Study on Mobile Banking

1. Introduction To Mobile Banking

The last technology that had a major impact in helping banks service their customer was with the introduction of the internet banking. Internet banking helped the customers anytime access to their banks. Customers could check out their account details, get their bank statement, perform transactions like transferring money to other account and pay their bills sitting in the comfort of their homes and offices. However the biggest limitation of Internet banking is the requirement of a PC with an Internet connection, not a big obstacle if we look at the USA and the European countries, but definitely a big barrier if we consider most of the developing countries of Asia like China and India. Mobile banking addresses this fundamental limitation of Internet banking, as it reduces the customer requirement to just a mobile phone. Mobile usage has seen an explosive growth in most of the Asian economies like India, China and Korea. In fact Korea has seen one of the most aggressive rollouts of mobile banking services. Still, the main reason that mobile banking scores over Internet banking is that it enables Anywhere Banking. Customers now dont need access to a computer terminal to access their bank. The scales at which Mobile banking has a potential to grow can be gauged by looking at the pace users are getting mobile in these big Asian economies. According to the Cellular Operators Association of India (COAI) the mobile subscriber base in India hit 40.6 million in the August 2004. In September 2004 it added about 1.85 million more. The explosion as most analysts say, it yet to come as India has about one of the biggest untapped markets. China, which already witnessed the mobile boom, is expected to have about 300 million mobile users by the end of 2004. South Korea is targeted to reach about 42 million mobile users by the end of 2005. All three of these countries have seen gradual roll-out of mobile banking services, the most aggressive being Korea which is now witnessing the roll-out of some of the most advanced services like using mobile phones to pay bills in shops and restaurants. 1

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Indian Scenario:
Most Indian banks offer mobile banking facilities. RBI has cautiously encouraged the trend with guidelines on mobile banking with putting in place a Rs 5000/- limit on withdrawals via a mobile banking transaction to avoid fraud. The mobile payments market is still at its infancy in India and it is estimated that the current daily transaction volumes today will be in the range of Rs 5-10 Million. Even if 5% of mobile bill payment and recharge shifts onto mobile payments platform the industry can grow to Rs200 Million a day. Silicon India classifies mobile transactions as follows 1. Push Based 2. Pull Based 3. 4. Transaction Based Fund Transfer Bill Payment Other financial services like share trading. Enquiry Based Credit/Debit Alerts. Minimum Balance Alerts Bill Payment Alerts Account Balance Enquiry Account Statement Enquiry. Cheque Status Enquiry. Cheque Book Requests. Recent Transaction History.

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2. Features of Mobile Banking

Mobile Payments are any monetary transactions that take place with the help of a mobile phone. There are three primary types of mobile payments: M-Commerce Mobile phones linked to credit/debit cards can be used to make payments typically for transportation, vending machines etc.

E-Money Cash loaded in the mobile phones at service provider outlets. Consumers use this virtual cash as real value for all types of transactions.

Banking Channel Mobile phone used for accessing the bank accounts. All payments are routed through the bank. Today Cash cow will be focusing on Mobile Banking. Mobile banking is a way for the customer to perform banking actions on the cell phone or other mobile device. The amount of banking you are able to do on your cell phone varies depending on the banking institution you use. Some banks offer only the option of text alerts, which are messages sent to your cell phone that alert you to activity on your account such as deposits, withdrawals, and ATM or credit card use. This is the most basic type of mobile banking. A more involved type of mobile banking allows the user to log into his or her account from a cell phone, and then use the phone to make payments, check balances, transfer money between accounts, notify the bank of a lost or stolen credit card, stop payment on a check, receive a new PIN, or view a monthly statement, among other transactions. 3

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Some ground realities According to Financial Chronicle State-owned banks have received a much poorer response from their clients compared with their private-sector peers for mobile banking, with only a small number of PSB customers showing interest to avail the services State-owned banks have received a much poorer response from their clients compared with their private-sector peers for mobile banking, with only a small number of PSB customers showing interest to avail the service. Union Bank of India, the first state-owned bank which introduced mobile-based banking services in the market, has so far added only 1,700 customers in mobile banking, banks, Indias largest lender State Bank of India (SBI) has also received poor response for its mobile banking product, which it launched in December 2008. It rolled out the service in association with local technologyservice provider, Spanco Telesystems. SBI has so far received only 10,000 registrations for mobile banking but hopes to attract more clients to avail the service in the months ahead, an SBI official said. IDBI Bank has also received a lukewarm response from its retail customers for its mobile banking roll out. The bank has a tie-up with service provider Paymate for the service. Since the launch the scheme, around 10,000 customers have registered for the service. ICICI Bank has 80 lakh customers registered so far for mobile banking while HDFC Bank has 40 lakh registered clients. Kotak Mahindra Bank has around 52,000 clients under the mobile banking .

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3. Models in mobile banking Conceptual model

In one academic model, mobile banking is defined as: Mobile Banking refers to provision and availment of banking- and financial services with the help of mobile telecommunication devices. The scope of offered services may include facilities to conduct bank and stock market transactions, to administer accounts and to access customized information." According to this model Mobile Banking can be said to consist of three interrelated concepts: Mobile Accounting Mobile Brokerage Mobile Financial Information Services Most services in the categories designated Accounting and Brokerage are transaction-based. The non-transaction-based services of an informational nature are however essential for conducting transactions - for instance, balance inquiries might be needed before committing a money remittance. The accounting and brokerage services are therefore offered invariably in combination with information services. Information services, on the other hand, may be offered as an independent module. Mobile phone banking may also be used to help in business situations

Study on Mobile Banking

Mobile banking business models A wide spectrum of Mobile/branchless banking models is evolving. However, no matter what business model, if mobile banking is being used to attract low-income populations in often rural locations, the business model will depend on banking agents, i.e., retail or postal outlets that process financial transactions on behalf telcos or banks. The banking agent is an important part of the mobile banking business model since customer care, service quality, and cash management will depend on them. Many telcos will work through their local airtime resellers. However, banks in Colombia, Brazil, Peru, and other markets use pharmacies, bakeries, etc. These models differ primarily on the question that who will establish the relationship (account opening, deposit taking, lending etc.) to the end customer, the Bank or the Non-Bank/Telecommunication Company (Telco). Another difference lies in the nature of agency agreement between bank and the Non-Bank. Models of branchless banking can be classified into three broad categories - Bank Focused, Bank-Led and Nonbank-Led. Bank-focused model The bank-focused model emerges when a traditional bank uses non-traditional low-cost delivery channels to provide banking services to its existing customers. Examples range from use of automatic teller machines (ATMs) to internet banking or mobile phone banking to provide certain limited banking services to banks customers. This model is additive in nature and may be seen as a modest extension of conventional branch-based banking.

