BANKING IN TRANSITION. Mobile payment services of telcos yet to catch on

When Purab Mondal, a Bengali migrant labourer working in Trichur district of Kerala, wanted to send money back to his family in Birbhum, he walked into a Vodafone M-Pesa outlet. Being new to mobile money-transfer process, he wanted to get more details before he could go ahead with the transaction.

But the staff manning the Vodafone centre in Trichur could speak only English and Malayalam, while Mondal was not comfortable in anything but Bengali. To address his concern, the Vodafone centre in Trichur patched a call to a Vodafone M-Pesa outlet in Birbhum located nearest to Mondal’s family from where Bengali executives explained the process in the language of his choice.

With nearly one lakh banking agents for its mobile payment service M-Pesa, Vodafone is set to take advantage of the recently acquired payments bank licence. “Payments bank licence will be a huge enabler. It will allow cash out without having a bank at the backend,” said Suresh Sethi, Business Head M-Pesa, Vodafone India.

The company already has 3.5 million customers and distributes its products through 1.7 million outlets and 9,800 retail touch-points across the country, 60 per cent of which are in the rural belt.

But despite the reach and network capabilities, mobile payment services being offered by telecom companies have not been a massive success so far. The numbers are still small compared to the overall market because of lack of awareness and unfamiliarity with technology.

Most consumers, especially in the rural areas, are wary about transacting on a mobile. Almost all operators, including Airtel and Idea Cellular, have launched mobile money services, and are hoping that this will take off in the future. “More than 95 per cent of all retail payments in India are still done using cash. Out of 20 million or so merchants in the country, less than one million accept card-based payments. In turn, this lack of acceptance of digital payments by merchants means that customers remain wedded to cash,” Mukesh Ambani, Chairman, Reliance Industries, said recently at the company’s annual general meeting.

Reliance is launching Jio Money, a digital money and payments service.

“Our goal is to create a wide network of merchants who use Jio Money, so that most household payments can happen digitally. Customers can use Jio Money’s digital wallet, a Jio Money card or any other credit/debit card directly from the wallet to pay merchants seamlessly and instantly,” Ambani added.

In India, there are only one lakh plus bank branches. In rural areas, for every 1,000 km there are 33 branches. Penetration is only 5 per cent.

Telecom companies, with their wider distribution reach, are hoping to plug that gap.

“We know workers and labourers keep the money with themselves in their pockets because they do not have anywhere else to keep it. Sometimes they keep it with contractors, which is not safe. We are saying — put the money in your mobile wallet.

“We have the capability to transfer money real time 24/7. We also charge almost like a bank account charges; so it’s a cheap, transparent proposition. We are charging a total of 3 per cent commission. Banks are lower at 1.5-2 per cent, but there are other costs like travelling 30 km to the bank branch,” Sethi said.

According to Jaideep Ghosh, Partner, KPMG in India, payments bank licence will augment the mobile operator’s business by complementing its own mobile money platform, offerings and leveraging wide geographical reach.

“Considering the number of unique mobile subscribers is much higher than bank accountholders, mobile operators can play an important role to enhance financial inclusion by providing payment and remittance services to the unbanked,” he said.