MOBILE BANKING

ADOPTIONImran Reza 16-071Zakaria Hasan 17-006Rafia Khan 20-036Imtiaz Rashid Merit 553

Mobile Banking◦Mobile banking can be defined as the ability to conduct bank transactions via a mobile device, or more broadly to conduct financial transactions via a mobile terminal (Drexelius & Herzig, 2001)◦Mobile banking is the performing of finance related functions on a mobile device like a Smartphone or tablet.◦Also known as m-banking/ MFS (Mobile Financial Services)◦Mobile Financial Services (MFS) is an approach to offering financial services that combines banking with mobile wireless networks which enables users to execute banking transactions

History of Mobile BankingThe origins of

modern banking can be traced to 14th Century

Development of Internet and

Electronic Computer in

1950s

First ATM : 1969

Development of Mobile Network :

1987

Internet banking in the mid-1990s

SMS Banking :

1997

3G Mobile Network & Smartphone: 2003/04

APP Store : 2008

Mobile Banking :

2009/2010

KEY MOBILE BANKING TERMINOLOGY Mobile Carrier – the service provider for phone (i.e. AT&T, Sprint, Verizon,

etc)Mobile Device – a cell phoneText Banking – (SMS – Text messaging). SMS is an acronym for Short

Message Service, more commonly known as “text messaging”. Mobile Banking user may receive account information or alerts through text messages. The maximum length of a text message is 160 characters.

Mobile Originated Message (acronym MO) – a text message sent from a phone by a Mobile Banking user to the bank in the form of a Shortcode.

Mobile Terminated Message (acronym MT) – a text message sent by the bank to a user’s phone

Activation Code – a 6 digit, numeric code provided by the Mobile Banking user after a successful enrollment of his/her mobile device

Shortcode – a 4 to 6 digit numeric code that allows Mobile Banking users to communicate with the bank using text messaging.

Mobile Web – internet browsing for internet banking from a mobile device.Mobile App – (also known as downloadable app) – is an application that is

downloaded to a mobile device.Smart Phone - a mobile phone offering advanced capabilities with PC-like

functionality and internet access.

Agent- A person or organization authorized by a bank to carry out financial transactions on behalf of the bank. Often these are small shops whose proprietor can provide cash‐in and cash‐out services to a bank’s clients.

ARPU(Average Revenue Per User) – standard comparable measure of revenues for mobile network operators.

IVR (Interactive Voice Response) – refers to different ways users can use a voice prompted menu driven service over the phone.

Prepaid Mobile instruments- Allow customers to add value and spend this value at vendors, utilities and other merchants. But cash‐out is either not permitted or highly restricted. Airtel Money in India and MobiCash in Bangladesh are prepaid mobile instruments.

MNO(Mobile Network Operator) – Airtel, Banglalink, Citicell, GrameenPhone, Robi, Teletalk.

USSD (Unstructured Supplementary Service Data) – a real time communication channel between a mobile handset and the servers of a mobile network operator. MFS providers typically require a commercial agreement with a mobile network operator to gain access to USSD, but this has the advantage of being accessible over any handset.

UISC-(Union Information and Service Centers)– rural one‐stop services outlets in Bangladesh run by local entrepreneurs offering internet based information services. In some cases UISCs are being used as agents for MFS

Mobile Banking Architecture

Types of Mobile Banking Service

Banks classify these services based on how information flows

A Pull transaction is one in which a mobile phone user actively requests a service or information from the bank. For example, inquiring about an account balance is a pull transaction. So is transferring funds, paying a bill or requesting a transaction history. Because banks must respond or take some action based on the user request, pull transactions are considered two-way exchanges.

A Push transaction, on the other hand, is one in which the bank sends information based on a set of rules. A minimum balance alert is a good example of a push transaction.

Mobile Banking Services◦ Account information◦ Transaction◦ Investments◦ Support◦ Content services

Advantages of Mobile Banking Benefits for Mobile Operators - Operators can expand their services portfolio, promote their brands

and create strategic marketing differentiation - attracting new customers

- Mobile Banking strengthens customer loyalty and reduces churn and attrition rates.

- Mobile Banking increases operator revenue by boosting trafficBenefits for Financial Institutions- Mobile Banking allows financial institutions to enhance customer

satisfaction and retention by offering new, better services while gaining a direct marketing channel for their products and services

- They attract new customers to the one on-one bank-customer relationship

- By turning mobile phones into their bank’s ATMs, financial institutions gain access to new markets, different from those traditionally served by their physical branches.

- As access to mobile phones grows worldwide, so does the opportunity to attract more customers and extend the reach of financial services.

- Access to banking services at anytime and from anywhere also generates revenue through higher service usage, and reduces operating expenses because of fewer direct teller interactions, while maintaining or improving the level of services.

- Financial institutions gain another important benefit by adding Mobile Banking to their existing channels. They will be with their customers at all times.