Study on Mobile Banking

Bank-led model The bank-led model offers a distinct alternative to conventional branch-based banking in that customer conducts financial transactions at a whole range of retail agents (or through mobile phone) instead of at bank branches or through bank employees. This model promises the potential to substantially increase the financial services outreach by using a different delivery channel (retailers/ mobile phones), a different trade partner (Telco / chain store) having experience and target market distinct from traditional banks, and may be significantly cheaper than the bank-based alternatives. The bank-led model may be implemented by either using correspondent arrangements or by creating a JV between Bank and Telco/nonbank. In this model customer account relationship rests with the bank

Non-bank-led model The non-bank-led model is where a bank has a limited role in the day-to-day account management. Typically its role in this model is limited to safe-keeping of funds. Account management functions are conducted by a non-bank (e.g. Telco) who has direct contact with individual customers.

Mobile Banking Services Mobile banking can offer services such as the following: Account Information Mini-statements and checking of account history Alerts on account activity or passing of set thresholds Monitoring of term deposits Access to loan statements Access to card statements Mutual funds / equity statements Insurance policy management Pension plan management Status on cheque, stop payment on cheque 7

Study on Mobile Banking

Ordering cheque books Balance checking in the account Recent transactions Due date of payment (functionality for stop, change and deleting of payments) PIN provision, Change of PIN and reminder over the Internet Blocking of (lost, stolen) cards Payments, Deposits, Withdrawals, and Transfers Domestic and international fund transfers Micro-payment handling Mobile recharging Commercial payment processing Bill payment processing Peer to Peer payments Withdrawal at banking agent Deposit at banking agent A specific sequence of SMS messages will enable the system to verify if the client has sufficient funds in his or her wallet and authorize a deposit or withdrawal transaction at the agent. When depositing money, the merchant receives cash and the system credits the client's bank account or mobile wallet. In the same way the client can also withdraw money at the merchant: through exchanging sms to provide authorization, the merchant hands the client cash and debits the merchant's account.

Investments Portfolio management services Real-time stock quotes Personalized alerts and notifications on security prices

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Support Status of requests for credit, including mortgage approval, and insurance coverage Check (cheque) book and card requests Exchange of data messages and email, including complaint submission and tracking ATM Location

Content Services General information such as weather updates, news Loyalty-related offers Location-based services Based on a survey conducted by Forrester, mobile banking will be attractive mainly to the younger, more "tech-savvy" customer segment. A third of mobile phone users say that they may consider performing some kind of financial transaction through their mobile phone. But most of the users are interested in performing basic transactions such as querying for account balance and making bill payment.

Future functionalities in Mobile Banking Based on the 'International Review of Business Research Papers' from World business Institute, Australia, following are the key functional trends possible in world of Mobile Banking. With the advent of technology and increasing use of smartphone and tablet based devices, the use of Mobile Banking functionality would enable customer connect across entire customer life cycle much comprehensively than before. With this scenario, current mobile banking objectives of say building relationships, reducing cost, achieving new revenue stream will transform to enable new objectives targeting higher level goals such as building brand of the banking organization. Emerging technology and functionalities would enable to create new ways of lead generation, prospecting as well as developing deep customer relationship and 9

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mobile banking world would achieve superior customer experience with bidirectional communications. Illustration of objective based functionality enrichment In Mobile Banking Communication enrichment: - Video Interaction with agents, advisors. Pervasive Transactions capabilities: - Comprehensive Mobile wallet Customer Education: - Test drive for demos of banking services Connect with new customer segment: - Connect with Gen Y Gen Z using games and social network ambushed to surrogate banks offerings Content monetization: - Micro level revenue themes such as music, e-book download Vertical positioning: - Positioning offerings over mobile banking specific industries Horizontal positioning: - Positioning offerings over mobile banking across all the industries Personalization of corporate banking services: - Personalization experience for multiple roles and hierarchies in corporate banking as against the vanilla based segment based enhancements in the current context. Build Brand: - Built the banks brand while enhancing the Mobile real estate.

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4. Benefits of mobile banking.

The biggest advantage that mobile banking offer to banks is that is drastically cuts down the costs of providing service to the customers. For example an average teller or phone transaction costs about Rs 2.36 each, whereas an electronic transaction costs only about Rs 0.10 each. Additionally, this new channel gives the bank ability to cross-sell up-sell their other complex banking products and services such as vehicle loans, credit card etc. For service providers, mobile banking offers the next surest way to achieve growth. Also service providers are increasingly using the complexity of their supported mobile banking services to attract new customers and retain old ones. Mobile banking solution offer a full range of benefits for financial institution, ranging from reduced customer support costs to improved customer satisfaction and retention as well a revenue growth. A recent Gartner Measurement Study showed that an average contact center deflects 16% of its contacts to phone-based automated self-service technology, with some high performing companies achieving deflection rates upto 50%. With typical IVR (Integrated Voice Response) calls averaging Rs. 0.95 per call, banks could reap cost saving of up to 45% by deflecting half of their calls to an IVR system. A mobile self-service alternative to both call centers and IVR customer queries could reap even more cost saving. Bank-related customer support calls typically relate to routine banking inquiries, such as account balances, which are perfectly situated to a mobile self-service solution. Customer ROI studies has shown that Mobile aware can reduce the cost of simple query resolution or transaction by up to 95%. Added to that is a more satisfied customer based that is no longer faced with the frustration of dealing with IVR systems, or waiting in line for the next available customer service representative. Mobile banking also offers financial institutions the opportunity to target and acquire new customer segments that value mobility and real time control of their finances, leading to increased customer growth and revenue.

