in Germany, Sweden, Austria,
Spain and the UK. At around 2003, more than a million individuals were enrolled on Paybox and
the organization was ranked by Gartner as the best-known company in this area.
Another early starter and alsodistinguished as a leader in the field,was a Spanishinitiative called
Mobi Pago. It was later renamed as Mobi Pay and all the banks and mobile operators in Spain
were welcomed to join.
Numerous other large players declared initiatives and ran pilot surveys with big fanfare, but
never showed adhesion and all initiatives were eventually discontinued. Some of the examples
are, the popular vending machines at the Helsinki airport, upheld by a framework from Nokia.
Siemens made declarations in conjunction with recorded and high-flying German e-commerce
company, Brokat. Brokat additionally won the lucrative Vodafone contract in 2002, but failed
soon because of the shortage of funds. Initiatives in Sweden, Norway, and France never got
resistance. France Telecom propelled a product based on an exceptional mobile phone with an
integrated card reader.
The solution worked well, yet never became famous because of the unattractive, phone that
members required so as to perform these payments. Since 2004, mobile banking and payment
industry has progressed. Recently, many successful arrangements with positive business cases
andenormous key impact have been seen. The increasing course of mobile technology and WAP
–enabled strategy has brought noticeable development in e- banking or mobile banking during
2008-09. Global mobile subscription in June, 2015, reported at 7085.4 million.
1.4.1 History and Evolution of M-banking in India
The first state-owned bank i.e. UBI (Union Bank of India), is the pioneering bank in the proving
M-banking services in India, but it has been able to involve only 1,700 clienteles till date in
proving M-banking services. SBI has so far received just 10,000 enlistments for mobile banking,

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while ICICI Bank has touched 80 lakh clienteles enlisted so far for providing M-banking services.
HDFC Bank is able to reach till 40 lakh enlisted customers as againstKotak Mahindra Bank,which
had almost 52,000 customers under the M-banking fold till 2010 ((Mohd, A, and Matihenthiran,
2010). As per the report of the Economic Times (2009), the Boston-based consulting and the
financial firm reported that in the year, 2005, there are almost 84% of the Indian household that
were unbanked and since 2002, there has been a progression by 94% in proving mobile banking
services in the Indian scenario.
The COAI Annual Report has shown that there were 813 million mobile phone users in Dec,
2016, as against less than 210 million bank account holders (Economic Times, 2010); a great
prospect for the banking sector to the masses. According to RBI projection, the penetration of
mobile phone banking active user base is anticipated to increase to 257 million in 2020, as
compared to 36 million in 2014 (Reserve Bank of India, 2014).
The extensive use of mobile phones and the beginning of smartphones have led to a digital
revolution globally. This research postulates an outside-in viewpoint on the global trends in
mobile banking about user adoption, regional and demographic variations and upcoming
technologies.
Globally, Mobile Banking has changed rapidly from a transactional feature to an experience-
driven tailored offering. Today, it continues to play a dynamic role in the digital policies of all
banks internationally. It has developed from ‘pull’ based SMS services to ‘high-end’ custom-
made offerings, such as, wearable devices and biometric apps (Figure 1.1). The application of
social media, cloud, big data, and near field communication (NFC) technology has become a key
distinguishing factor amongst banks.
Banks are progressively making use of predictive behavior models, driven by cash management
and deposits data to identify new, low-risk service opportunities. This allows relationship
managers to engross the client with tailored offerings and also lessen bank’s administrative
costs (Hodgkinson, 2015).

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Source: Digital offerings in mobile banking – The new normal (May, 2015)
Figure 1.1: Functional Evolution of Mobile Banking
1.4.2 Growth of Mobile Banking in India
The business drivers that have impacted the growth of M-banking across varied modes of
operation are shown in Figure 1.2
1. SMS alerts: One of the main concerns that banks were facing, was a long queue of
customers at ATMs for several inquiry transactions. This traffic was specifically heavy
during salary days. Banks take up a solution of proactively conveying account balances
and other important transactional activity of accounts to customers via a simple SMS.
2. Account inquiries: The SMS technology turned out to be simple enough for banks to elect
this as a self-service channel. This model of operation entangled customers, sending an
SMS to a broadcast number of the Bank with an identification information and key word.
The customer understanding for SMS-based inquiries was not so good and this led to the
induction of real-time communication channels such as USSD and WAP recently.

