“Money Management by Phone” as an Un-banked ‘Pay by Phone service’ for ‘Financial Inclusion’ and ‘Micro Finance’ support to people in lower strata across the country.
It is suicidal for Telcos to allow Banking Industry to hijack ‘Pay by Phone’ Value added Services. Link to the article. http://wp.me/p1ZsI2-d
Introduction: Money through Mobile. The following proposal of Money Through Mobile (MTM) non telephony related value added service is a path breaking, State of the art Pay by Phone (PBP) idea to enable all sorts of day to day money transactions using phones, any time from anywhere in its service area.
- MTM is different from Mobile Banking. At the outset, ‘Money through Mobile’ (MTM) system proposed herein is transparent to Banking industry and services and non-Internet dependent and therefore, is an entirely different service, and therefore, not to be confused with mobility in Banking service or service of e-banking using Mobile phones being currently provided by banks, termed as ‘Mobile Banking’ service.
2. ‘Financial Inclusion’ and ‘Micro Finance’ support to people in the lower strata. In addition to offering convenient and easy to use ‘Pay by Phone’ facility, there is a need to urgently implement un-banked and non- internet dependent solutions to realize empowerment of mass in the lower economic and social strata across the country both in urban and rural areas by their Financial Inclusion and Micro Finance support. Please see list of features of Money to through Mobile (MTM) service given below.
3. MTM is also a means to effectively disperse Governments welfare payments to real beneficiaries. The banks, both nationalized and private, are white elephants with always an eye on profit rather than service. Whatever said and done, banks will not be able to effectively serve people in the lower economic strata in urban as well as rural areas. Even with Banking correspondents, formal banking procedures are not user friendly for illiterate and poor customers especially for the women and aged.
Moreover, Banks cannot be expected to handle huge volume of low value money transactions expected by the common mass.
Similarly, service cost of most of the Micro Finance Institutions are unaffordable to common people. MTM system will make macro and micro money payment facility available, accessible and affordable to everyone; at an individual level who will be able and eligible to have access to a phone , mobile or land line. in urban / rural areas. Further, MTM as envisaged can provide Micro Finance service also to those who do not even own a phone.
Money through Mobile (MTM) service can be effectively used for sending various forms of government welfare payments, pensions etc., to retired employees, old aged and widows, mentally / physically handicapped and payments related to programs like MNREGA, Right to Food, Education & Health care, directly to the MTM account of the beneficiaries across the country so that the money is received by the real beneficiaries without pilferage and third party intervention. The money thus received in their MTM account can be transacted by them using their mobile phones sitting at their homes or from anywhere any time. .
MTM can enable effective usage of ADHAR. As and when it become ready, Adhar can be used for identification and information needed for KYC of the MTM users, which linked with MTM account number can enable personalized secure transactions to realize Financial Inclusion and Micro Finance services available, accessible by everyone and especially the people in the lower economic strata, both in urban and rural across the country at affordable cost.
4. Why Telecom Industry should not allow Banking Industry to hijack this non- telephony related value added service.
- In a given Eco system, Telephony related usage and revenue remain more or less constant. MTM Pay by Phone service offer an excellent non-telephony related VAS that can enhance Telephone usage and thereby enhance revenue.
- With the advent of 3G and new generation digital services, the transition from Voice call business to Direct and IP based Data and Multimedia already move out substantial amount of business revenue from Telecom Industry to external service providers such as banks, content providers, and other multimedia companies. These external service providers, use the access through Telecom network and systems and Telecom SPs Customer base that are set up and run incurring huge amount of CAPEX and OPEX and are compelled to meet the need to expand it further in order to cater for these ever growing non-telephony service related services.
- Telecom Industry will find it difficult to survive unless they ensure adequate share of revenue from these external Service providers and industries that by default use their customer base, systems and network.
- Telecom service providers, who are compelled to provide additional capacity at huge cost for facilitate these services, Telecom Industry has all the right to get adequate share of revenue from these Pay by Phone services and it is suicidal for them to remain as mere onlookers while other industries hijack their revenue potentials.
5. Success of Pay by Phone service depends on the following aspects:
a) Any Pay by Phone service shall be a common centralized system that shall be available, accessible and affordable to all types of customers served by various Service providers across the service area. Disparate systems and networks and End User services at various ‘Points of Sale’ and ‘Point of Services’ will make it unworkable, inconvenient and confusing for the end users as well as the vendors, shops and other Utility and institutional Service Providers.
b) To make the Pay by Phone service simple, user friendly, efficient, profitable and effective, it is necessary that Pay by Phone subscribers, Utility Service providers, Vendors, Shops, Banks, Post Offices etc involved in Pay by Phone service are able to deal with a common Pay by Phone system and its service provider and not with many different ones.
c) Since the system involves high volume of very low value money transactions, the service shall be without any additional service cost of usage to the end users. Any cost involved on low value transactions and service shall be compensated by profitably deploying the liquidity available to the PBP service Provider as most of the real money remains within their system.
d) The success of the Pay by Phone System and Service depend on its ability to offer Universal service anytime, anywhere, for every form of payment. In order to realize these, the MTM system shall be ideally a common, centralized, stand-alone, third party system that is set up by a Consortium of Telecom Service Providers by themselves or by a third party provider on revenue / profit share basis for the stake holders involved.