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Business Benefits Greater Customer Convenience Finical mobile banking solution empowers banking customers to make informed decisions by providing them with an invaluable set of financial management tools on the mobile handset. These tools help in quantitative and qualitative analysis, as well as in the selection and comparison of financial products.

Reduced Turnaround Time Finical mobile banking solution has a robust integration framework which allows it to function in tandem with disparate host systems, core banking solutions, payment networks and third-party applications. This translates into reduced go-to-market time for the bank as well as support for legacy systems.

Robust Inclusivity Framework Finical mobile banking solution leverages Infosys connect to smoothly hurdle the challenges posed by the multiplicity of form factors and access mechanisms on multiple devices to provide context agnostic view to the transaction server. This enables banks to include, through the mobile channel, its various customer segments, ranging from the HNWI to specific unbanked communities, surmounting the complexities of diverse location and dissimilar mobile devices.

Maximize Innovation Banks can leverage Finical solutions indigenously developed middleware Infosys connect, to configure an unlimited palette of services from any channel, to the mobile space, with ease. The need for development of new back end services is precluded due to the availability of a banking solution behind the mobile interface. Finical also provides the flexibility to deploy services over the existing online banking platform or through a standalone delivery channel interfaced directly with

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the relevant host systems. This ensures the rapid delivery of a comprehensive range of financial services, embellished with new innovative features, on mobile devices.

Robust Security The solution offers extensive application security features like URL encryption, referral URL check and session management to provide a robust security framework. The solution also supports OTP (one time password), which provides a two factor authentication mechanism for users transacting with downloadable mobility client. This enables the bank to offer products that are highly secure and geared to withstand the onslaught of security threats associated with mobile transactions.

Cost Savings The solution presents banks with the advantages of reduced integration by leveraging common interface messages, maintenance and deployment costs. This translates into significant cost savings without banks having to compromise on features or the range of devices supported. The mobile banking solution is inherently independent of the network service provider, obviating the need to build a business model that involves costs and profits sharing with them.

Client Value Finical mobile banking solution enables banks to offer the convenience of comprehensive anywhere anytime banking, using GPRS, mobile browser or SMS. It supports a wide range of mobile devices and mobile browsers. Banking customers can query on account balances and make fund transfers. Banks can also proactively send timely information to customers in a completely secure environment, whenever a customer-defined event occurs. The solutions selfservice capabilities empower customers to manage their banking activities better. The solution also addresses data transmission and storage related security concerns adequately, delivering a truly streamlined customer experience. 13

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5. Technologies Enabling Mobile Banking Technically speaking most of these services can be deployed using more than one channel. Presently, Mobile banking is being deployed using mobile application developed on one of the following four channels: 1. IVR (Interactive Voice Response)

IVR service operates through pre-specified numbers that banks advertise to their customers. Customers make a call at the IVR number and are usually greeted by a stored electronic message followed by a menu of different options. Customers can choose options by pressing the corresponding number in their keypads, and are then read out the corresponding information, mostly using a text to speech programme. Mobile banking based on IVR has some major limitation that they can be used only for enquiry based services. Also, IVR is more expensive as compared to other channels as it involves making a voice call which is generally more expensive than sending an SMS or making data transfer (as in WAP or Standalone clients). One way to enable IVR is by developing a PBX system that can host IVR dial plans. Banks looking to go the low cost way should consider evaluating asterisk, which is an open source Linux PBX system. Asterisk, due to its open source nature has caught on in a big way and is being old as a PBX solution by quite a few companies commercially. However there has been considerably noise on multiple asterisks related forums over the stability of asterisk based systems. Companies planning to use Asterisk for their IVR solution should certainly do a rigorous evaluation of its capabilities before committing their long term future on it.

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2.

SMS (Short Messaging Service)

SMS uses a popular text-messaging standard to enable mobile application based banking. The way this works is that the customer requests for information by sending an SMS containing a service command to a pre-specified number. The bank responds with a reply SMS containing the specific information For example, customer of the HDFC bank in India can get their account balance details by sending the keyword HDFCBAL and receive their balance information again by SMS. Most of the services rolled out by majors banks using SMS have been limited to the Inquiry based ones. However there have been few instances where even transaction-based services have been made available to customer using SMS. For instance, customer of the Bank of Punjab can make fund transfer by sending the SMS TRN (A/C no) (PIN No)(amount). One of the major reason that transaction based services have not taken of on SMS is because of concerns about security and because SMS doesnt enable the bank to deliver a customer to access more complex service such as transactions. The main advantage of deploying mobile application over SMS is almost all mobile phones, including the low end, cheaper ones, which are most popular in countries like India and Chine are SMS enabled. An SMS based service is hosted on SMS gateway that further connects to the mobile service providers MS center. There are couple of hosted IP based SMS gateways available in the market and also some open sources one like Kannel.

3.

WAP (wireless access Protocol)

WAP uses a concept similar to that used in Internet banking. Banks maintain WAP sites which customers access using a WAP compatible browser on their mobile phones. WAP sites offer the familiar from based interface and also implement security quite effectively.

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Bank of America offers a WAP based service channel to its customers in Hong Kong. The banks customers can now have an anytime, anywhere access to a secure reliable service that allows them to access all inquiry and transaction based service and also more complex transaction like trade in securities through their phone. A WAP based service requires hosting a WAP gateway. Mobile application users access the banks site through the WAP gateway to carry our transactions, much like internet users access a web portal for accessing the banks services. The following figure demonstrates the framework for enabling mobile applications over WAP. The actually forms that go in to a mobile banking application stored on a server, and served on demand. The WAP Gateway forms an access point to the Internet from mobile network.

4.