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Development in the Mode of Operation of M-banking
Figure 1.2: Mobile Banking Over Varied Modes of Operation
3. Bill payment and funds transfer: As customers experience from M-banking improved,
banks started realizing the potential of offering various financial transactions via a mobile
device. The first type of transactions to be rendered were, funds transfer between
customers’ own accounts and payments to pre-assigned billers e.g. Utility companies.
These facilities immensely reduced the use of cheques, hence contributing in reducing the
cost for the banks.
4. Payment services: Mobile phones had knocked on much faster than all other previous
technology delivery channels and banks were forced to offer new facilities. The mobile
phone was distinctive in the sense that, itwas a personal device which had storage ability,
computation power and captured a greater mindshare of the customer than the
conventional money wallet. This sparked new thoughts among the bankers who wanted
to pull these capabilities extend the new set of transactions over the mobile phone. This
came in the form of facilitating payment transactions via cellular phone.
5. Loan requests and service requests: As mobile phones evolved into smart phones, and it
has increased the usability, banks are confident to offer more convoluted services on the
mobile phone. The mostrecent trends include;offering loans throughsolicitations,placed
from the cellular phone, where pre-enlisted clients can give details about the loan and
avail instant sanction of loans. The mobile device technology advanced at a very rapid

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pace andconsumers’desires onease of use begantoprogress. M-banking evolved tooffer
enhanced client experience and adopt the latest innovation patterns in communication.
Growth in Technology of Mobile Banking
These technology driven advancements of mobile banking can be portrayed as in the Figure 1.3.
Figure 1.3: Growth in Technology of Mobile Banking
1. SMS banking: The early eras of M-banking were controlled by SMS communication. Using
SMS banking, banks could alert clients about actions on their bank accounts and clients
could ask for information by sending an SMS to a registered number. This method of
banking was quite known, but had the following restrictions:
- SMS transmissionwas notreal time and customer experience started weakening.
- Security issues around SMS communication was another problem.
2. WAP banking: In time, mobile banking marched to WAP banking which allowed clients to
access their ownbank accounts using areal-timedata communicationmode. This enhanced
the customer experience as, data access was now secure and real time.
3. USSD: WAP banking, while quite famous, was confined to a specific set of gadgets and the
use of Unstructured Supplementary Service Data (USSD)came intopractice whichallowed
a real-time interactive access to the bank accounts on very basic handsets.
4. Mobile web: The mobile communication technology proceeded and mobile gadgets
began supporting complete web pages. This immensely enhanced the customer
experience on smart phones and complex handsets, which provided a nearly desktop like

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experience. Mobile banking started progressing in this direction by giving the nearly
Internet banking experience on the cellular phone.
5. Application on the mobile phone: The mobile devices became revolutionary and it is
possible to install applications on the mobile phone to impart a rich user interface. The
new era in mobile banking applications offer extensive features such as:
- Pre-stored customer related information to improve customer experience and
response times.
- Increased communication layer security through the use of encryption algorithms.
- Richer user interface and cellular device specific user interface thereby enriching
customer experience.
- Intense user experience leads to more extensive features being imparted on mobile
banking.
In 2010, SBI recorded a y –o – y growth of 1865 percent in transaction values,ICICI recorded 532
percent growth and HDFC recorded a growth of 512 percent.
1.4.3 RBI Guidelines for Mobile Banking
The Indian Government has constituted and IMG i.e. Inter-Ministerial Group on Department of
Electronics and Information Technology. DIT initiated on November 19, 2009, to finalize the
framework for providing the basic financial services on cellular phones. The head of IMG is the
Secretary of DIT, and it also includes the representatives from other departments as well, such
as; Department of Posts, Department of Financial Services, Planning Commission, Ministry of
Rural Development, UID Authority of India, RBI, TRAI, Department of Telecom and the Home
Ministry. After the discussion among the members and the stakeholders (banks, telecom
companies, security agencies and the public) and meetings with the whole group and sub-
groups, IMG was able to finalize its framework on March, 2010. A Committee was also
constituted which considered the importance of ever increasing mobile phone subscribers in
the rural areas. With the advancement in the technology, mobile phone subscribers has
outreached the number of account holders in the rural areas, this means they have access to
mobile technology not to the banking services. So, to reduce the population of the unbanked
section of the society, a system is necessary which can help this disadvantaged section of society
in accessing the financial services via mobile phones in India.

