With a booming cellular base, India represents one of the fastest-growing m-commerce markets in the world. ABN AMRO now wants to take advantage of the ever-increasing reach of cellphones by introducing a new payment mechanism that it says will transform the face of banking. Could this well be the shape of things to come.
Enter Mpower. ABN AMRO Bank’s proprietary technology offering in this space takes mobile banking a step up the evolutionary ladder. The technology promises to provide the much-needed thrust to make mobile banking as commonplace as using your debit or credit card. The best part is it promises enhanced levels of security in comparison to these business channels.MOBILE banking is not a new concept. There are myriad technology offerings that enable customers to avail of banking services using the mobile handset. Unsurprisingly, as is the case with any new technology, not many in India have opted for this mode of conducting business transactions though banks do offer basic services like account balance enquiry, details of the last few transactions, statement and cheque-book requests, stop payment options and fixed deposit enquiry.
Mpower, in the words of Nitin Chopra, head, consumer banking, ABN AMRO, is a comprehensive mobile banking platform providing services similar to those available on the Internet. The technology platform provides the customer access to all the services that are currently available over the mobile handset as well as the Internet. In addition, the customer can now transfer funds from one account to another, and most importantly, make payments at merchant establishments using Mpower.
Debit cards came with the promise of doing away with the need to carry cash around. With Mpower, ABN AMRO promises to do away with the need to carry even those cards. Of course, security is much higher, as none of the other channels provide the option of authenticating the transaction.
To access Mpower the customer needs to own a mobile access device with the short messaging function activated and a mobile banking personal identification number (PIN). The PIN is sent to the customer by the bank once the mobile banking account is activated.
The process begins when the customer tells the merchant that he wants to pay with Mpower. The merchant will then send a payment request to ABN AMRO Bank through a specialised Mpower terminal (installed at the premises of the merchant). The bank will then check the validity and authenticity of the transaction, and send the customer an SMS with the payment details for approval. The messages will come from the number 8877. Any other number can be considered a case of fraud.
The message will contain details such as the merchant’s name, transaction amount, the invoice number and ABN AMRO’s transaction reference number. The customer will then have to validate the transaction by keying in ‘MPA’ and the PIN number. Once the customer confirms the transaction, the amount is deducted from his account and credited to the merchant’s account. An SMS confirming the transaction is then sent by the bank to both the customer and the merchant.
For instance, if you want to order a pizza from Domino’s, the merchant will initiate the whole process. This reduces doorstep cash handling. A customer can even order cinema tickets using this system. A confirmation number will be sent via SMS, which has to be produced half an hour before the commencement of the movie.
Security
Secure payment is paramount to ensure the success of any remote banking solution. Customers are generally reluctant to conduct transactions over the Internet using credit cards primarily because of the fear that their credit card numbers will be misused. Through Mpower, the bank promises to make conducting transactions via SMS a secure process.
In case the customer’s mobile handset is stolen or lost, he can rest easy as the PIN number is required to validate any transaction, which is not the case with credit and debit cards. The PIN gets locked after five consecutive incorrect attempts. It can only be reactivated after calling up the bank and authenticating your identity.
Also, the PIN will work only with the mobile number registered with the bank. This ensures that even in case the secret PIN and account number have been compromised, a third party cannot carry out transactions. The customer has to specify the account number along with the PIN. In case the customer has more than one customer identification number, then different PINs will have to be generated for each. If the customer wants to use Mpower (PIN) from any other mobile, he needs to call up the bank and intimate them about the new number, or do it online using NetBanking.
Advantages
Mpower offers various advantages over credit cards and other channels of payment. According to Chopra, not only is the technology easy to install, but it also promises faster transactions. Says he, “The customer doesn’t have to invest in new technology, since micro-payment via SMS does not require the user to install any new software on his handset. Also, with credit cards, the total transaction time can be a minute and half. With Mpower this has been reduced to 40 seconds.” But the best part, according to Chopra, is that since it is far cheaper than giving a 2 percent discount on a credit or debit card, Mpower helps reduce operational costs.
Security is another key advantage. The customer no longer needs to share credit card information with a third party, hence the fear of someone using the card number to transact over the Net is done away with. The biggest use of this medium, if implemented, could be seen in online transactions.
As of now the credit card is the only channel of payment over the Net. Though transactions over the Net have been gaining in popularity, people are reluctant to use this payment solution. There are a number of sites offering merchandise over the Net, but few of them have actually been able to generate sustainable income. Only those sites that have been able to create trust in the minds of the customer have been able to make any headway.
Strategy
ABN AMRO Bank stands to gain significantly through this initiative. The bank can build valuable and viable business propositions by building cases with banks, merchants and mobile operators. It also stands to gain by jointly branding the account with the telecom operator. The bank can also gain traction with the telecom operators’ customer base, and in the process promote its own customer take-up.
Considering the rapid rate at which mobile phones have been making inroads into India, this technology will slowly but steadily gain mass consumer acceptance. If the way consumers have got hooked to SMS is anything to go by, the chances of them becoming dependent on this channel are quite high. Chopra plans to capitalise on this trend to increase penetration.
Though Mpower doesn’t offer huge revenue potential, at least in the short run, Chopra is looking at growing the mobile commerce market. Towards this end, ABN AMRO has introduced a reward programme similar to those available on credit cards. The customer earns royalties (rewards points) for every transaction made through Mpower.
The bank plans to look at revenue streams as and when customers move on to macro-payments. But as of now Chopra is only looking at increasing consumer acceptance by ensuring a successful and uncomplicated experience. Says he, “Empirically it has been shown that people who engage with you on many platforms see you as a complete bank.”
Mpower ahead
The penetration of the service depends on what mobile instrument people carry. Ideally, Chopra would prefer people to use WAP-enabled handsets. The bank has completed a pilot launch of Mpower in Noida, and already more than 40 percent of its client base has opted for the solution. Geographical expansion of these services is the next step for the bank. Says Chopra, “We are looking at expanding into metros and mini-metros, wherever we have a branch, in the next few months.”
The only glitch Chopra envisages is in case there is a problem with the mobile service providers’ network; if and when this happens, the transaction can’t go through. Inter-changeability and inter-operability is what will propel this technology. But this business model can evolve only if the industry wakes up instead of waiting for yet another player to make a success of it.
This article first appeared in Express Computer.
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