Standalone Mobile Application Clients

Standalone mobile application are the ones that hold out the most promise as they are most suitable to implement complex banking transaction like trading in securities. They can be easily customized according to the user interface complexity supported by the mobile. In addition, mobile applications enable the implementation of a very secure and reliable channel of communication. One requirement of mobile application clients is that they require to be downloaded on the clients device before they can be used, which further requires the mobile device to support one of the many development environments like J2ME or Qualcomms BREW. J2ME is fast becoming an industry standard to deploy mobile applications and requires the mobile phone to support JAVA. The major disadvantage of mobile application clients is that the applications needs to be customized to each mobile phone on which it might finally run. J2ME ties together the ATI for mobile phones which have the similar functionality in what it calls profiles. However the rapid proliferation of mobile phone with support different functionality has resulted in a huge number of profiles, which are further significantly driving up development costs. This scale of this problem can be gauged by the fact that companies implementing mobile application clients might

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need to spend as much as 50% of their development time and resources on just customizing their application to meet the needs of different mobile profiles. Out of J2ME and BREW, J2ME seem to have an edge right now Nokia has made the development tools open to developers which has further fostered a huge online community focused in developing application based on J2ME.

Banking on technology Fifty percent of respondent use mobile to check their bank balance 29% thinking mobile baking is safe 41% are ready to pay for service that allow them to freeze a card 35% are ready to pay for reporting a potentially fraudulent transaction.

banking tecnologyes

safe ready to pay for services ready to pay for reporter a fraud transaction

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6. The value of mobile banking

Deposit mobile phones being much more prevalent than PCs, there are more service available in the market place for internet commerce rather than mobile commerce or M-commerce. It is interesting to note this phenomenon, as one would assume a marketers interest in tapping a device that is always with the customer. While one almost carries a mobile phone, one does not carries ones PCs and laptop. The adoption of mobile technology is still slow while web technology is still slow while web technology in being used by people to offer more convenient customer services. The same is true for banking services. Bank need to look for multiple and alternate channels to engage the customer by providing him/her with value added services. Bank also need to look for innovative means of reducing transaction costs as the per-customer transaction have increased, as bank are providing multiple service under one roof. Mobile technology can come into rescue of financial services in such a scenario. SMSs based through a web interface could be one such service. A web interface allows you to communicate instantly with individual or groups via bulk text messaging.one could send SMSs to ones group through a mobile phone. Yet another way of improving customer services could be to inform customer better. Credit Card Fraud is one such area. A bank could, through the use of mobile technology, inform owner each time purchases above a certain value have been made on their card. This way the owner is always informed when their card is used, and how much money is used for each transaction. Similarly, the bank could remind customer f outstanding loan repayment dates, date for the payment of monthly installment or simply tell them that a bill has been presented and is up for payment. The customer can then check their balance on phone and authorize the required amount for payments. The customer can also request for additional information. They can automatically view deposit and withdrawal as they occur and also pre-schedule payment to be made or cheques to be issued. Similarly, one could also request for services like stop cheques or issue of cheques book over ones mobile phone. 18

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There a number of reasons that should persuade bank in favour of mobile phones. They are set to become a crucial part of a total banking services experienced for the customers. Also, they have the potential to bring down costs for the bank itself. Through mobile messaging and other such interfaces, bank provided value added services to the customer at marginal costs. Such messages also bear the virtue of being targeted and personal making the services offered more effective. They will better result on account of better customer profiling. Yet another benefit is the anywhere or anytime characteristics of mobile services. A mobile is almost always with the customer. As such it can use over a vast geographical area. The customer does not have to visit the bank ATM or a branch to avail of the banks services. Research indicates that the number of footfall at a bank branch has fallen down drastically after the installation of ATMs. As such with mobile services, a bank will need to hire even fewer employees, as people will no longer need to visit bank branches apart from certain occasion. With Indian telecom operators working on offering services like money transaction over a mobile, it may soon be possible for a bank to offer phone based system. This will make credit card redundant and also aid in checking credit card fraud apart from offering enhanced customer convenience. The use of mobile technology is thus a win-win proposition for both the banks and the banks customers. Such services are highly personal in nature and are effective because of the same. The bank adds to this personalized communication through the process of automation. For instances, if the customer ask for his account or car balance after conducting a transaction , the installed software can send him an automated reply informing of the same. This automated reply thus saves the bank the need to hire additional employees for servicing customers needs.

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7. Mobile banking in the world

Mobile banking is used in many parts of the world with little or no infrastructure, especially remote and rural areas. This aspect of mobile commerce is also popular in countries where most of their population is unbanked. In most of these places, banks can only be found in big cities, and customers have to travel hundreds of miles to the nearest bank. In Iran, banks such as Parsian, Tejarat, Mellat, Saderat, Sepah, Edbi, and Bankmelli offer the service. Banco Industrial provides the service in Guatemala. Citizens of Mexico can access mobile banking with Omni life, Ban comer and MPower Venture. Kenya's Safaricom (part of the Vodafone Group) has the M-Peas Service, which is mainly used to transfer limited amounts of money, but increasingly used to pay utility bills as well. In 2009, Zain launched their own mobile money transfer business, known as ZAP, in Kenya and other African countries. In Somalia, the many telecom companies provide mobile banking, the most prominent being Hormuud Telecom and its ZAAD service. Telenor Pakistan has also launched a mobile banking solution, in coordination with Taameer Bank, under the label Easy Paisa, which was begun in Q4 2009. Eko India Financial Services, the business correspondent of State Bank of India (SBI) and ICICI Bank, provides bank accounts, deposit, withdrawal and remittance services, micro-insurance, and micro-finance facilities to its customers (nearly 80% of whom are migrants or the unbanked section of the population) through mobile banking. In a year of 2010, mobile banking users soared over 100 percent in Kenya, China, Brazil and USA with 200%, 150 %, 110 % and 100 percent respectively.