6. Un-banked Mobile money management is a must, but need to be regulated.
As explained above, a situation of having disparate Money management systems, product and services by various parties without any regulatory arrangement will not deliver desirable results especially for Financial Inclusion and Micro Finance support for empowerment of people in the lower strata across the country. Therefore, government and regulatory authorities should take immediate steps to bring all forms of Un-banked money management service under regulatory controls through National Payments Corporation of India (NPCI) under the ambit of RBI. Otherwise the entire service will be messed up and become not only uncontrollable but also ineffective as far as the common people are concerned.
7. The reasons why this much wanted ‘Pay By Phone’ services are delayed in India. It appears that reason for delay in implementation of this power and user friendly service are:-
a. Telecom Service providers either have not understood the dangers of allowing Banking industry to hijack a highly promising Value added service or;
b. As usual, Telecom Service Providers are reluctant to come into an agreement between them to have a common universal system owned by a consortium of Telecom providers that is mandatory to make it a success.
c. The Reserve Bank is unwilling to leave this product outside the ambit of Banking Industry in spite knowing fully well Banks cannot lower itself to the level of providing satisfactory service to the a large percentage of people in the lower economic and social strata both in urban and rural areas across the country.
d. Banks also cannot be expected to handle huge volume of low value transactions that will happen in the 24/7 mode of pay by phone activities.
e. Instead of doing nothing for years other than mere lip service about the need of ‘Inclusive Finance’ and ‘Micro Finance suppor’t to people of lower economic and social strata, Government should come out with bold decision to introduce possible Un-banked Money Management systems such as MTM as suggested here. If Government feel that it need to be controlled by NPCI under the ambit of RBI, they should decide accordingly, instead of sitting on it for years.
A solution to resolve this impasse between Government and telecom Service providers is to have an exclusive banking system associated with the MTM Service providers that is set up as a 3rd party system by the consortium of Telecom Service providers.
8. MTM system and Network.
MTM system can be a common, centrally placed, stand-alone third party system that can be accessed by all phone users of different service providers over mobile phone in the PLMN and as well as from land line network in the PLMN.
8.1. Technology involved. Technology involved in MTM is identical to IN based Pre-paid system as it uses Mobile network and switching systems for access to MTM system and service. However, the MTM system shall reside outside the Telecom network and it shall be transparent to any particular Telecom network or Service provider.
MTM transactions involving Banks, Post Offices and other financial institutions; will in the same position and functional level, using same product technology at par with other MTM users.
8.2. USSD based technology. The message transactions between MTM mobile and MTM server will be USSD based as in Pre-paid system. Unlike web based mobile banking services using INTERNET access, USSD is a highly secure CC7 signaling with additional security with Calling Line Identification (CLI), personal password and encryption making the MTM operation safe and secure. User-to- User Signaling (UUS) feature can be incorporated for additional authentication for secure money transactions.
Unlike the store and forward feature used in SMS, USSD is capable to support real time transactions. It is fast, easy and convenient to use. Anyone familiar with making normal phone calls can use MTM facility without any difficulty as the transactions between the phone and MTM system is by keying in of few numerals in the key pad like *123# etc as used in prepaid service.
USSD can work in basic 2G environment and does not need GPRS and 3G. MTM system can be directly implemented in the areas where already mobile networks are available and can be spread to other areas along with provision of mobile access.
8.3. Phone users can become a registered MTM client at any MTM franchisee outlet or at local Post office or banks. MTM user can also link their MTM account with their Post office Savings bank account.
Crediting money into users MTM account can be done using pre-paid coupons available from franchisee outlets or by transferring money from Post office or bank accounts to MTM account or through any other MTM user from their account. For example money can be transferred from MTM account of spouse or parent to children or between friends.
8.4. MTM Set Top Box. The killer application exclusive for MTM system that will make MTM system universal is the special purpose ‘Set top Box’ at the user end at various vendor and utility and other service provider premises as an interface between their Local Area Network (LAN) and MTM through Mobile Net work. This special purpose Set Top Box (STB) shall have facility to equip SIMs of various mobile service providers, if necessary to provide multiple accesses to mobile network to take care of the call traffic and the MTM system through the signal transfer points (STP) of Mobile gateways. The STB will interface a local computer with MTM application in it to interact with MTM system via mobile network. MTM applications required in the user devices can be download from the system.
Alternately, a USB plug in dongle device can be developed provide network access to MTM system by local computer or vending machines in small shops.
8.5. Solar powered energy to support MTM. To make available the required Eco system to power Mobile phones and STB’s at user premises where regular electric supply is not available or cannot be afforded by villagers in rural areas, solar powered mobile phone chargers etc., at subsidized cost. Facility for free charging mobile phones could be provided at public places, Post offices, Panchayat offices, Bus stations / Railway stations etc.