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The IMG has reached an agreement on the following important issues which are associated
with providing very basic financial services through cellular phones:
 The use of mobile phones for conducting the basic financial services is the basic goal.
 The necessary prerequisites to be fulfilled while accomplishing the set goals.
 Especially for the unbanked citizen, the key players of the financial delivery mechanism.
Thereafter, the IMG has identified the following three elements which would be an important
part in implementing the processes and infrastructure and these would be shared between
various service providers of banking services as part of an optimal delivery framework.
i. “Know Your Customer (KYC)” includes processes, norms, and actual data relating to the
registration of new clients for services under the framework proposed by IMG. For arriving
at the shareable KYC requirements, IMG has decided to consult this with MHA.
ii. A global infrastructure constituent (comprising human resources involved) for ‘cash-in’
and ‘cash-out’ operations at the village/local level.
iii. An additional infrastructure constituent for assisting management of a large number of
micro-transactions and small value accounts that are required in dispensing of basic
financial banking services.
Regulatory Initiative taken by the RBI in M-banking
October 8, 2008
As defined by RBI, M-banking is “undertaking banking transactions using mobile phones by bank
customers that involve credit/debit to their account.”
Some of the noteworthy norms were as follows:
Technological and security standards were also laid down.
 Irrespective of the value limit of the transactions, it should be encrypted.
 The interoperability of services was also ensured.
 Rules regarding the grievance mechanism and customer complaints were also laid down
 The rules were also laid down regarding the daily limit of transactions; 5000 per client
for transferring the funds and 10,000 per client for those transactions which involve the
purchasing of goods and services.

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 After obtaining their respective Board’s approval, banks are directed to seek prior
approval from RBI.
 Such type of services could also be offered via Business correspondents.
December 24, 2009
 Banks have raised the daily transaction limits regarding the transfer of funds and
for purchasing the goods and services to 50,000.
 Transactions up to 1000 can be simplified without any end to end encryption of
messages.
 Allowed to carry out cash transactions to the recipients via ATMs or Business
correspondents subject to a limit of 5000 per transaction and a maximum of
25,000 per month per client.
May 4, 2011
 Transaction limit was further raised to 5000 can be expedited without any end to end
encryption of messages.
December 22, 2011
 Removal of the transactions limits regarding the transfer of funds and for purchasing the
goods and services of 50,000 per user.
 With the approval of their board, banks are allowed to keep their own limits on
transactions based on their perception towards risk.
 Ceiling on cash out to the beneficiaries through ATMs or Business correspondents rose to
10,000 per transaction subject to the existing limit of 25,000 per month.
June 30, 2013
 All the banks, which have the license, supervised and are physically present in the country
are only allowed to extend M-banking services.
 Such services intend to be limited only to the client of banks or holders of debit or credit
cards.
 Prohibiting the use of M-banking services for any kind of cross-border financial and non-
financial transfers.

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 The guidelines that are issued by RBI on “know your customer (KYC)”, “anti-money
laundering (AML)” and “combating the financing of terrorism (CFT)” are also applicable to
M-banking services.
 Banks are also directed to start a system of registration based on the documentary
evidence and with the mandatory physical presence of their users is also mandatory,
before commencing M-banking service.
 Advanced technology that is used to offer M-banking services should be secure and
must guarantee authenticity, integrity, confidentiality, and non-reputability.
 The user protection issues, undertake an exceptional importance in view of the fact that
the delivery of any banking services via cellular phones is comparatively new.
 Banks demanding to offer M-banking services shall seek at least prior approval from RBI
by furnishing full details of the proposal, only once.
The RBI, which is compassionate about providing M-banking services in India has placed many
regulations regarding this, which is mentioned below.
 All the banks, which have the license, supervised and are physically present in the country
are only allowed to offer M-banking services.
 The services should be limited to only to those bank accounts or credit card accounts in
India, which are KYC/AML compliant.
 Only Indian Rupee based services are allowed.
 For extending this facility to their customers, banks may use the services of business
correspondents. The rules with respect to the use of business correspondent would be as
per the RBI circulars on business correspondents that are issued from time to time.
 The “Risks and Controls in Computers and Telecommunications” guidelines will also be
applied to mobile payments.
 The “Know Your Customer (KYC)” and “Anti-Money Laundering (AML)” as suggested by
RBI are also applicable to M-banking services.
Transaction Limits in Mobile Banking
 Only Indian Rupee transactions and these transactions are allowed within India only.

