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Passage III
Far from the glamorous, high octane world of banking, there is a little known, nonetheless outstanding story. It’s about Equity Bank, a lender in Kenya. Equity was so cheesed off with telecom companies, which were refusing to share their network with the bank for mobile banking that the African bank did something which few have dared to do; it went ahead and took a telecom operators licence. Equity rolled out a service what the Modi government intends to offer in India. The institution used a fairly new technology- ‘unstructured supplementary service data’ (or USSD in trade parlance)- to enable its countrymen, mired in low incomes and poverty, to avail an inexpensive banking service with ordinary handsets.
A customer had to simply text simple alphanumeric messages to access his/her bank account and carry out virtually every transaction one does with a bank. No smart-phone, no android application, no internet access were required. Kenya and Bangladesh- another country where USSD has taken off may not come across as acceptable models for India which, as the tired cliche goes, is a tiger about to be uncaged. However, it may make sense to put in place a few things before this ancient animal is unleashed.
The powerful telecom lobby, represented by some of India’s biggest business houses, had been resisting sharing their infrastructure that would allow USSD backed basic mobile banking services, connecting banks through a centralised payment gateway. Their argument was simple; they had bid for telecom licence to offer voice and data services and had no obligation to open up their infrastructure to all and sundry; besides, 10 paise per transaction was too low to charge. Things changed.
A stern Prime Minister brushed aside some of the arguments and the charge was raised to ₹ 1.50. The service pushed by the government backed National Payment Corporation of India - an entity that is desperately trying to take a toehold- will be formally launched by Modi as part of the Pradhan Mantri Jan Dhan Yojana, that is the government’s national mission for financial inclusion. But like most things in India, the USSD will start on a half baked note. First, ₹ 1.50 per transaction is too high to charge. While it has helped telecom firms to grudgingly accept the terms. A meaningful impact from mobile banking and its spread would required the charge to be slashed closer to 50 paise.
Second, restricted access and a handful of basic banking transactions would narrow the scope. Every institution should have access to telecom infrastructure and all kinds of payments should be permitted. Individual users should be able to use basic mobile phones to sell mutual fund units, pre-pay personal loan, and even pay for groceries or flight cards using credit or debit cards. The technology allows all this. And if we are embracing the technology, why we do it half-heartedly? The PM, the babus and every stakeholder in the payments game must come together to drive a bargain with the telecom companies to make it happen. Putting up ATM machines in distant villages is not a step towards digitalisation. It’s a headache for banks that run it and can be a pain for users who are not used to using a debit card and remembering the four-digit PIN.
A mobile phone is a cheaper, easier option towards a cashless economy. Anyone can use a mobile phone- it has multilingual keys and poses no hurdle to an illiterate person. But if digitalisation has to catch on, USSD backed mobile banking has to be taken out of the clutches of mobile companies. All the players should have the access and pay the same charge - just as a power utility does not discriminate between a grocer and a jeweller. The gates should be opened to everyone. Banks. NPCI, Visa, MasterCard, Micro-finance Institutions, Mutual Funds, Insurers, Telecom Companies- all should join the game. Even if a mobile company sponsors a payment bank, it should be directed to let others access its communication infrastructure at a reasonable price. Confining USSD based mobile banking to a few services and to a few players will be a lip service to digitalisation and eventually financial inclusion.
Far from the glamorous, high octane world of banking, there is a little known, nonetheless outstanding story. It’s about Equity Bank, a lender in Kenya. Equity was so cheesed off with telecom companies, which were refusing to share their network with the bank for mobile banking that the African bank did something which few have dared to do; it went ahead and took a telecom operators licence. Equity rolled out a service what the Modi government intends to offer in India. The institution used a fairly new technology- ‘unstructured supplementary service data’ (or USSD in trade parlance)- to enable its countrymen, mired in low incomes and poverty, to avail an inexpensive banking service with ordinary handsets.
A customer had to simply text simple alphanumeric messages to access his/her bank account and carry out virtually every transaction one does with a bank. No smart-phone, no android application, no internet access were required. Kenya and Bangladesh- another country where USSD has taken off may not come across as acceptable models for India which, as the tired cliche goes, is a tiger about to be uncaged. However, it may make sense to put in place a few things before this ancient animal is unleashed.
The powerful telecom lobby, represented by some of India’s biggest business houses, had been resisting sharing their infrastructure that would allow USSD backed basic mobile banking services, connecting banks through a centralised payment gateway. Their argument was simple; they had bid for telecom licence to offer voice and data services and had no obligation to open up their infrastructure to all and sundry; besides, 10 paise per transaction was too low to charge. Things changed.
A stern Prime Minister brushed aside some of the arguments and the charge was raised to ₹ 1.50. The service pushed by the government backed National Payment Corporation of India - an entity that is desperately trying to take a toehold- will be formally launched by Modi as part of the Pradhan Mantri Jan Dhan Yojana, that is the government’s national mission for financial inclusion. But like most things in India, the USSD will start on a half baked note. First, ₹ 1.50 per transaction is too high to charge. While it has helped telecom firms to grudgingly accept the terms. A meaningful impact from mobile banking and its spread would required the charge to be slashed closer to 50 paise.
Second, restricted access and a handful of basic banking transactions would narrow the scope. Every institution should have access to telecom infrastructure and all kinds of payments should be permitted. Individual users should be able to use basic mobile phones to sell mutual fund units, pre-pay personal loan, and even pay for groceries or flight cards using credit or debit cards. The technology allows all this. And if we are embracing the technology, why we do it half-heartedly? The PM, the babus and every stakeholder in the payments game must come together to drive a bargain with the telecom companies to make it happen. Putting up ATM machines in distant villages is not a step towards digitalisation. It’s a headache for banks that run it and can be a pain for users who are not used to using a debit card and remembering the four-digit PIN.
A mobile phone is a cheaper, easier option towards a cashless economy. Anyone can use a mobile phone- it has multilingual keys and poses no hurdle to an illiterate person. But if digitalisation has to catch on, USSD backed mobile banking has to be taken out of the clutches of mobile companies. All the players should have the access and pay the same charge - just as a power utility does not discriminate between a grocer and a jeweller. The gates should be opened to everyone. Banks. NPCI, Visa, MasterCard, Micro-finance Institutions, Mutual Funds, Insurers, Telecom Companies- all should join the game. Even if a mobile company sponsors a payment bank, it should be directed to let others access its communication infrastructure at a reasonable price. Confining USSD based mobile banking to a few services and to a few players will be a lip service to digitalisation and eventually financial inclusion.
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