Mobile Banking in India: Dual Strategy for Rural and Urban Segments

by Sreekrishna Sankar, April 14, 2010
Industry Trends
Asia-Pacific

Abstract

Indian mobile banking has two major segments: the urban segment and the rural segment. Celent estimates that urban mobile banking subscribers will reach 65 million by 2012. The rural mobile segment represents a huge opportunity to bank the unbanked population, thereby adding a revenue stream.

In a new report, Mobile Banking in India; Dual Strategy for Rural and Urban Segments, Celent explains the mobile banking ecosystem in India and looks at the trends driving the growth in its urban and rural subsegments. The report looks at the prospects of mobile banking from both a regulatory perspective and an industry perspective.

In India’s urban segment, mobile banking is an enabling fifth channel, and in the rural segment, mobile banking is a primary mode of financial inclusion. In both segments, the two fundamental factors affecting the growth of mobile banking are regulations and technology. Nontransactional users will remain the majority in India because they will continue to use online banking and other payment mechanisms. Government-to-person (G2P) payments will be the major growth driver for rural mobile banking. Regulatory changes are also a big driver. Celent believes that, by 2012, over 60 million rural users will be beneficiaries of mobile banking through business correspondence.

“While the urban banking market is dominated by information services, the payment transactions segment has not picked up mainly due to regulatory limitations,” says Rajesh M R, an analyst with Celent and coauthor of the report. “However, recent relaxation of payment norms by RBI has presented a huge opportunity for this segment.”

“The rural mobile banking segment is a high growth area, due to the adoption of the business correspondent model and relaxed Know Your Customer norms, but financial literacy remains a big issue for retaining the rural adopters,” says Sreekrishna Sankar, Celent analyst and coauthor of the report.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

3

Introduction

5

Regulatory Landscape in India

6

Urban Customer Segment

11

 

Role of Mobile Banking...As a Fifth Channel

11

 

Statistics of the Urban Market

13

 

Technological Models

14

Rural Customer Segment

17

 

Role of Mobile Banking–Financial Institutions

17

 

Statistics of the Rural Market

20

 

BC Implementations

22

Conclusion

24

 

Urban Segment

24

 

Rural Segment

24

 

Focus Areas

25

Appendix

26

 

Global Benchmarking

26

Leveraging Celent’s Expertise

29

 

Support for Financial Institutions

29

 

Support for Vendors

29

Related Celent Research

30

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