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 Per day transaction cap of 50, 000 has been removed by the RBI, and every bank can
change this cap depending upon their risk.
 Transaction without end-to-end encryption is 5000/- (SMS Based).
Security and Authentication
The highlights of security and authentication guidelines specified by the RBI on Mobile Banking:
 The M-PIN or higher standard of mechanism should be used to authenticate the mobile
banking customer.
 End-to-end secure encryption mechanism should be followed in transactions.
 To ensure the complete security of the M-banking systems, the banks should conduct the
regular security audits of information security.
Despite many initiatives taken in the field of mobile banking, there are only 12 percent (17
million) users out of 143.2 million mobile phone internet subscribers who are using banking
services on their mobile phones (Alpesh Patel, 2013).
1.5 Need for Promoting Mobile Banking in India
The state of the banking industry is not admirable in India. In 2011, 65% of India’s population
did not have admittance to a bank account (Global Findex, 2011). Till date, lots of Indian
population do not have their own personal bank accounts. Reserve Bank of India also appeals
to the masses of the country that each person should have at least one saving account in any of
the banks of India. But still, the population is not much aware. So, mobile banking is a good
opportunity for the banking sector to build their customer base. With the assistance of mobile
telecommunication technology, the clients can make various transactions in the bank anytime.
There are various researches which illustrated thatIndia is moving fastin terms of mobile phone
users as well as mobile phone internet users, which is also a great push to the banking industry
to support the mobile banking.
Importance of Mobile Banking
 Easy Accessibility
 Security
 Less Cost

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 Speed
 Universally Accepted
 Account Statement
 Increasing Customers
 Always Connected
 Economic Development
1.6 Mobile Banking Products: Initiatives of Indian Banks
Acknowledging the significance and reacting to the initiatives of the RBI on M-banking facility,
banks have begun to adopt solutions, like, point of sale, mobile technology, biometric smart
cards, and mobile bank to reach thousands of the last-mile villages.
SBI conducted pilot plans in Andhra Pradesh, Meghalaya, Mizoram, and Uttarakhand and
established a M-banking kit, called, ‘bank in a box’ that contains mobile phone acting as a POS
machine, i.e. the Point-Of-Sale machine, a tiny printer and a unique finger print reader. This
machine is utilized for initiating “no-frills –accounts” that are linked to the smart cards allotted
to the customers.
Corporation Bank started trial ventures on the experimental basis on launching the branchless
banking in Tamil Nadu,Andhra Pradesh, Karnataka andGoa, surveying villages, helping the rural
population to open their own bank accounts and allotting the smart cards for the same. It
opened branchless banking units in 1200villages during 2009-10 and activated deposits of 25.97
crore by initiating ‘no-frill’ accounts of about 5.47 lakh clients who were allotted smart card
keeping in view RBI’s prerequisites of KYC/AML.
Andhra Bank, Indian Bank, SBI, Canara Bank, State Bank of Hyderabad, Axis Bank, HDFC, Union
Bank are the banks using smart card-based technology solutions (ITU Reports, 2016).
Integra proposes Integra Mobile Financial Applications Secure Terminal i.e. iMFAST, it is a
portable teller machine that executes basic banking functions in rural areas in the country.
Activated by Business Correspondents (BCs) in villages, the iMFAST solution, a hand-held
terminal handling transactions concerning Reoccurring Deposits, deposit, loans, withdrawal, bill
payments, insurance, and booking train or bus tickets in the rural areas of the country, is
presently operated by 15 banks in over 500 locations (including Canara Bank, Bank of Baroda,