Dutch-Bangla Bank (www.dutchbanglabank.com) launches the very first mobile banking service in Bangladesh on 31 March, 2011. This service is launched with Agent and Network support from mobile operators, Bangla link and City cell. Sybase 365, a subsidiary of Sybase, Inc. has provided software solution. There are around 160 million people in Bangladesh, of which, only 13 per cent have bank 20

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accounts. With this solution, Dutch-Bangla Bank can now reach out to the rural and unbanked population, of which, 45 per cent are mobile phone users. Under the service, any mobile handset with subscription to any of the six existing mobile operators of Bangladesh would be able to utilize the service. Under the mobile banking services, bank-nominated Agents perform banking activities on behalf of the banks, like opening mobile banking account, providing cash services (receipts and payments) and dealing with small credits. Cash withdrawal from a mobile account can also be done from an ATM validating each transaction by mobile phone & PIN instead of card & PIN. Other services that are being delivered through mobile banking system are person-to-person (e.g. fund transfer), personto-business (e.g. merchant payment, utility bill payment), business-to-person (e.g. salary/commission disbursement), government-to-person (disbursement of government allowance) transactions.

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Most Popular Banking Service on Mobile Checking account balances is the most popular banking service used by urban Indians with almost 40 million users followed by checking last three transactions, 28 million and status of cheques with 21 million users. Mobile banking is popular among the Rs.1 to 5 lakhs per year income group with almost 60% of mobile banking users falling in the income bracket, an indicator of adoption of this service by younger generation.

Most Popular Bank ICICI bank maintains its position as country biggest private lender on mobile screen as well with 17.75 million users. HDFC accounts for second most subscribers with 9.1 million subscribers followed by State Bank of India with 6.13 million subscribers.

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Mobile banking in Western Europe

According to a recent report by Celent, there are currently about 5 million users of mobile financial services in Europe. Recently, i-mode services have been Imported from Japan, and a number of banks are offering i-mode services now, hoping that it will lead to more rapid growth in terms of usage. After the failure of WAP-based mobile financial services in 2001,now hopes for mobile banking in Europe have been awakened by a Japanese import, i-mode. A hand full of banks in western Europe have deployed mobile banking services using the Japanese i-mode standard.

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number of mobile banking user in westerEurope

8% 10% 4% 12% 9% 10% Germany Benelux France Iberia Italy 8% 39% U.K Scandinavia Others

However, according to Octavio Marenzi, author of the report, there is little demand for interactive banking services via WAP or i-mode in Western Europe. However, there has been rapid growth in the use of text messages or SMS messages. We expect that future growth will continue to be driven by SMS alert, rather than more sophisticated interactive services. According to the study, wide variances exist between countries in Europe, with mobile banking playing a virtually non-existent role in many countries. The rather unexpected leader in terms of mobile banking penetration is the French market, which accounts for almost 40% of all mobile banking users in Western Europe.

The report analyses and compares the mobile banking offering of the top 25 banks in Western Europe, compare the state of play in the major countries within Europe, examines the role of WAP, i-mode and SMSs and make recommendation to banks regarding future mobile strategies.

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8. Relative Advantage

Relative advantage is concerned with the degree to which an innovation is perceived has being better than the idea it supersedes, the degree of relative advantage is often expressed as economic profitability, social prestige, saving in time and effort, immediacy of the reward or as degree of discomfort. The construct of relative advantage can be seen differently innovation and on other hand of differently in context of different innovations and on other hand on different consumer. In case of mobile banking relative advantage is mainly formed across the mobile value of the new banking service delivery medium. Mobile value signifies he value arising from the mobility of the medium, i.e., making use of electronic service on the move/road; mobility offers the creation of choice and new freedom. As the major trigger of adopting mobile banking services regular services regular users (77.8 per cent) named the accessibility and of the regular users (85.5 percent) and occasional users (52.1 percent) and 43.8 percent of reason to adopt as well as savings in financial cost of conducting banking.

Complexity The perception of complexity involved when conducting financial transactions via mobile channel is often inversely related to a customers experience with technology in general. Adoption of complex products depends on adopters ability to develop new knowledge and new patterns of experience. This ability can be enhanced by the knowledge gained from related products. In Finland usage of Internet banking has already diffused to masses of banking customers, it can be argued that Internet banking is sort of related service. Payment and account management products over mobile GSM phone as SMS have been available in Finland since 1992. When respondents were asked about problem faced with mobile banking, all the response alternatives got rather low ratings. Regular users mentioned that malfunction of service (12.5%) had caused some problems, whereas occasional users complained about insufficient guidance (14.6%) to using mobile banking services. 25

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Compatibility The degree to which an innovation channel such as a mobile device is compatible with the individuals past experiences and values appears to have a significant impact on willingness to adopt. Respondents were asked about their attitudes towards technology-based products and services. Every target segment informed with positive means scores to mobile phone and services, Internet, personal computer, cable television, E-mail that they were pretty enthusiastic about using technology, except of electronic ID-card. Furthermore 82% of the respondent had an Internet connection on use. In Finland mobile phone penetration exceeds 85%, which certainly affects adoption of mobile banking services too. These results are consistent with Rogers suggestion and previous research that compatibility of an innovation with previously introduced idea can influence the adoption of the innovation as well as the development stage of infrastructure. Further, Hirschman (1980) has suggested tat prior experience with the products class, which for example in this case is usage of Internet banking, may lead to greater acceptability of a new product.

Observability Observability of an innovation describes the extent to which an innovation is visible to other members of a social system, how easily the benefits can be observed and communicated. The lack of physical domain in service product may present some problems, even though in this case the service delivery medium, mobile phone itself, may enhance physical evidence of the innovation. In the surgery respondent mentioned they had gained information of mobile banking services from banks personal via personal selling activities, and secondly from marketing communication activities, such as advertisements and mailings.

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Trialability Rogers argues that potential adopters who are allowed to experiment with the innovation will feel more comfortable with it and are more likely to adopt it. Consequently, if consumers are given the opportunity to try the innovation certain fears of unknown and inability to use can be reduced. In this survey 12.75 % of non-users had tested mobile banking services, but this did not lead to permanent use. However, this evidences that trial use of mobile banking services is possible.

Perceived Risk Security and trustworthiness of usage of service was mentioned to be the most important factor within every target segments when deciding on banking service delivery channel. Survey participants responded also positively to the argument using mobile phone in banking is trustworthy.