9. MTM-ATM Kiosks. Connectivity between MTM-ATM kiosks and MTM system can be through Internet where available or through Mobile network using STB at MTM Kiosk end. Withdrawal of cash can be done using MTM Card (identical to ATM VISA / MASTER cards) provided by the MTM service provider or by accessing the MTM-ATM by mobile phone over mobile network and interacting with it with the Mobile.
Hard cash can be obtained at MTM franchisee outlets or from MTM cash vendors on nominal discount. By transferring money from own MTM account into their MTM account.
IP connectivity directly or via Web based service over INTERNET can be also options can be deployed for inter working of MTM system with Banks, Post Offices, major malls, utility service provider’s premises, franchisee outlets, between MTM system and MTM-ATMs.
9.1. MTM Service can be extended to Land Line phone users. MTM service such as payments of Utility bills, Service charges etc and transfer of money to any MTM user account can be extended to Land Phones also as the numerals, * and # keys used in USSD messaging are available in land line phones. IVRS incorporated with MTM system can take care of the transactions between Land Phone and MTM system.
9.2. Financial Inclusion of all in real sense. MTM as a service for all.
With MTM- ATM Kiosks and services in place, MTM facility can be extended for non-phone users also. Any one can open an MTM account in MTM system and avail the service using MTM Chip Cards provided by MTM service provider for taking out or crediting money into own account or any other MTM account in the MTM-ATM systems or from Post Office linked MTM accounts.
10. Features of MTM :
- Initial subscription to become MTM user and recharging / refilling of users MTM account through Post Offices, Banks and MTM franchisee outlets.
- Recharging / refilling of the MTM account in the MTM system could be done by buying and using MTM prepaid recharge coupons marketed by the MTM system provider as being done now for prepaid mobile phone service.
- Every MTM user can pay-in money into own MTM account and any other MTM user account. Withdrawal and e-transfer of money can be done only from own account.
- MTM users can avail loan against their collateral such as Gold ornaments deposited with MTM service provider, at very low interest rate into them MTM account, use it and pay back or re-take again and again transparently as Micro Finance support. Any house wife can use such loans at low interest rate (say at 2%) and re-lent it as low value loans to her trustworthy MTM users at nominal interest say 1 paisa per Rupee per Week and earn a profit of 10% by transactions over MTM sitting in her house.
- Capability of e-transfer of money using the MTM prepaid coupons, by any Mobile phone or by Land line phone from anywhere to any MTM client account in the service area is another powerful feature envisaged of the proposed MTM system.
- MTM cash vending machines (MTM-ATM), identical to bank ATMs, provided by MTM system provider at MTM franchisee points and other secure places shall be used to deliver real cash to MTM users.
- MTM-Cards. MTM users can use MTM-VISA Cards identical to credit cards; issued by MTM service provider that can be used to receive or credit in real cash from MTM-ATM or any of banks ATMs.
- MTM-ATM service can be provided to non-phone users also.
- At locations where people need quick cash at malls, and other locations, licensed Money changers can dispense real cash at a discount in lieu of e-transfer of money to their MTM account.
- Government agencies can send welfare payments like MNREGA etc to MTM system through banks to get credited into beneficiary’s MTM accounts.
- As the transactions are recorded, it will be possible prevent avoidance of Tax collections and the Govt. can access / collect statistics to cross check it.
- MTM system and network use UUSD based real time transactions that is more secure and faster than web based services.
- CLI and TPIN cross check, UUS authentication and encryption will enable enough security.
- IVRS incorporated with MTM system can take care of the transactions between Land Phone and MTM system.
11. The business part: MTM deals being virtual e-transactions, and therefore, most of the real money remains within the MTM system. This opens out enormous business potential for various stake holders associated with MTM business.
There will be above billion phones in India soon. With a modest assumption of a monthly average of Rs.10000/- transaction per phone, the annual turn around of the business will be a mind bogging sum in Trillions of Rupees.
11.1. MTM service can be provided free of charge to users. The huge excess liquidity available with MTM Service provider can be profitably deployed in various instruments of money management products within regulatory norms. With above business logic, it is possible to provide MTM service free of cost to users which will make the system popular with all types of phone users that will enhance MTM usage.
12. With the enhanced money business from this un-banked value added service, there will be enough profit shares for various stake holders, for the Telecom service providers and others, involved in MTM business on revenue/profit sharing and other models.
13. Pragmatism in planning: Telecom & IT solutions can by itself out grow unless the change in the eco sytem also happen hand in hand. However, Government should consider to bring in people friendly products and services using contemporary technology instead waiting for many years for the perfect solution. The pay by phone service as explained above can be straight away implemented as the technology is readily available and what is needed is a basic telephone network that can be linked with central MTM system using satellite links even from the remotest villages. Looking at the benefits of the system, it is even worthwhile for the Government to set up exclusive GSM system by BSNL for MTM services if the private Telcos are not willing to come around to implement it forming a consortium. Incidentally I have persuading this for years with DOT, TRAI and RBI.
Author: Abraham Paul.