Oct 12 2008

A Framework to Understand Power Distribution in Mobile Banking Platforms

Ignacio Mas and Kabir Kumar from CGAP have written a great paper on the issues involved in mobile banking — Banking on Mobiles: Why, How, for Whom?1.

Here’s a quick summary of some of the ideas in the paper —

– Mobile phones offer always-on/ anytime/ anywhere ubiquitous reach and can partially or fully work as four devices: a virtual bank card, a POS terminal, a human ATM and an internet banking terminal. Not only that, mobile phones provide a unique user experience driven by personalization, immediacy and perceived control. Finally, mobile phones combine the tight security of the SIM with the flexible open architecture of the phone itself. Combined with the location awareness embedded into mobile phones, this capability can be the basis for a number of unique services.

– Banks can use the benefits offered by the mobile phones to build services that allow them to achieve one or more of the following objectives: increase penetration, sell more services, retain the most valuable customers, and reduce the cost of providing services.

– Combining the benefits offered by mobile phones with the strategic objectives of the banks, we can form three extreme deployment scenarios that, in combination, span the range of strategies a bank might pursue. It can offer mobile banking services as a cool value addition to retain existing customers. It can position mobile banking services as easy banking to gain customers from competition and increase market share. Or, it can use mobile banking as virtual banking to increase penetration and bring the unbanked into the economic mainstream.

– To implement these deployment scenarios, banks need to make technology decisions about how to transmit data (voice/ SMS/ USSD/ data), how to ensure security (bearer encryption/ end-to-end encryption/ terminal security) and how to manage user interactions (single command/ server based interactive sessions/ client based interactive sessions).

– These strategic and technology choices condition the relationship between the three parties that need to work together to offer mobile banking services — the bank, the mobile network operator and third party intermediaries. The power in these relationship can be extremely skewed towards one of the parties — banks (banks as MNVOs), mobile operators (mobile operators as issuer of accounts and maintainer of floats) or third party intermediaries (platforms with operator and bank interoperability) — or it can be shared more or less equally between all three.

Power Equations in Mobile Banking Platforms

– Finally, even though these decisions decide the power distribution between banks, mobile operators and third party operators, often these decisions are forced by regulatory policies.

In a recent post, I wrote about how RBI’s guidelines for mobile banking in India favor banks and third party intermediaries over mobile operators. In a subsequent post, I’ll use this framework to explain why.


1 Banking on Mobiles: Why, How, for Whom?, Ignacio Mas and Kabir Kumar, CGAP, June 2008.

2 responses so far | Categories: 2008-09 Fellows,Gaurav Mishra,Mobile | Tags: , , ,

2 Responses to “A Framework to Understand Power Distribution in Mobile Banking Platforms”

  1. Tax On Prize Or Award on 23 Oct 2008 at 9:24 am

    Regulatory policies are what keep banks in line and this is something that I believe should be in place more s throughout the world. You make a good point that these mob9ile banks have to follow such an extensive food chain just to transfer money, good point.

  2. Survive Recession on 05 Mar 2009 at 12:45 pm

    One would wonder if you fully understand how these systems work. banks do not process credit or debit cards. They have intermediary processors to do this work. Processing through mobile phone services is already available. But, PCI compliance and securing the technology makes the srvice m ore expensive than processing from a hard line POS. The amount of technical much less physical security that would be necessary to make this happen is very prohibitive.

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