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Central Bank of India, Indian Bank and Vijaya Bank). Integra has also allotted ATM cards to over
3 lakh clients in Karnataka, Tamil Nadu, Kerala, Madhya Pradesh, Maharashtra, Uttar Pradesh,
Andhra Pradesh, Jharkhand, and Sikkim.
HDFC Bank’s “Anywhere Bank Terminal” at sites of Business correspondents, moreover, “Bank
on Wheels” was launched in 13 States (including M.P., Bihar, U.P., and Rajasthan). It was
launched for the purpose of giving assistance to the low-income unbanked and neglected
population and to give them the access of financial and banking services at a very reasonable
cost via biometric ATMs. The bank has touched almost six lakh clienteles from its sub divisions
by using this high-tech platform.
In alliance with Grameen Financial Services channeled M-banking in Bangalore with 100
borrowers with Mcheck (Bangalore-based technology provider). Two years later, it assisted
additional 3, 30,000 customers in rural areas and this company has intended to spread these
services beyond four million users by 2018. GFS incorporated technology, by means of Mifos,
open source software created by Aditi Technologies, particularly for micro financial institutions
(MFIs). With the help of Business Correspondents like, Drishti, Basix, Infrastructure Leasing and
Financial Services,UBI have added thousands of clients in the villages of the remote areas. Under
National Rural Employment Guarantee Act (NREGS), banks in Andhra Pradesh directed many
projects on a trial basis to test “leakage proof routing payments electronically to the
beneficiaries’ accounts and transfer payments to the workers via smart cards-based savings
accounts”.
Zero-M. A. S. S. (Microfinance and Saving Support), is a foundation based in Karnataka, which
has instigated an innovative technique and the arrangement is based on biometric fingerprint
authentication. This technique is able to cross 5 Million clients including NREGS, beneficiaries of
the pension scheme, social security, and SHG members in the18 states of India. This group of
the product is known as ‘ZERO’, it is an end-to-end online payment method to help clients with
the small amountof transactions whichincludes cashless transactions, cash-in/cash-outservices
and payments leveraging the security issues and connectivity problems of this innovative
generation of cellular phones.
In alliance with banks, a physical structure known as kiosks has been set up by BASIX, it helps in
providing basic banking financial services and also helps in assisting the local populace in

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safeguarding the essentials and staying in connection with the outside world via Internet
connection.
Banking services, especially to women, have been provided by M-check, these banking services
includes loan repayments, bank deposits, withdrawals, kirana shop payments and account
balance. M-check’s vision is to unite the whole ecosystem of its associates across the banking
service providers, banking sector and telecommunications operators and service providers to
assist the user base.
1.6.1 Mobile Banking Products: Government Initiatives
The Government of India and RBI are devoted to developing a policy framework for optimal
utilization of low-cost mobile technology to quicken the access of the poor families to financial
andbanking services,inter alia, following measures have been taken to persuade banks toadopt
M-banking technology (Reserve Bank of India, 2014).
1. In January, 2006, RBI has allowed the banks to utilize the facilities of NGOs (Non-
Government Organizations), MFIs (Micro Finance Institutions) set-up under
Cooperative Societies Act, Societies/ Trust Act, and Section 25 Companies,
enrolled NBFCs not consenting post offices and public deposits to act as Business
Correspondents to offer banking services to customers on behalf of a bank, which
involve collection of smaller deposits, receive and send small value remittances,
disbursal of and recovery of loans of small value of principal and interest,; cross-
sell third party products for e.g. mutual funds and pension products , micro-
insurance and engage in bill payments for services.
2. RBI issued policies on M-banking transactions in October, 2008, and has offered
approval to 32 banks to give M-banking facility in the country, of which 21 have
begun giving these services.
3. Launched the Financial Inclusion Technology Fund with a total amount of 5,000
million, to boost investment in Information Communication Technology (ICT),
which intended to promote financial inclusion in the country, intensifying the
diffusion of technology and research in financial inclusion, intensification of the
absorption of technological advancement in the field of financial service

