Indian Mobile Banking: Unexplored Opportunity

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29 June 2009


Mobile banking in India is in a budding stage, with the high penetration of mobile phones acting as a growth driver. India’s existing mobile phone user base consists of 347 million users, including 73 million rural users. Celent expects the mobile banking active user base to reach 2% by 2012, up from the current 0.2%.

In a new report, Indian Mobile Banking: Unexplored Opportunity, Celent examines the potential for mobile banking growth in India’s urban and rural markets. Mobile banking is currently free of cost to encourage customers to adopt this new channel. Despit this, the registered user base is only 25 million people, and the active user base is just 10% or 2.5 million of registered user base.

One major reason for the current low adoption of mobile banking, especially among the urban population, is the availablity of alternative modes of banking, such as accessibility to ATMs, online banking, etc. Additionally, there are security concerns about mobile banking among Indian customers," says Celent analyst Prathima Rajan, author of the report.

Mobile payments have evidenced better usage among youth. The young, banked, urban working population are tech-savvy and present short-term potential for the growth of mobile banking in India.

Rural India is a huge and challenging market to reach, and service providers need to develop a long-term strategy to serve this untapped market. Many banks have initiated pilot projects, because banks consider mobile banking to be one of the cheapest ways to reach the roads less traveled. India has close to 600,000 villages, making it nearly impossible to establish brick and morter banks everywhere.

India's rural markets are also harder to tap due to illiteracy, lack of accessibility for services and technology, regulatory barriers, etc. To serve this market, banks should make use of pre-existing networks like regional rural banks, microfinance institutions, local delis and post offices, and field officers and authorized outlets. It is also important to leverage the latest technology in reaching out to this market.

The report analyses urban and rural India as two distinct markets requiring different products, service offerings, networks, and technology. The report also highlights possibile opportunities and limitations, providing suggestions for overcoming market constraints. It gives examples of the experiences of foreign countries where mobile banking has already proven successful, which will help Indian service providers develop similar strategies.