The wallet in your mobile phone

You’re in the back of beyond but plan to meet your friends at the nearest multiplex to catch the latest blockbuster. No Internet access, and nobody’s going to deliver tickets in the boondocks. But you still manage to book tickets and amaze your friends. Magic? Not really. All you need is a mobile phone and a credit card and you can pay for more goods and services than you thought possible. A day will soon come when you can walk into a store without any money— paper or plastic—and pay for whatever you buy with your 10-digit mobile phone number. And this is not one of those things that will happen at some point in the dim and distant future. Technology companies are already working roundthe-clock to make mobile banking a reality. And mobile phone operators are delighted at the prospect of more revenue coming their way.

But what does all this mean to you? Is it safe? What happens if you lose your phone? Can your text messages be hacked into? To get an answer to these and other questions, it’s important to understand this new technology. So, what exactly is mobile payment or m-payment? At a very basic level, it is the transfer of money from one person to the other in exchange for goods or services.

All you need is an application (a small program) that can be downloaded to your phone and can be activated every time you need to use the phone to make a payment. M-payment services are currently offered by solution providers who are the intermediaries with banks and card companies who allow the access to funds and vendors and merchants where one can avail of these services at the other end.

The two big players in the mpayment arena, mChek and PayMate, work closely with all the stakeholders—banks, credit card issuers, card holders, merchant establishments and mobile service providers—to get the full cycle in place. JiGrahak is a relatively smaller player, and recently, Obopay, a US-based m-payment firm, has entered the Indian market and is expected to roll out its services.

“The credit card industry in the country has a penetration of only 3,00,000 points of sale; compare that to the mobile phone penetration and the reach that it offers,” says Ajay Adiseshan, founder and managing director, PayMate. The services offered by these intermediaries are still at a nascent stage, and the list seems small compared with the immense potential (see table M-payment Network). However, the list of services as well as intermediaries offering them will expand.

The services offered by m-payment solutions providers range from payment of mobile bills, buying film and railway tickets to gift purchases and transfer of money from one person to another and even your insurance premium. Says Anita Pai, executive vice-president, ICICI Prudential Life Insurance: “We have partnered with mChek to make premium payments easy and make customer interactions convenient and effortless.” Barclays Bank also allows customers to check their bank balance and make specified utility payments on the phone. Fidelity too offers customers the chance to buy and check funds’ performance on the phone. Balance enquiry and transaction updates on the mobile have been in existence for some time and are free.

But, how does the payment mechanism work? The option to make payments is either at point of sale or an e-commerce website of the retailer through a text message or even voice response system. But before all that you need to register yourself with the service provider, after which your mobile phone number is linked with your credit or debit card. The registration itself can be done online or the registration form can be downloaded on to the mobile phone and one can even use the phone to initiate this process. PayMate, in some instances, asks subscribers to visit their bank ATM for registration (see graphics How It Works).

But for sceptics, the biggest drawback of the m-payment model remains security. Transaction security is a concern because the text messages are not encrypted. However, m-payment companies are switching to what is called the “second-factor authentication” method. Says Sanjay Swamy, CEO, mChek: “Single-factor authentication solutions such as passwords and PIN are weak and particularly vulnerable to phishing attacks. Our ‘pass code’ is a second-factor authentication solution that enhances security. Our technology also doesn’t let the PIN get stored in the sent items box.”

Some merchant partners and service providers argue that the value of transaction using such a platform is not high enough at this stage and as the phenomenon catches up, both mobile phone operators and payment partners will step up security.

On their part mobile operators are tying up with payment intermediaries to strengthen their hold in this yet another lucrative valueadded service. For instance, mChek has joined hands with Airtel, ICICI Bank, HDFC Bank, State Bank of India, Corporation Bank and Visa for enabling money transfer through mobile phones. It also partners online travel agency makemytrip. com for browsing flight schedules.

PayMate currently has a tie up with 3,000 online merchant establishments, has covered all multiplexes and claims to be adding 1,000 companies every month. Other than mobile phone companies tying up with intermediaries, banks are partnering mobile companies, starting with payment of mobile phone bills on the phone. HDFC Bank expects its tie up with Reliance Communications to help its banking customers to use their Reliance phones to pay a number of utility bills.

JiGrahak goes a step ahead and allows users to browse through various products of partner companies before buying. Though services are offered to users with basic handsets, some services work better with a Java or GPRSenabled phone.

The other hurdle is of mobile networks; for instance, mChek services can be availed of only by Airtel and Vodaphone subscribers. The biggest advantage that mpayment has is the wide number of mobile phone users compared to credit card or debit card users in the country (4.5 crore). Mobile phone subscription stood at 24.24 crore by January 2008, a whopping five times the plastic card base and 605 times the merchant establishments.

The industry is optimistic about the future of m-commerce. If one goes by RBI’s financial inclusiveness objectives, mobile banking and m-payment can help banks enter hitherto untapped areas. Given the market size, m-payment may soon become as ubiquitous as the mobile phone itself.

Registering and transacting using mobile phone is as easy as sending an SMS. However, there are several questions on the cost, care and security of using mobile payment.We answer 5 most relevant questions.

Q. Is there any fee levied on the service?

A. Registration is free. PayMate charges Rs. 2 for every SMS transaction. In the case of mChek it’s free.

Q. Will the transaction reflect on my credit card statement?

A. Yes. Like any other entry but would mention the name of the mpayment company through which the transaction has taken place.

Q. What if I lose my phone or change my phone number?

A. In case you lose your phone, inform your cellular service provider and get the SIM deactivated. This way the account with the payment company also gets closed. You will have to re-register with the new number.

Q. Can I change my credit card detail or add another card to continue the service?

A. mChek lets the mobile user link multiple credit or debit cards, whereas PayMate does not offer this facility. However, if you wish to stop using a card for m-payment; you need to inform your credit card company or bank.

Q. How do I get physical receipts on payments made?

A. The transaction would be reflected in the credit card details and if the account is linked with a debit card, the transaction would be reflected in the bank statement. For instance in case of mobile phone bill, the amount will be reflected in the credit card statement and you get an instant SMS indicating payment made; you do not get a physical receipt.