What are Different Types / Channels of Mobile Banking / m-commerce ?

5 Years ago, we first tested Paymate Mobile payment services tied to a Credit Card and since then the industry has evolved. However, before diving into to check the state of m-Banking, m-Commerce in India, we’ll first have a peek into various types(options) / Channels available for the consumer to go for Mobile Banking.

M-banking is a broad term. It could be as simple as an SMS-based cash transfer between two users, or it could also refer to payments made on mobile-web at different merchant sites. We briefly discuss – various services / transactions offered under m-banking, how different technology channels are used and the merits of each.

Services offered by Mobile Service Providers
Mobile Wallet SIM card is used to store information on cash balance, account and transaction information. Here, the subscriber is not necessarily required to have a banking account, e.g. Airtel Money as he can load cash on to his account. In developed markets, this is expanded to also include credit card information, e.g. NTT DoCoMo’s mobile wallet includes prepaid as well credit card and ID card information. You can also use it for •Retail POS – Contactless (NFC) /Non-contactless, Ticketing – movies, travel, Utility Bill Payments, etc

Carrier Billing This includes purchases that are billed directly to the subscriber mobile phone bill. Such as when subscribers purchase ringtones or games from the carrier using prepaid or postpaid accounts. For example, Facebook is working with Indian telcos to facilitate in-application purchases (for games, credits, Apps, Songs, Ringtones, etc.) which can be directly billed to the users bill or prepaid balance.

m-Banking Direct access to the subscriber’s bank services and information via the mobile device. This is typically offered by the bank as an extension of its existing banking services like Account balance, Bank transfers, check debits and credits, etc.

What are the different Types of technology channels for m-payment ?
SMS channel SMS messages were the earliest means (and common still in many countries) of enabling m-banking transactions, especially as these services took off in emerging markets. However, SMS channels could pose some security challenges.

USSD Channel Unstructured Supplementary Service Data (USSD) is a protocol used to offer basic data services on a wide range of handsets. Unlike SMS, USSD creates a real-time connection with the server and allows for two-way communication, making it more interactive than SMS. USSD is used for services such as prepaid callback, P2P money transfers, and menu-based information services.

Mobile browser/ Applications With the penetration of 3G, transactions are now happening through browser or applications. This medium provides more interactivity and a much better user experience. However, mobile Internet also allows OTT operators (Google, for example) to directly reach out to the subscribers and hence there is a risk of telcos being excluded from the value chain.

NFC / Contact less m-Commerce NFC uses a chip that enables machine-to-machine communication to enable contactless payments. NFC, however, would apply more to point-of-sale transactions and is likely to co-exist with the mobile Internet based channel. Credit Card companies, such as Visa and Master Card, are also rolling out contactless payment solutions.

When affordability was low and proliferation of sophisticated handsets another issue, m-payments have been delivered through SMS or USSD which is deployable across mobile phones predominantly by the telcos, hence giving them a more dominant role. However, with the increasing adoption of smartphones and data over the longer term, we believe payment solutions are likely to be mobile Internet or Applications based. In the next article we will cover the state of Mobile Banking and Scope of it in India.