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9. Marketing for mobile banking

Mobile banking is poised to become the big killer mobile application arena. However, banks going mobile the first time need to tread the path cautiously. The biggest decision that banks need to make is the channel that they will support their services on. Mobile banking through an SMS based service would require the lowest amount of effort, in terms of cost and time, but will not be able to support the full breath of transaction based services. However, in markets like India bulk of the mobile population users, phones can only support SMS based services, this might be the only option left. On the other hand a market heavily segmented by the type and complexity of mobile phone usage might be good place to roll of WAP based mobile application. A WAP based services can let go of the need to customized usability to the profile of each mobile phone, the trade-off being that it cannot take advantage of the full breadth of features that a mobile phone might offer. Mobile application standalone clients bring along the burden of supporting multiple mobile device profiles. According to the Gartner Group, a leading wireless computing consulting organization, mobile banking services will have to support a minimum of 50 different device profiles in the near future. However, currently the best user experience, depending on the capability of a mobile phone, is possible only by using a standalone client. Mobile banking has the potential to do the mobile phone what E-mail did to the Internet. Mobile Application based banking is poised to be a big M-commerce feature, and if South Koreas foray in to mass mobile banking is any indication, mobile banking could well be the driving factor to increase sales of high-end mobile phones. Nevertheless, Banks need to take a hard and deep look in to the mobile usage patterns among their target customers and enable their mobile services on a technology with reaches out to the majority of their customers.

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10. SMS Banking

When people are hard pressed for time, the need for anytime anywhere banking gains utmost importance. Bearing this in mind, banks provide a novel services which gives retail customers account information and real-time transaction capabilities from their cell phones. With SMS banking the following services can be obtained: Get account balance details Request a cheques book Request last three transaction details Pay bills for electricity, mobile, insurance, etc.

SMS Banking Overview In order to avail the services mentioned above, a user subscribing to a wireless carries sends an SMS with a predefined code to the bulk services providers number.

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The services provider forwards this message to the banks mobile banking applications. The mobile banking applications interface with the core banking servers (that contain the user account information) that service the request made by the user. The response is then sent by the mobile banking applications to the bulk service provider who in turn forward it to valid user via SMS. There are two ways in which a bank can communicate with a customer using SMS. In the first method the bank proactively sends data to customers in response to certain transactions. For e.g. account to account transfer, salary credit and some promotional messages. This data can sent to the customer in two ways E-mail to mobile (E2M) In this method, the bank sends an email to the mobile banking application through a specific E-mail address. This E-mail may consist of the message content together with the mobile number of the customer. The mobile banking application in turn sends this message in a specific format (for e.g. XML tags are part of a HTTP GET message query string) to the service providers application serve. From here on the information from the XML tags is extracted and send as a SMS to the wireless carrier which in turn forwards this message to the customer. Database to mobile(D2B) here the mobile banking application continuously polls the bank database server and whenever a relevant period happen, for e.g. an account to account transfer , it forward the specific message to the service providers application server. The message format may be the same as one used in the E2M case. This message is then forwarded to the wireless carrier which in turn forwards the messages to the customer.

In the second method the bank send data in respond to specific customer query such as account balance details. The customer first sends a pre30

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defined request code via SMS to the Bulk SMS providers registered mobile number. Depending on the message code, the Bulk SMS provider forwards the SMS to a PULL application in the mobile banking server. The PULL application receives the request and forwards it to the core banking application for further processing. The core banking server than processes this message and sends the reply to the pull application which in turn forwards in to the customer via the service provider. As in the above cases the request and the response for the PULL application may be a HTTP GET message with tags in the query string.

Concerns and Skepticism about SMS Banking Many banks would have some concerns when the prospects of introducing SMS Banking are discussed. Most of these concerns could revolve around security and operational controls around SMS banking. However supporters of SMS claim that while SMS banking is not as secure as other conventional banking channels, like the ATM and Internet Banking, the SMS Banking channel is not intended to be used for very high-risk transactions.

The Convenience Factor The convenience of executing simple transactions and sending out information or alerting a customer on the mobile phone is often the overriding factor that dominates over the skeptics who tend to be overly bitten by security concerns. As a personalized end-user communication instrument, today mobile phones are perhaps the easiest channel on which customers can be reached on the spot, as they carry the mobile phone all the time no matter where they are. Besides, the operation of SMS Banking functionality over phone key instructions makes its use very simple. This is quite different to Internet banking which can offer broader functionality, but has the limitation of use only when the customer has access to a computer and the Internet. Also, urgent warning messages, such as SMS alerts, are 31

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received by the customer instantaneously; unlike other channels such as the post, E-mail, Internet, telephone banking, etc. on which a banks notification to the customer involves the risk of delayed delivery and responses. The SMS Banking channel also acts as the banks means of alerting its customers, especially in an emergency situation; e.g. when there is an ATM fraud happening in the region, the bank can push a mass alert (although not subscribed by all customers) or automatically alert on an individual basis when a predefined abnormal transaction happens on a customers account using the ATM or credit card. This capability mitigates the risk of fraud going unnoticed for a long time and increases customer confidence in the banks information system.

Compensating Controls For Lack Of Encryption The lack of encryption on SMS message is an area of concern that is often discussed. This concern sometimes arises within the group of the banks technology personnel, due their familiarity and past experience with encryption on the ATM and other payment channels. The lack of encryption is inherent to the SMS Banking channel and several banks that use it have overcome their fears by introduction compensating controls and limiting the scope of the SMS Banking application to where it offers an advantage over other channels. Suppliers of SMS Banking software solutions have found reliable means by which the security concerns can be addressed. Typically the methods employed are by pre-registration and using security tokens where the transaction risk is perceived to be high. Sometimes ATM type PINs are also employed but the usage of PINs in SMS Banking makes the customers task more cumbersome.

