Financial Regulators Should Listen to Bill Gates on Mobile Money

From American Banker

“People around the world are holding an instrument for economic empowerment in the palm of their hands-but some of those who could benefit most from mobile money are facing a lock screen.

Mobile payments have emerged as a key tool in the fight against global poverty. People in poor and rural areas of countries like Kenya and India are already using cell phones to send and receive funds and pay bills. Microsoft founder Bill Gates highlighted a broad range of possibilities at the Sibos banking conference in Boston early this month, describing how mobile payment applications can help people in developing countries receive vital aid, set aside money to buy fertilizer for next year's crops, save for tuition fees and build credit scores that give them to access to affordable loans.”

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Forget Bitcoin: There’s A Better Model For Mobile Money

From ReadWrite

“It's called M-Pesa, and it's also spreading around the world.

Bitcoin has all the buzz right now. But there's another financial innovation that could have a far more meaningful impact on the lives of billion of people without bank accounts across the world.

In 2007, two years before the mysterious Satoshi Nakamoto wrote the original proposal for Bitcoin, Safaricom, a Kenyan telecommunications company effectively controlled by Vodafone, launched M-Pesa, a service that let anyone with an active cell-phone line send and receive money instantly.

“Pesa” means money in Swahili, and M-Pesa, short for mobile money, has become synonymous with money in Kenya. M-Pesa transactions accounts for 40 percent of the gross domestic product. It has spread beyond Kenya’s borders to South Africa, Afghanistan, India, and most recently Romania. It doesn't require smartphones; it works on the very basic so-called “feature” phones that are common in the developing world. If you can send a text message, you can bank with M-Pesa. “

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The End of Indian IT Staffing as We Know It

“India's IT outsourcers are promoting "mini CEOs" capable of running businesses on their own, while trimming down on the hordes of entry-level computer coders they normally hire as they try to squeeze more profits out of their staff.’

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What we are reading … 19th March 2013

The On/Off Debit Card Switch Comes to Centier Bank's Mobile App http://dld.bz/cqKUW

For Students, Banking 2.0 Involves Social Media (and the Ads That Go With It) http://abcn.ws/WispBC

Royal Bank of Scotland rolls out 'Ideas Bank' http://www.finextra.com/News/FullStory.aspx?newsitemid=24637

The Hunt for India Bank Licenses - India Real Time http://dld.bz/cqKUP

More Banks Hit by Cyberattacks than Initially Thought http://dld.bz/cqvD4

Doctor 'used silicone fingers' to sign in for colleagues http://bbc.in/XorS2U

One Per Cent: Bitcoin add-on makes your virtual purchases private http://shar.es/e7lI4

India: What’s holding us back from using mobile banking?

“If data were to be believed, a lot of you would have graduated from using Internet banking to mobile banking already but a lot of us have still not made the leap.

Though the number of transactions through mobile banking increased by 64% in the April-December 2012 period, according to data from the Reserve Bank of India (RBI), 67% of overall banking transactions still happens through cash, according to a 2011 Deloitte-Assocham study.

So what’s holding us back from using this mode of convenience in a big way?”

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Reality check on India's rise

Stratfor Vice President of Global Analysis Reva Bhalla discusses how power grid failures in India are symptomatic of its struggle to become an industrial giant despite a weak government and bloated bureaucracy.

For more analysis, visit: http://www.Stratfor.com 

Ekosysystem – Mobile banking India

Five years’ ago, Abhishek and Abhinav Sinha created a software program that allows migrant workers in cities across India to send money to their families using a mobile phone. Now their company, Eko Financial Services, is working with two major banks, the State Bank of India and ICICI, India’s second largest bank, to offer financial services to poor and low income customers using local corner stores, pharmacies, and airtime resellers as agents. By harnessing the huge potential of domestic remittances as an anchor product, Eko hopes to tap a huge potential market in India, where three quarters of the 1.25 billion people live on less than $2 a day.

Mobile banking is just one of the reasons India is a place to watch for innovations in financial inclusion. This short film profiles one such innovation, Eko, to see how businesses chasing the fortune at the base of the pyramid are serving the needs of poor customers in India.

Remittances to India are expected to reach $55 billion in 2010

Indian expatriates are expected to remit about $55 billion into the country this year as the number of emigrants from the nation is likely to reach 11.4 million, a new World Bank report saya. India is likely to stay as the top receiver of remittances in 2010, as inflows of $51 billion to China keeps it a place down, with Mexico in the third spot, is expecting $22.6 billion from its expatriates.

The World Bank in its 'Migration and Remittances Factbook 2011' report says that worldwide inflows are expected to reach $440 billion by the year end, with remittances to developing nations are likely to reach a record $325 billion from the 2009 figure of $307 billion.

