Enabling micropayments using cellphone…….Ashok Jhunjhunwala
India has largely been a cash economy.Credit cards are still used by a small fraction of Indians.Debit cards are much larger in number,but used primarily to withdraw cash from ATMs.Cheque payments do exist,but largely in the corporate sector and for some bill payments.Internet payments are yet to take off.
It is in this scenario that the launching of mobile banking and payments has the potential of transforming Indias cash economy.Firstly,it is aimed at micropayments;even payments of Rs 50 can be made easily.Secondly,a majority of Indians today own a mobile phone,and in the near future,it is likely that most Indian families would own a mobile phone.The micropayments are envisaged as mobile-tomobile payments.All one needs to know is the mobile number and the Mobile Money ID (MMID) of the payee and the money can be transferred from the payers bank account to that of the payee in an instant.Thirdly,the payer and the payee need not be in the same place;in fact the payment can be carried out between any two people present in any two parts of the country.
How does this work A person with a bank account in virtually any bank can register for the mobile banking service and provide her mobile phone number to her bank.The bank would enable downloading of an application on her phone and provide her an MMID.She also has to choose a password (similar to ATM PIN) to use the service.Now,she can operate her bank account completely through her phone.Most banks would allow her to check her balance,view past transactions,make bill payments and now the person-to-person payments.To make a payment to any person (having a similar facility),all she would have to do is use the mobile application to log in using her password,enter the payees mobile number and MMID,and the amount to be transferred.The money would be instantly transferred from her account to the payees account.Both she as well as the payee will get messages immediately on their phones.She does not even need to know the banks name and the bank account number of the payee.Soon one may see mobile phone application where the MMID is integrated with the address book of the phone and she would not even have to type the payees mobile phone number and the MMID to make payment to a person in her address book.
In the not too distant future,one could envisage that a taxi or an auto would have their mobile phone number and MMID written (painted) on their vehicles and she could pay the fare through her mobile phone,avoiding any cash.Similarly,small and large shops would have their mobile phone number and MMID displayed and she could make mobile payment.It will be great to see the day when vegetable vendors can be paid in this manner.
This has become possible due to the efforts of the Mobile Payment Forum of India (MPFI),formed at the initiative of RTBI (Rural Technology and Business Incubator) at IIT Madras and IDRBT (Institute for Development and Research in Banking Technology),Hyderabad.Most banks,mobile service operators and technology providers have joined the forum to make this dream come true.MPFI members defined the technology required and the standards needed for all the interfaces.MPFI then worked with the RBI to get the regulations in place for banks to launch the mobile banking service for its customers.MPFI then took up the task of defining interoperability standards so that payment can be made across banks and that too using only the mobile phone number.It came up with the concept of MMID,which serves three purposes: MMID provides the parity bits so that a transaction is rejected in case a customer enters the payees mobile number wrongly;in case a customer has multiple bank accounts mapped to her phone,the MMID would be different for each of these accounts;finally,the MMID helps in identifying the destination bank when a transaction is carried out.National Payment Corporation of India (NPCI) joined the effort and commissioned a switch to carry out transactions and settlement between banks.The ecosystem was ready.
Six MPFI members State bank of India,ICICI Bank,Union Bank of India,Bank of India,Yes Bank and Axis Bank have started providing the service and HDFC is carrying out tests.Other banks are likely to join soon.Electronic micropayments through mobiles is on the verge of becoming a reality in India,making a difference to the economy as well as to the lives of people.
The author is chairman, Mobile Payment Forum of India and a professorat IIT Madras