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Technologies Employed For SMS Banking

Most SMS Banking solutions are add-on products and work with the banks existing host system deployed in its computer and communications environment. As most banks have multiple backend hosts, the most advance SMS banking system are built to be able to work in a multi-host banking environment; and to have open interfaces which allow for messaging between existing banking host systems using industry or de-facto standards. Well developed and mature SMS Banking software solution normally provide a robust control environment and a flexible and scalable operating environment. These solution are able to connect seamlessly to multiple operators in the country of operation. Depending on the volume of messages that are require to be pushed; means to connect to the SMS could be different, such as using simple modems or connecting over leased line using low level communication protocols. Advanced SMS Banking solutions also cater to providing failover mechanisms and least-cost routing options.

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11 . PUSH and PULL Message

SMS banking services are operated using both PUSH and PULL messages. PUSH messages are those that the bank chooses to send out to a customers mobile phone, without the customer initiating a request for the information. Typically PUSH messages could be either Mobile Marketing messages or messages alerting an event which happens in the customers bank account, such as a large withdrawal of funds from the ATM or a large payment using the customer credit card etc. Another type of PUSH message is One-time password (OTPs). OTPs are the latest tool used by financial and banking service providers in the fight against cyber fraud. Instead of relying on traditional memorized passwords, OTPs are requested by consumers each time they want to perform transactions using the online or mobile banking interface. When the request is received the password is sent to the consumers phone via SMS. The password expired once it has been used or once it scheduled life-cycle has expired. PULL messages are those that are initiated by the customer, using a mobile phone, for obtaining information or performing a transaction in the bank account. Example of PULL messages for information include an account balance inquiry, or request for current information like currency exchange rates and deposit interest rates, as published and updated by the bank. The banks customer is empowered with the capability to select the list of activities (or alerts) that he/she needs to be informed. This functionality to choose activity can be done either by integrating to the internet banking channel or through the banks customer service call center.

Typical push and pull services offered under SMS Banking Depending on the selecting extend of SMS banking transaction offered by bank, a customer can authorized to carry out either nonfinancial transactions, or both and financial and non-financial transaction. SMS Banking solution offer customers a range of functionality, classified by Push and Pull services as outlined below. 34

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Typical Push Services would include: Periodic account balance reporting (say at the end of the month); Reporting of salary and other credits to the bank account; Successful or unsuccessful execution of a standing order; Successful payment of a cheque issued on the account; Insufficient funds; Large value withdrawals on an account; Large value withdrawals on the ATM or on a debit card; Large value payment on a credit card or out of country activity on a credit card. One-time password and authentication.

Typical Pull Services would include: Account balance inquiry; Mini statement request; Electronic bill payment; Transfers between customers own accounts, like moving money from a saving account to a current account to fund a cheque; Stop payment instruction on a cheque; Requesting for an ATM card or credit card to be suspended; De-activating a credit or debit card when it is lost or the PIN is known to be compromised; Foreign currency exchange rates inquiry; Fixed deposit interest rate inquiry.

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12. CASE STUDIES 1. LG Telecom, South Korea

In terms of the evolution of services being offered on mobile applications, South Korea is showing the way. The big push came when LG telecom Ltd., the smallest of Koreas three mobile service providers teamed up with the Kookmin bank to launch the Bank on service. Under this scheme mobile users were able to use smart chips embedded in cell phones for accessing all of the transaction and inquiry based services. The chip-based service automated the authentication of users when they assessed their banks financial services to make the whole process much faster and convenient. The icing on the cake came with the ability of these chip enabled cell phones to be used simultaneously as cash cards. By Oct, 2004 there were already about 100,000 infrared readers adapted to take payment directly from mobile phone handsets in Korea. Users can now use their cell phones to pay for everything, from restaurant bills, travel ticket, merchandise and even haircuts.

2. Reliance Infocomm, India

When Reliance Infocomm, India rolled out its CDMA network, (at the time the mobile market in India was still in its infancy, and data service were almost never heard off) its made sure that all handsets supported JAVA. The Reliance application platform, also known as R-World brought Java compatibility even to the lower end phones. Reliance used a novel way to overcome the memory limitations of lower-end mobile phones, which hampered deploying the multiple standalone J2ME based clients. Instead of storing applications statically on their cell phones, user access a single menu based application called R-World, which connect them to the Reliance services. Using the menu based user interface, mobile users select the applications, which they want to run and download them over-the-air to their cell phones. These applications are then executed locally on the mobiles. From mid-2004 Reliance tied up with two of the popular private sector banks, HDFC and ICICI, to provide a host of their inquiry and transaction based mobile banking services through its R-World environment. 36

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13. THE POSSIBLE FUTURE FOR MOBILE BANKING

Payment on approval by SMS: This feature allows for joint accounts or business account to have a pre-determined limit to prompt for either supervisor or joint account holder approval. A payment request is made from the account to another pre-nominated account; a message is then send to either supervisor or joint account holder to also approve the payment. Two-stage confirmed payment: This payment process is similar to a letter of credit, when the end user sends a payment instruction for goods or services, the amount of payment will be transferred to a specific account. The beneficiary will be notified that the amount is guaranteed. Once the goods or services are delivered the end user/payee will be able to accept or reject the goods or services and make payment accordingly by approving or denying the payment process. Mobile payment in retail outlets Using nothing but their own mobile handset, consumers will be able to make purchased at a wide variety of retail outlet. Lets use the supermarket as a common example: the consumer needs to make a purchase from a supermarket, he/she goes to the cashier and sends a payment request along with his/her password and the specific POS machine number. The system will then send back a Digital Money Sequence Number (DMSN) to the buyer. When asking to pay for the goods, the cashier will use his/her special banking card, and when the buyer is asked for a password all they need to the is enter the DMSN. As long as the transaction is within the daily limit of the account the transaction will take place instantly.