The top remitting countries in 2009 were United States ($48.3 billion), Saudi Arabia ($26 billion), and Switzerland ($19.6 billion).

Remittances remained a resilient of external financing during the recent global financial crisis and were steady despite the pangs of financial reconstruction in the developed world, the report said.

As high-income countries remain the main source of remittance flows, migration to the developed economies grouping saw an increase.

India ranks second in the top three emigration countries with 11.4 million of its population chose overseas destinations. Mexico tops the chart with 11.9 million figure and Russia getting third position having 11.1 million people working in other countries.

India-UAE is among the top 10 migration corridors with 2.2 million migrants. Mexico-US is expected to be the largest migration corridor in the world, followed by Russia-Ukraine, Ukraine-Russia and Bangladesh-India.

World Bank said majority of expatriates in the Gulf hail from India, Pakistan, Sri Lanka, Egypt, Philippines, Bangladesh, Yemen, Iran and Sudan.

According to the Factbook 2011, the top migrant destination country remains the United States that kept 42.8 million immigrants, followed by Russia (12.3 million), Germany (10.8 million, Saudi Arabia (7.3 million), Canada (7.2 million), United Kingdom (7.0 million), Spain (6.9 million), France (6.7 million), Australia (5.5 million), India (5.4 million), Ukraine (5.3 million), Italy (4.5 million) and Pakistan (4.2 million).

The top immigration countries relative to population are Qatar - 87 per cent, Monaco - 72 per cent, UAE - 70 per cent, Kuwait - 69 per cent and Andorra - 64 per cent.

Reserve Bank of India is concerned that electronic transfer guidelines are being ignored

The Reserve Bank of India (RBI) has expressed serious concerns over complaints regarding delays in affording credits as well as the return of transaction. The RBI in a circular to participants has urged participants in electronic transfer system to strictly adhere to RBI guidelines. The services involved are the various electronic payment products like Real Time Gross Settlement (RTGS), National Electronic Funds Transfer (NEFT), National Electronic Clearing Service (NECS) and Electronic Clearing Service (ECS). Member banks were also found not to be paying the required interest for delayed credits to beneficiaries’ accounts as provided for in the Procedural Guidelines. The RBI said that ‘this results in inconvenience to customers and loss of credibility in the system and adversely impact the growth of electronic payment systems in the country.

RBI said various electronic transfer systems have been growing in terms of acceptability and coverage and for increasing the pace of migration, it was essential that the credibility of the electronic payment systems was upheld and member banks using the products strictly comply with the procedural guidelines and circulars instructions issued by RBI from time to time, in both letter and spirit.

“Keeping in view the seriousness of the issue and to ensure proper and efficient management of these systems, all member banks participating in the electronic payment systems viz, RTGS, NEFT, NECS and ECS variants are advised to strictly adhere to the various provisions contained in the respective Procedural Guidelines as also instructions / circulars / guidelines issued by the RBI from time to time, while handling electronic payment system products” RBI said warning that any violation of these guidelines would attract the punitive consequences as envisaged in the relevant laws.

Forty Indian banks can now offer mobile banking

The Indian Government has said that 40 banks across the country have now been authorized to offer mobile banking services to their customers.

The government together with the Reserve Bank of India (RBI) have also put in place guidelines for mobile banking to prevent money laundering and terror funding through the system, according to the Indian Minister of State for Finance Namo Narain Meena.

"The RBI has authorised 40 banks till date to offer mobile banking services to their customers. To guard against money laundering, terror funding, etc, care has been taken while issuing mobile banking guidelines...," Meena said.

Under the rules, banks have to comply with various guidelines, including Know Your Customer (KYC), Anti-Money Laundering and Combating Financing of Terrorism (CFT), he added.

The minister said that banks can extend mobile banking services to any place in India with a one-time approval of the central bank. Banks can offer mobile banking services with a daily cap of Rs 50,000 (USD 1,080) per customer for fund transfer as well as transactions, he added.

IMF launches online database on Financial Access

The IMF recently launched a new online database on financial access, which should start measuring access to and use of financial services systematically. The database measures the reach of financial services by bank branch network, availability of automated teller machines, and by four key financial instruments: deposits, loans, debt securities issued, and insurance. The website contains annual data from about 140 respondents for the six-year period, including data for all G-20 countries. Country surveys offer a wealth of information covering the use of banking services as well as access to banks' physical outlets. Data is downloadable in Excel format.

To visit the IMF site and explore the Financial Access Survey please CLICK HERE

Reserve Bank of India prefers the bank-led mobile banking model

The Reserve Bank of India (RBI) prefers the bank-led mobile banking model over the mobile operator-led one, as it offers facilities such as deposit insurance, access to affordable credit and payment system, not just remittance, the RBI governor D Subbarao has said.

