With around a quarter of its population expected to become smartphone users by the end of this year, mobile phone-based services (or customer services delivered through mobile phones) are witnessing rapid growth in the country. This includes mobile banking services, which has recorded around 72 crore transactions in the year 2016-17, compared to just 9.47 crore transactions in the year 2013-14 (according to data released on the Prime Minister’s website). The overall value of the mobile-based digital transactions has increased from just 224 crores in the year 2013-14 to over 10,500 crores in 2016-17. Initiated by the Indian government, the Bharat Interface for Money (BHIM) smartphone app, which has been designed to facilitate easy payment transfers across bank accounts, has been downloaded by over 2 crore smartphone users.
Leading Indian banks such as Kotak Mahindra Bank are also leveraging mobile technology by offering their own banking apps to their customers. With the use of a mobile phone and Internet connection, customers can now avail of all their banking services using mobile banking instead of having to physically visit their bank branch. In addition to being available 24/7, mobile banking customers can perform a range of digital transactions including fund transfers, bill payments, checking of account balance and recorded transactions, among others.
The use of mobile technology in banking is disrupting the traditional banking and financial industry in the following 7 ways. Let’s take a deeper look.
Following the 2016 Demonetisation drive in the country, the number of cashless digital transactions has seen an upward surge reaching a total of 1.11 billion transactions in the month of January 2018 (according to data released by the Reserve Bank of India or RBI). This marked a 4.73% from the 1.08 billion transactions recorded in December 2017. Triggered by the growth of digital transactions, the number of ATMs is also witnessing a month-on-month decline in 2017.
Thanks to digital technology, India is witnessing the rise of Financial Technology (or FinTech) industry, which is estimated to be valued at $2.4 billion in the year 2020. FinTech companies such as Paytm and Faircent are using innovative technology to provide a range of financial products to mobile phone customers. This includes payment transfers, instant loans, and even online insurance. According to a BCG-Google industry report, the non-life insurance industry is expected to grow to around INR 230 thousand crores by the year 2020, with the online insurance market likely to grow by 20 times.
A 2017 FinTech Adoption Index survey of around 22,000 digitally-active consumers ranked India at 2nd position (with 52% digitally-active population) behind China at 69%. India is emerging as a major hub for the FinTech industry with more than 400 companies including 200 start-ups.
A 2017 Consumer Payments Insight Survey conducted by analytics company, GlobalData ranked India as one of the top global markets with regards to the adoption of mobile or digital wallets. The value of the mobile wallet transactions has increased from INR 24 billion in the year 2013 to over INR 955 billion in 2017. The 2016 demonetisation drive by the Indian government was a major boost for digital wallets such as Paytm and PayUMoney with mobile wallet transactions growing by 2.5 times between 2016 and 2017.
The GlobalData survey also reported that the use of cheque and cash for E-commerce transactions has also declined from 31% in the year 2013 to 16% in the year 2017, while the use of mobile wallets in the same period has increased from 7% to 29%.
While the payment industry in India is still largely dominated by cash, digital payments in India has tripled in value from 2.5% of the GDP in 2017 to around 7% in the year 2018 (according to Anil Agarwal of Morgan Stanley). The government-backed Unified Payments Interface (or UPI), which was launched in August 2016, has seen a major surge in transactions since September 2017 doubling in value every 2-3 months, as stated by Anil Agarwal.
The ease of making digital payments using mobile phone technology is driving its growth in both urban and rural India, with over 80% of the Indian urban population likely to adopt digital payments by the year 2022.
Electronic Fund Transfer
A major benefit of the use of mobile technology has been in electronic fund transfers using digital modes such as NEFT, RTGS, and IMPS. According to data released by the National Payments Corporation of India (NPCI), the total value of IMPS transfers in the first quarter of 2018-19 was around INR 3.23 trillion, with the number of transactions crossing 100 million in March 2018 and 120 million in June 2018.
Mobile Retail E-commerce
The increasing number of mobile internet users in India is also contributing to a rise in digital shoppers or online buyers. While retail E-commerce sales contributed only 2.9% of the overall retail sales in 2018, the rising number of mobile users in the country is seen as a major market opportunity by E-commerce players such as Amazon and Flipkart.
India’s younger generation and growing middle class is driving the growth of digital buyers estimated to reach around 25% in 2018 and grow to over 41% by 2022. The mobile retail E-commerce sales in India is projected to reach a value of USD 37.96 billion by the year 2020 (according to Statista).
Banking for all
While the Jan Dhan Yojana initiative by the Indian prime minister, Narendra Modi has created more bank accounts for Indian households, most banking services are truly available to only 49% of the Indian citizens. Additionally, 53% of the Indian rural population still have no access to the banking system.
However, with the reducing costs of smartphones and Internet connections, mobile banking is making banking services inclusive for more Indians irrespective of their physical location.
How Kotak 811 is Transforming Mobile Banking
Among India’s leading banks, Kotak Mahindra is transforming mobile banking with the launch of its Kotak 811 app that can be easily downloaded on smartphones. Apart from offering a zero-balance account, Kotak 811 offers multiple benefits including high interest rate, a virtual debit card that is embedded within the smartphone app, and mStore feature for availing product offers such as Goibibo offers and purchase of PVR movie tickets.
Thanks to mobile banking, Indians from both urban and rural centers are experiencing the ease and convenience of banking on their personal smartphones. Along with promoting cashless transactions, mobile banking is transforming the way Indians are performing financial transactions such as fund transfer, payment transfer, bill payments, and online retail shopping.