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Mobile Payment Forum of India: Regulatory Sub-Committee. Sachin Khandelwal June 07, 2008. Mobile Infrastructure and Banking system in India. Mobile subscribers – 261 million as on 31 st March 2008 and growing 8 million per month Population of 1.2 billion

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mobile infrastructure and banking system in india
Mobile Infrastructure and Banking system in India

Mobile subscribers – 261 million as on 31st March 2008 and growing 8 million per month

Population of 1.2 billion

Bank accounts – 360 million December 2007

67 percent of adult population have bank accounts

Nearly 45,000 out of 72,000 bank branches are under the core banking solution (CBS) of banks

Electronic payment predominantly happens through the CBS branches

Internet banking penetration is very low though picking up fast in last two years

Money transfer to/from remote places is still a big challenge

Electronic benefit transfer (EBT) is a big task ahead

mobile banking infrastructure at present
Mobile banking infrastructure at present

A good number of banks have started using mobile as a delivery channel

SMS alert for transaction updation, reminder for payments, balance enquiry, last five transactions etc. being provided by many banks

Utility bill payments, intra-bank funds transfer offered by a few banks

Many pilot runs, many solutions and little interconnectivity – banks are not sure whether they are too early or too late

1 introduction
1. Introduction
  • Mobile phone has become an alternate channel for delivery of banking & financial services
  • Mobile banking is defined as information exchange between a bank and its customers for financial and/or non-financial transactions
  • Three players – banks, mobile payment service providers & mobile operators
  • Guidelines are restricted to banked customers using the mobile platform
  • Extending the service to non-banked customers will be examined later
2 regulatory supervisory issues
Products restricted to bank account holders

Services to be in INR

Guidelines on Risks & Controls in Computers & Telecommunication to be applicable

Banks should develop & enforce outsourcing guidelines to manage 3rd party service providers

Current KYC & AML guidelines will be applicable

Whether NRIs can carry out Rupee denominated transactions

2. Regulatory & Supervisory Issues
3 registration of customers
Banks should offer service to own customers only

Two levels of service – informational & transactional

In case of customer having multiple accounts within/across banks, service provider should enable designation of primary account or card

One-time registration through a signed document

3. Registration of Customers
4 technology security standards
Ensure authentication & non-repudiation

Online transactions


End-to-end encryption

2nd factor (optional)

Offline transactions

Offline PIN

End-to-end encryption

Payment service provider to comply with PCI DSS or bank’s security guidelines

Use of mobile number as 2nd factor?

Suggest –

For what all txns?

(Mobile # + PIN) 1st factor

(Password / DOB / Txn PIN) 2nd factor

Card number / OTP as 2nd factor is impractical

On WAP & Web, getting mobile numbers as a mandatory field from Telcos

Mpin to be encrypted

If SMS is encrypted, then it does not pose any additional risk as compared to other channels

4. Technology & Security Standards
5 interoperability
Service should be available across all telcos

Use standard messaging formats (prescribed by MPFI and/or ISO 8583) to ensure interbank transactions

How do we ensure that service is available across both GSM and CDMA operators, given that CDMA operators adopt a different approach

Use of SFMS and NEFT for interbank non-card txns

5. Interoperability
6 clearing settlements
Option of bilateral / multilateral arrangements for Interbank settlements

Banks to not participate in any e-money / stored-value prepaid product

Discuss the stance on other prepaid systems recently allowed

Understand the concept of Interbank Payment Gateways

6. Clearing & Settlements
7 legal issues
Customer to be made aware of any additional channel risk prior to sign up

Banks could be exposed to enhanced risk of liability on account of mobile technology – bank to take adequate risk control measures

All precautions taken in the case of Internet Banking become directly applicable in the Mobile scenario

7. Legal Issues