The growing concerns about money laundering and financing of terrorism is also a reason the central bank favours a bank-led model.

“World over, there are two distinct models - the ‘bank-led’ model and the ‘mobile operator-led’ model. The RBI has a clear preference for the bank-led model,” Subbarao said while addressing a banking event in Hyderabad last week.

On interoperability of technological solutions, the governor said the priority clearly has to be to facilitate ‘inclusion’ first. ‘Interoperability’ is no doubt important but it can follow. Clearly inclusion cannot wait for interoperability to happen.”

Subbarao also expressed concerns over the tech barrier between banks and customers as the absence of human touch can be intimidating for those just entering the banking network. He asked banks to take extra care to ensure poor are not scared away by technology.

New Indian mobile banking service launched

The State Bank of India has unveiled a new mobile banking service, "State Bank freedoM", which enables customers to move funds, check balances, make bill payments all by way of their mobile phones without having to visit for registration for the service. This is a free service offered by the bank. Customers will have to bear the charges imposed by the telecom operators however.

This service also allows users to conduct m-commerce transactions. The bank has linked up with Paymate for the payment for goods/services over the Internet.

The bank also has plans to set up a Mobile Wallet which will allow it to take the mobile banking to non customers.

Mobile Banking and phishing

Online fraudsters continue to use advanced methods with their victims. Now a phisher has de-activated a bank's mobile alert system.

An SMS alert informing money withdrawals was blocked by phishers after fraudulently obtaining online banking information of a Chennai (India) based victim through a phishing e-mail. A first-of-its-kind case reported here, a thorough probe is under way to find its modus operandi.

The victim received the phishing e-mail in February supposedly sent from a his bank where he held an account with online and mobile banking facility. “Taking it for real, the complainant responded to the e-mail asking to update his online and mobile bank account to refrain from debarment,” said Additional Deputy Commissioner of Police (Cyber Crime Cell) M. Sudhakar.

The victim realized that all the money from his account was withdrawn only after visiting an ATM a few days later. Puzzled about not receiving any SMS alert on his mobile phone on the withdrawal, he contacted the bank and later, lodged a police complaint.

Preliminary police investigations revealed that the phishing mail was sent from Lagos in Nigeria and Rs. 60,000 that was illegally transferred from the victim's account was deposited in two bank accounts in Lucknow and Jaipur. The accounts were blocked immediately and sums of Rs. 43,000 and Rs.17,000 were recovered from them.

“After obtaining confidential online banking details of the complainant through the phishing e-mail, the culprit de-activated the SMS alert in order to keep the victim unaware of the money transfer from his account as long as possible,” Dr. Sudhakar said.

This is the first case reported here, in which an SMS alert was blocked before money transfer, he added.

Even though the money lost was minimal, the Cyber Crime Cell carried out a detailed investigation into how the phisher in Lagos managed to go to the extent of deactivating the mobile alert system.

On the other hand, police search to track the account-holders of the bank accounts in Lucknow and Jaipur hit a barrier after it was found to be opened for non-existing business houses.

He also said that illegal online money transfer could be reduced, only if banks would verify with the respective customer on every request for an online money transfer from overseas. “The culprit in Lagos cannot be apprehended as there is no international law to extradite him.”

Referring to the case, city Police Commissioner T. Rajendran said that an international body to investigate cyber crime is essential. “The number of arrests made in cyber crime cases here is very low now as most culprits operate from overseas,” he added.

PayPal can return to India but without personal payments

Early last month, online payment service provider PayPal had stopped transactions in India and also reversed some fund transfers to personal accounts. The shutdown was because of the doubts that had arisen as to whether the personal payments at Pay Pal were remittances payment from expatriate Indian workers.

Now the Reserve Bank of India (RBI) has allowed PayPal to resume Indian bank withdrawals for Indian businesses that use PayPal to sell their goods or services abroad.

Personal payments into India will still remain suspended. Fahad Irani, the PayPal’s Asia Pacific boss said that the personal payments still remain switched off. RBI has said that it needs specific approvals to allow personal inward remittances to India.

The Indian Payment and Settlement Systems Act states that no person other than the RBI shall commence or operate a payment system, except with an authorization issued by the RBI under the provisions of the Act.

According to the rules set by the RBI, transactions for goods and services to Indian bank accounts will now be requiring a "purpose code" tag specifying the nature of the transaction.

PayPal has said that under new Indian laws these purpose codes are required for all cross-border transactions; depending on the amount of the withdrawal and purpose case, a bank may require additional documentary proof of the transaction, such as invoices and receipts.

The Indian Government has laid down these new laws because it fears that intermediaries like PayPal are used by freelancers who do not pay taxes for income generated abroad.

Remittances – Regulator query leads to PayPal suspending payments to and from India

PayPal said a ban on personal transactions to and from India will continue for "at least a few months" while the online payment service tries to resolve a problem with local regulators.

