subject: The Banks May Reduce Costs Through The Use Of Mobile Money [print this page] The Indian Economy is growing and the possible role of mobile money in the same may not be overstated. The author of The March of Mobile Money, Sam Pitroda, is an advisor to the PM on infrastructure and innovation. The main reason why he feels so passionately about his idea of digital wallet - the banks havent been able to reach the bottom of the pyramid yet. He firmly believes his idea will help reach the banks to these inaccessible markets.
Everyone Has Financial Needs
Quite naturally, the banks have only focused on those sections of the market which have large savings (rich people), and the more money banks get access to, the more they make. As a natural corollary, they are not interested in people who dont have much money. At the same time, even those sections, which are considered as unbankable markets, have real world financial needs.
Every New Customer Costs Money
The situation right now is the banks have large costs for customer acquisition due to their brick and mortar structure. They never knew there was any other way they could exist. Even when the process of computerization was introduced in the process, it was done first at the back end, because that was the place where all the money flow was happening. The next place where the computer came was the teller, or the front end. ATMs also were set up, but that also cost them (the banks) money.
Will Brick and Mortar Be History Soon?
Through all this, expenses kept going up, though the picture is expected to change abruptly with the arrival of mobile phones which act as powerful computers most of the time. Sam Pitroda believes the next generation of banks would not be based on a brick and mortar structure, they would just require a central server somewhere and trust among the customers.
The Time for Micro-Transactions Has Come
The distribution can be done just through the PCO, where the customers would be able to deposit and withdraw the money. The people who make transactions through these new channels will not have large needs, rather their transactions would be small, thus giving rise to micro-transactions. In one single stroke, the banks would reach the bottom of the pyramid as well.
Regulatory Hurdles Have To Be Resolved
Its not that the situation is not without complications, as there are likely regulatory issues arising out of it. People (both regulators and users) are still not very sure the system will take off in India. According to Sam Pitroda, there are solutions in sight. Sam Pitroda clarifies the mobile operators will have to realize the banks will still be banks and that they would continue to be mobile operators. Only the process of information is being transferred to the mobile phones, the money still remains with the bank. Even if the money is transferred, it still remains in a bank, though may be a different one.
