Today, RBI took another incremental step in defining Mobile Payments in India. The bank has published draft guidelines for Mobile Payments – â€œMobile Payments in India â€“ Operative Guidelines for Banksâ€ . Itâ€™s encouraging that steps are taken in recognizing the industry and putting standards around it. However; it seems like a cautious approach. My observations:
RBI has defined Mobile Payments as
â€¢ Exchange of Information on mobile â€“ Balance Enquiry, Statements etc
â€¢ Payments done involving mobile
RBI has acknowledged Banks as an important partner (since banks are liable for KYC norms) in offering mobile services and therefore, such services are restricted to KYC/AML compliant instruments â€“ Bank Accounts, Credit/Debit Cards
Implications:This would bring services like eWallet / mWallet / Store value cards under RBI scanner and I see a regulatory risk in such businesses
The bank has recognized the long term goal of mobile payments to enable Peer to Peer (or Peer to Business) money transfer. However; RBI has also limited this scope to bank accounts.
Implications:Going back to my above point; I think businesses like Paypal might not pass regulatory hurdle in India. All operators & service providers have to partner with banks to enable payments involving mobile. I also donâ€™t see any hope for relaxing this in future.
RBI has also raised the entry barriers for new entrants. Banks have to take board approval for offering such services to their customers. It would mean longer sales cycle â€“ good for existing players but bad for new ones.
We have been following payment space from last some time and it looks interesting to us. I have also seen some case studies in geographies similar to India. In my opinion, two top most success factors in this industry would be:
â€¢ A strong use case to drive user adoption â€“ In all success case studies, I have seen there is one use case which compels customer to try mobile payments. It can be mobile recharge, peer-to-peer money transfer, ticketing for mass transit system etc etc
â€¢ It would need active involvement of banks and mobile operators. While banks provide the backend payment infrastructure (& regulatory issues around payments); operators are best partners to acquire customers.
If you want to read technologies related to Mobile Payments in India, find them here
I would be happy to discuss and understand what new payment start ups are doing in Mobile Payments