"We temporarily suspended these services to respond to enquiries from the Indian regulators, specifically questions on whether personal payments constitute remittances into India," PayPal said.

The company is working with regulators and bank processing companies to resolve the problem as soon as possible, it said. But "personal payments to and from India will be suspended for at least a few months until we fully resolve the questions from the Indian regulators."

"We realize that this is causing considerable inconvenience to our customers and I want to reassure you that this is a top priority for the leadership at PayPal," the company said.

PayPal notified users on Saturday that personal payments to and from India had been suspended, as well as transfers to local banks. Customers can still make commercial payments to India, but merchants can't withdraw funds in rupees to local banks, the company said.

On Tuesday it said customers should be able to withdraw funds to a local bank within a few days. But for now it can do nothing to facilitate personal transactions.

The problems may have been triggered by a marketing push that promotes PayPal as a way to send money abroad. The campaign - which reads "As low as $1.50 to send $300 to countries like India" - may have caught the attention of Indian regulators, the source said.

Some Indians use PayPal to receive payments for services in the country such as software development. The suspension of payments appeared to catch many by surprise and has generated more than 150 pages of comments in an online discussion thread.

Some expressed frustration that PayPal had apparently suspended payments without warning, and said they learned only from buyers that payments from overseas had been returned.

PayPal processed more than US$4 billion of payments in the Asia Pacific region in 2008, a PayPal spokesman said. Its largest market in that region was Australia. The company processed $60 billion in payments worldwide in 2008.

RTGS Payment System Glitch – Operational Risk Vulnerabilities in India

A snarl in the real-time gross settlement (RTGS) system this past Monday, saw a few banks face a near default-like situation. This has yet again raised questions on the value and the soundness of the infrastructure supporting the Indian financial system.

RTGS, for the uninitiated is an almost instantaneous funds-transfer and settlement system. In the Indian RTGS system, it’s possible to transfer money to another bank account within a maximum of two hours. RTGS is mainly used for high-value clearing.

When contacted, a Reserve Bank of India (RBI) spokesperson said, “There was a glitch (in the system) on Monday, after we upgraded the RTGS software over the weekend.” She clarified that RBI had rectified the problem on the same day.

Bankers familiar with the RTGS system said that while clustering of payments is an often-enough occurrence (four to five times a year) this is the first instance of such large-scale malfunction. One large state-owned bank, in particular, faced an acute payment crisis that forced it to request assistance from other banks, to meet its obligations. After a considerable delay, funds were arranged.

“Many of the counterparties did not receive payment till as late as 1.00 am the next morning. And by virtue of one critical fund or counterparty not paying up, it would have had a cascading effect on other banks,” said the head of treasury at one foreign bank.

Customer payments can be processed through the RTGS facility only up to 4.30 pm on weekdays while inter-bank transactions are possible up to 6.00 pm.

People familiar with the matter maintain that central bank officials and computer staff worked towards moving the entire RTGS load to the back-up site of the system vendor. It was only after this switch that RTGS operations could be brought back on an even keel.

While some say, the incident highlights the inadequacy of the RTGS infrastructure, others were too quick to commend RBI for the promptness with which it acted to restore order. “Any system is open to the occasional risk. However, there should always be a fallback arrangement to cater to such eventualities,” said an irate banker who had to soothe quite a number of ruffled clients.

However, a section of the industry terms it as just a blip on account of the fact that RTGS users have grown many-fold. “RBI and several banks are still in the process of enhancing their servers to cater to the excess load. This has occurred, because banks have crossed normal threshold limits, hence, the bunching up of payments. However, in such times, the National Electronic Fund Transfer (NEFT) system can provide an alternate. The only difference is that the window would be slightly larger than 4-6 hours,” said a senior staff member of a leading public sector bank.

Under NEFT, the transfer takes place either on the same day or on the next day, depending on the time of instructions given. Yet, senior private sector bankers disagree. “NEFT can’t be an alibi for RTGS. The bottom-line is that any robust infrastructure should have a fall back. If this had occurred during the month end, we would have had a virtual stampede,” a senior private sector banker said.

Payment Systems in India – A Vision for the Future

Recently the Reserve Bank of India released a report entitled ‘Payment Systems in India - Vision 2009-12‘. In this the Indian central bank discusses initiatives it has taken and what it plans to do to improve security of cards, make ATMs more accessible to the public, make banking more accessible to the public, improve its efficiency, timings and reduce risks. It notes that the future is in mobile payments and offers its outlook on alternate methods to improve the Indian payments industry.
This succinct summary of the Reserve Bank of India’s proposal MEDIANAMA is a “must read”. Access it at RBI’s Vision For Mobile & E-payments, Major Projects | MediaNama