Benefits for the End User- Mobility- More Secured than Manual Transactions- Time Independent (24/7)- Less Costly- Convenient- Speedy ONE OTHER IMPORTANT BENEFIT- ENCOURAGES GREEN

AND PAPERLESS BANKING

Disadvantages of Mobile BankingMay prove costly for normal mobile holdersRestricted scopeNon-uniformity of servicesOne account managed through only one numberThreat of virus and spamsHigher costs of KYC (Know Your Customer)Risk of Unofficial mobile applicationTheft of mobileLoss of Personal Banking ExperienceDiscomfort due to Small ScreenNot considered for bulky or large volume of transactions

5 Ways Mobile Banking Is Evolving1. Mobile Photo Account Opening2. Mobile Mortgage Application3. Originating Small Business Loans4. Optimizing Mobile PFM (Personal Financial

Management)5. Dynamic Mobile Statements

M-Banking in Bangladesh◦The new era of banking in Bangladesh 'Mobile Banking'

was inaugurated at 31st March 2011◦The central bank issued guidelines on “Mobile Financial

Services for Banks” in September 2011 clearly stating a choice to make the market bank-led.

◦Two early leaders of M-banking in Bangladesh are- bKash (Brac Bank) & Duch Bangla Mobile

◦Bangladesh Bank has fixed the transaction limit for the account holders of mobile financial services at maximum Tk. 10,000 daily and a total of Tk. 25,000 on monthly

◦Two major reasons behind m-Banking in Bangladesh are- Addressing the Un-banked & Less Costly but easier Transaction method

◦ Current Situation :

◦ Approved Mobile Financial Services (in broad categories) are listed below

- Disbursement of inward foreign remittances.- Cash in /out using mobile account through agents/Bank branches/

ATMs/Mobile Operator's outlets.- Person to Business Payments ‐ e.g. a. utility bill payments, b. merchant

payments.- Business to Person Payments e.g. salary disbursement, dividend and

refund warrant payments, vendor payments, etc.- Government to Person Payments e.g. elderly allowances. Freedom‐

fighter allowances, subsidies, etc.- Person to Government Payments e.g. tax, levy payments.- Person to Person Payments (One registered mobile Account to another

registered mobile account).- Other payments like microfinance, overdrawn facility, insurance

premium, DPS, etc.

Notable Benefits of m-Banking in Bangladesh◦ The practical and attractive features of mobile financial services are

a strong draw for individual customers. ◦ Relatively low costly and less time consuming◦ Another key benefit to the individual is how MFS lets users spend

less of their time overcoming bureaucratic obstacles.◦Mobile banking reduces its customers’ reliance on cash, a feature

that brings increased convenience and savings potential into Bangladeshis’ lives.

◦ Increased GDP- With mobile financial services adoption, Bangladesh could see a GDP increase of US$6 billion, or 2 percent, by 2020.

◦New Job Creation◦ Tax Revenue Growth◦ Reducing Rural Poverty◦Health Care Improvements◦Managing Natural Disasters

Performing M-Banking in Bangladesh◦Bank Mobile Account Registration: Registration can be done in any

approved agent point. Bank system will give a IVR (Interactive Voice Response) call or USSD prompt menu. Then the subscriber will give a four number PIN code to the answer which will use for transaction.

◦Documents for registration: Filled KYC Form (given by the approved agent), Photos of the subscriber, National or any eligible ID card.

◦Mobile Account Number: Your Mobile number will be the account number where a Check digit will be included.

◦Compatible Mobile set: Any type of mobile set can be used for the service.

◦Account opening: Only 10/- (ten taka) will be needed for the first installment.

◦Balance deposit and withdrawal: Money can be deposited in any branch of the bank and approved agent. Then the system will send a confirmation message and the agent will give a receipt. Withdrawing can be done from approved agent bank ATM booth. In this process you will receive a IVR call or USSD prompt menu where you will have to give your PIN code. After successful transaction your will receive money from the agent and receive a confirmation message from the bank system.

Cash-in (Cash deposit)◦ Customer hands over cash to

Agent◦ Agent inflates the

transaction, from his/her mobile

◦ Agent gets prompt menu and reply agent enters customer's mobile account number (including check digit) and amount

◦ Agent enters his/her PIN◦ System credits customer's

account for the same amount◦ Agent issues a receipt to the

customer◦ System sends a SMS to the

customer's mobile

Cash-out (Cash withdrawal)◦ Customer asks the Agent or

withdrawal of an amount from his or her mobile account

◦ Agent initiates the transaction from his/her mobile

◦ Agent gets prompt menu and in replay agent enters customer's mobile account number (including check digit) and amount to withdraw

◦ System sends prompt menu to the customer's mobile (or by IVR Call "You are going o withdraw Tk. XXXX from your mobile account if you want to continue, please enter your 4-digit pin)

◦ Customer enters his/her PIN◦ System debited customers

account and sends an SMS to the customers mobile

◦ Agent hands over money to the customer

Challenges of Mobile Banking in Bangladesh

◦ Poor Banking and IT infrastructure◦ Lack of proper strategic plan◦ Lack of international standard communication channel.◦High cost of establishing technology driven banking system.◦ Inadequate back and front office management.◦ Lack of integrated plan among the banks, MNO and the Central

Bank authority.◦ Inefficient clearing house facilities.◦ Inappropriate software and less trust by the bank authorities on

local software.◦ Legal barriers and inappropriate policy framework.◦ Lack of suitable product structure of banks and MFIs