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providers/users and persuade the atmosphere of cooperation among stakeholders
and innovative technological advancement. The entitled accomplishments and
activities, among others, cover: (i) empowering the technology solutions which are
user friendly, (ii) imparting financial support to all those who are providing
technological solutions, whose main objective is to offer affordable financial
services to the impeded segments of society (iii) generating a common
technological infrastructure with complete information regarding credit, (iv)
financial support to the technological advancement which helps in the simplifying
ofthe documentation process for applying loan, (v) imparting feasibility for the trial
projects financing for untested but prospective interventions in the technological
system, (vi) conduction of research, studies, consultancies, evaluation of
investigations and reviews relating to technological intrusions for financial
inclusion in the country (vii) sponsoring conferences , seminars and other
procedures for consultations, dissemination relating to technological interventions
in the financial inclusion, (viii) publication of the review of literature on financial
inclusion technology and other material for publicity, (ix) Capacity building of
persons of banks, State Government departments, post offices, NGOs, MFIs,
Voluntary Associations and other shareholders and stakeholders.
4. Inaugurated the fund that will be utilized for Financial Inclusion with a total amount
of 5,000 million, to aid the various promotional and developmental activities, in
order to increase the rate of financial inclusion, especially among the weaker
segments of the society, low-income groups and in backward regions. The
authorized undertakings, among others, cover (i) financing aid for capacity building
inputs to Business Correspondents and Business Facilitators.
5. Inaugurated the Institute of Development Banking Research and Technology,
Hyderabad, which has operated on several technologies with a view to providing
information to the financial and banking system. The institute has circulated
advisories to banks on the types of software solutions that are required by the banks
and also the concerns relating to secure connectivity between the point of
transactions and the base branch.

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6. The RBI Committee on Electronic Benefits Transfers suggested the bank to provide
Unique ID to each customer to curb fraudulent activities.
1.6.2 Mobile Banking: Regulatory Framework and Current Status
The ability of mobile phones as an instrument for offering financial banking services in the
nation, the Reserve Bank announced the set of standards on M-banking services in October,
2008. The bank-led model was viewed as appropriate for the nation with an order to banks such
that all transactions ought to begin from one bank account and end in another bank account. As
of now, few banks had already begun offering information based banking services, like, stop
payment command of cheques, site of the proximate ATM/branch, balance inquiry, transaction
inquiry etc. via this medium. The guiding principle issued by the RBI in October, 2008, allowed
banks to encourage funds transfer from one bank account to another bank account, both for
purchase of goods and services and personal remittances. Banks were instructed on the
regulatory/supervisory issues, to ensure technology standards, registration of customers for
mobile banking,interoperability, customer grievance and redressedmechanism and transaction
limits in an attempt to ensure safe, secure transfer of funds, interbank clearing and settlement
arrangements for fund transfers.
Inaccordance with these rules, banks have beenrecommending mobile banking services to their
clients via various channels such as SMS, mobile banking application, USSD channel etc.
However, real time inter-bank M-banking payments has been expedited by setting up of the
Interbank Mobile Payment Services (IMPS), now termed as Immediate Payment Service, and
controlled by the NPCI (National Payment Corporation of India) after getting the approval from
RBI. The IMPS has improved the proficiency of M-banking by facilitating real-time transfer of
funds between bank accounts and offering a centralized interbank settlement service for all
types of M-banking transactions.
The IMPS has additionally been improved to bolster merchant payments using cellular phones
to advance less cash society. The board considered the alternatives of using mobile phones for
the merchant payments, whereby, the merchants on commencing the payment request ends
the transaction by consenting an OTP generated by the client on their mobile phones. The board
also thought of standard and simple procedure to generate OTP across all the banks. In the
current scenario, the M-banking has been showing a growing trend (though the low volumes)