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Challenges for a Mobile Banking Solution: Key challenges in the developing a sophisticated mobile banking application are: Handset operability There are a large number of different mobile phone devices and it is a big challenge for banks to offer mobile banking solution on any type of device. Some of these devices support Java ME and others support SIM Application Toolkit, a WAP browser, or only SMS. Initial interoperability issues however have been localized, with countries like India using portals like R-World to enable the limitations of low end java based phones, while focus on areas such as South Africa have defaulted to the USSD as a basis of communication achievable with any phone. The desire for interoperability is largely dependent on the banks themselves, where installed applications (Java based or native) provide better security, are easier to use and allow development of more complex capabilities similar to those of internet banking while SMS can provide the basics but becomes difficult to operate with more complex transactions. There is a myth that there is a challenge of interoperability between mobile banking applications due to perceived lack of common technology standards for mobile banking. In practice it is too early in the service lifecycle for interoperability to be addressed within an individual country, as very few countries have more than one mobile banking service provider. In practice, banking interfaces are well defined and money movements between banks follow the IS08583 standard. As mobile banking matures, money movements between service providers will naturally adopt the same standards as in the banking world. On January 2009, Mobile Marketing Association (MMA) Banking SubCommittee, chaired by Cell Trust and VeriSign Inc., published the Mobile Banking Overview for financial institutions in which it discussed the advantages and disadvantages of Mobile Channel Platforms such as Short Message Services (SMS), Mobile Web, Mobile Client Applications, SMS with Mobile Web and Secure SMS. 38

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Interoperability: There is a lack of common technology standards for mobile banking. Many protocols are being used for mobile banking HTML, WAP, SOAP, XML to name a few. It would be a wise idea for the vendor to develop a mobile banking application that can connect multiple banks. It would require either the application to support multiple protocols or use of a common and widely acceptable set of protocols for data exchange. There are a large number of different mobile phone devices and it is a big challenge for banks to offer mobile banking solution on any type of device. Some of this devices support J2ME and others support WAP browser or only SMS. Overcoming interoperability issues however have been localized, with countries like India using portals like R- World to enable the limitations of low end Java based phones, while focus on areas such as South Africa have defaulted to the USSD as a basis of communication achievable with any phone. The desire for interoperability is largely dependent on the banks themselves, where java enabled applications are of better security, easier to use and offer development of more complex transactions similar to that of internet banking while SMS can provide the basics becomes as Hassel to operate with more difficult transactions. Security: Security of financial transaction, being executed from some remote location and transmission of financial information over the air, are the most complicated challenges that need to be addressed jointly by mobile application developers, wireless network service providers and the banks IT department. The following aspect need to be addressed to offer a secure infrastructure for financial transaction over wireless network : 1. Physical security of the hand - held device. If the bank is offering smart card based security, the physical security of the device is more important. 2. Security of the thick client application running on the device. In case the device is stolen; the hacker should require ID/ Password to access the application. 39

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3. Authentication of the device with service provider before initiating a transaction. This would ensure that unauthorized devices are not connected to perform financial transactions. 4. User ID/Password authentication of banks customer. 5. Encryption of the data being transmitted over the air. 6. Encryption of the data that will be stored in device for later/off- line analysis by the customer.

Scalability and Reliability: Another challenge for the banks is to scale-up the mobile banking infrastructure to handle exponential growth of the customer base. With mobile banking, the customer may be sitting in any part of the world (a true anytime, anywhere banking) and hence banks need to ensure that the systems are up and running in a true 24 x 7 fashion. As customer will find mobile banking more and more useful, their expectations from the solution will increase. Banks unable to meet the performance and reliability expectations may lose customer confidence.

Application distribution: Due to the nature of the connectivity between bank and its customers, it would be impractical to expect customers to regularly visit banks or connect to a website for regular upgrade of their mobile banking application. It will be expected that the mobile application itself check the upgrades and updates and download necessary patches. However, there could be many issues to implement this approach such as upgrade/synchronization of other dependent components.

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Personalization: It would be expected from the mobile application to support personalization such as: 1. Preferred language 2. Date/ time format 3. Amount format 4. Default transactions 5. Standard beneficiary list 6. Alerts These are a few of the most probable challenges that a banking organisation or company will face while newly introducing the mobile banking system into its business processes. However, a bank should see past all the difficulties and drawbacks in the mobile banking system as every aspect of todays world has some negative quality incorporated in it as every coin as two sides and so on. The main point that such a bank should focus on is the benefit such a system has in the future and how such a system will help the bank to further increase its customer base and increase its business in the future to come of the bank. For the time being these challenges, and many more which may arise and pose a threat to the adoption of mobile banking and its success, is not to be considered as a real drawback because for every problem or hindrance which may occur in mobile banking, there is a solution and such solutions are being devised, formulated and solved by professionals and expert who do what they do best and that is consult and find the most logical solution for that problem. For Example, an information security company NSS MSC SDN BHD has devised a suitable solution for mobile banking fraud. The main headache, which was caused by this fraud, for the banks were that the instructions regarding what has to be done by them which was told by the account holder, via mobile banking services, would fall into the wrong hands and lead to illegal transactions or, even worse, identity theft. 41

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For this reason, NSS MSC had devised a way to encrypt the message sent by the account holder to the bank. Only the account holders bank could read the encrypted message and the bank could carry on its duties as instructed by the account holder without the worry or Hassel of fraud or information falling into the wrong hands. Therefore, in future all problems and dead ends of mobile banking will be taken care off which will pave the way for the ascension of mobile banking services throughout all parts of the world.

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14. CONCLUSION

With the rapid development of transport and communication, people and services are coming together as if they were just around the corner. If this is the case for many services, then why should the banking industry lag behind? Internet banking, Phone banking, E-banking and now Mobile banking all enable the bank to be better connected with the customer and vice-versa. A customer who is provided with a variety of additional services feels appreciated and is more likely to be loyal to that bank, which is always a good sign for a bank. In the end mobile banking not only helps a bank to reduce costs but also helps it to retain its valuable customers. And as far as customers are concerned, this facility enables the customer to bank anywhere, at any time and in any condition, definitely a boon if a customer is stuck in the middle of nowhere and requires banking services as soon as possible. Thus mobile banking helps both, the customer as well as the bank, to lighten the burden of todays world and to save time, money and energy which is greatly required and appreciated. In a competitive world where everyone is waiting to outdo the other, a helping hand, in whatever forms and from whatever source, is definitely god sent and should not go unrecognized.

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15. BIBLIOGRAPHY

Online banking in India By R.K.Jha. http://en.wikipedia.org http://mbanking.blogspot.in http://www.globalenvision.org

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