Evolution of Mobile Banking in Microfinance:Issues and Challenges

The last two decades have witnessed a vast change in the mode of financial services offered by not only banks but also the financial sector, all of which have had a positive impact on the customers of these organisations and the general public at large.

Mobile phones are the new channel, explored by India to spread financial services. As an initial effort, the RBI in 2006 announced that it would develop a regulatory and oversight framework for mobile banking, and made clear its concern over the safety of transactions through mobile phones. Beginning from 2006, RBI has been issuing various guidelines for viable growth of mobile banking service as a tool of financial inclusion.

Generally the first concern of the regulator is to maintain, and if necessary restore, public confidence in financial services and markets. In addition to financial stability, the regulator is also concerned with financial inclusion. Hence, the restrictions imposed on the industry must be proportionate to the benefits that are expected to result from the restrictions. While making judgements for this, they take into account the costs to firms and consumers, by applying cost benefit analysis of proposed regulatory requirement.2 Proportionate, hence, is said to be the application of regulations which should not be burdesome and overly restrictive, recognising and resolving any inconsistancies in the light of country's overall priorities and achieve an appropriate balance for encourgaging innovations among the players through various types of partnerhip models.

This potential bank-mobile telephony integration has been the long awaited issue which has started appearing with the possibility of delivering new financial services by leveraging secure, low-cost mobile networks and extending access to financial services and perhaps stimulating convergence of two services-banks and telcos. Hence, the ability of mobile money is facilitation of financial inclusion that gives enormous potential for development impact.

However, the challenges to the growth of mobile banking services depend upon the issues like Business Correspondent (BC) appointments, KYC norms, Technology and Risk connected with mobile banking services. Hence, the paper attempts to bring out the regulatory issues relating to the challenges created by the mobile money market based on the experiences of few successful mobile banking services of developing countries like Bangladesh, Kenya, Philippines and South Africa.