Wait, Rural People are using Mobile Banking!

Having one bank account for every household is the aim of Indian government. With the arrival of mobile banking which is catching up very fast in the metros and other cities, it can be achieved soon. Recently, I read an article which commented on the scope of mobile banking in rural India. The article said that people form rural India can perform banking transactions using mobile phone which made me think over the road-ahead of this development.

A mobile phone acts as a branch of the bank which also stores the database of customers. The name, address, photo, and other relevant details held by issuing bank are stored in the smartcard of phone. Customers get a secure electronic identity using which they can perform banking transactions wherever they want to. Mobile banking also helps banks and government in saving crores of rupees by way of reduced transaction costs. As per a data analysis, it reduces the transaction cost by 70-80%.

Around 66 percent of rural India is still unbanked and I believe one of the strong reasons of this huge gap is lack of formal financial services in rural areas. People in these areas do not have access to banks and as a result government looses a huge sum of money in form of taxes and other transaction costs. Looking this huge opportunity, RBI has asked banks to launch mobile-banking services in the under-banked regions. In some of the states, these services have got huge response. In Andhra Pradesh alone, for instance, more than 2.5 lacs people have registered for mobile banking services.

Other than banks, many microfinance institutions and financial institutions are coming up with their innovative offers to attract the rural customers. SKS Microfinance and Ujivan are among the leading MFIs which are in talk with different banks to provide mobile banking services in rural areas. Many mobile services providers have also shown interest in these developments which may bring sea change in banking services in rural India. However, in my view, before introducing these services, all the institutions must work together in order to provide maximum benefits to the customers.