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with the volume and value increasing by 94.71million in2013- 14 vis-à-vis 53.39 million in 2012-
13) and 222.44 billion in 2013- 14 vis-à-vis 59.9 billion in 2012-13) respectively.
Mobile telephony in India has a gigantic potential with 980 Million mobile connections in 2015
in the country, of which about 418 Million are in rural areas. The number of subscribers who
uses the internet by mobile phones has increased to about 143 Million. With the substantial
proportion of households (41.3%),who donot have a bank account andlarge unbanked sections
of the society still residing in the villages. So, M-banking has a great prospect for the banking
industry to enhance the opportunity of growing mobile density in the country. The country has
a subscriber base of 980 Million, and around 589 Million bank accounts in 2015. The estimates
for active SIMs vary, but there are only 22 Million active mobile banking customers. In terms of
per-branch costs or per-transaction, the M-banking transaction is very cost effective as
compared to the traditional way of banking, and hence there is a need for banks to persuade
the M-banking channel in a big way keeping in mind the long haul monetary additions. The
advisory board has pondered the ways and intends to make mobile as a convenient, preferred
and economical channel for retrieving the banking service for all the customers.
1.7 Global Mobile Banking Trend
There is no suspect that M-banking is characterized as the accomplishment of financial and non-
financial banking transactions and services via cellular phone that has seen the remarkable rate
of adoption since the earliest WAP and SMS offerings. Yet, in the period of 2000-2005, these
provisions remained marginal and were exceptionally restricted in terms of the extent of the
functionality offered.

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Source: UBS Evidence Lab
Figure 1.4: Mobile Banking Penetration by Country
Today, many banks in India are offering M-banking services, either created in-house or by
utilizing the services of third-party specialist vendors, for e.g. Monetize or Clairmail (now
merged).
In the developed and developing countries, there is a rapid increase in the users of smartphones
and tablets that has immense influence the M-banking as an e.g. In 2004, Juniper Research
reported that worldwide M-banking users, standing at 0.8 billion (Figure: 1.5). An astonishing
verdict is that this already extraordinary level of adoption was set to prolong over the coming
years with Juniper foreseeing a worldwide M-banking user base somewhere in the range of 1.8
billion individuals by 2019.

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Source: Juniper Research, KPMG analysis
Figure 1.5: Global Mobile Banking Users
After introducing the mobile banking and its various concepts, the next chapter covers the
literature that has been reviewed by the researcher to gain the in-depth knowledge of the
related issues.
The following chapter structure is followed in this research.
Chapter 1: Introduction
This chapter deals with the introduction of the mobile phone, and mobile phone users and
mobile banking services. This Chapter also covers problems to study, some aspects of
the mobile phone, mobile phone users, mobile banking and mobile banking services,
chapter plan of the study. Basically, chapter one is a concept and growth oriented.
Chapter 2: Review of Literature
In the previous chapter, elaborate attempts were made to describe broad concepts related to
Mobile banking.Inthis chapter,the literature reviewis done,anditstarted with the introduction
of M-banking which has been reduced to M-banking in India. The market for M-banking and the
various modes of M-banking procedures were also reviewed. The researcher has also studied
the different technologies utilized by the banks in providing M-banking services. The
transmission of this innovation, its adoption and further development of innovative
technological advancement i.e M-banking was also surveyed. This chapter also helps in the
describing the adoption and acceptance phase of M-banking which has pulled attention in the

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past studies of Roger’s Diffusion of Innovation Theory and other models and theories related to
the research carried out in the historical and recent years. This chapter serves as a framework for
this thesis.
Chapter 3: Research Methodology
This chapter discusses in detail the methodology used for research in this thesis. This chapter
starts by describing the problem, the nature of the population and sample selected from it and
questionnaire used, the procedure adopted for data collection and statistical techniques that
have been used to analyze the data.
Chapter 4: Data Analysis and Interpretation
In this chapter, data collected is analyzed that was based on the frame of reference of this
research work. In this chapter, researcher had analyzed the responses and represented the
results and conclusions from the data that was collected after the survey. Structured
Equation Modeling was then applied for analyzing the data collected for this research
work.
Chapter 5: Interpretation of Findings, Conclusions, Limitations, and Suggestions
In view of the outcome of this research work, a detailed discussion of the theoretical and
practical implication is represented in this chapter. Additionally, the researcher has also
given some recommendations that can be adopted by the banks. In this chapter,
suggestions from research work, its delimitations and further scope of research is also
discussed.
Besides, these six chapters the study also includes the separate section i.e. appendix,
enlisting the secondary sources, which are used in conducting the research and related
terms, definitions and questionnaire involved in collecting primary data.