A bank need not always be a brick-and-mortar complex with a handful of tellers

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sitting in tiny cubicles and doling out cash, with armed security guards pacing up and down, and a place where someone always wants to borrow your pen to fill a form. For a bank in Japan, called Jibun Bank, a bank only means a mobile phone in the hands of all the customers. The bank, started in mid-2008, has absolutely no branches, operates only through mobile phones where its customers can perform all possible transactions. The bank clocked more than 1 million customers by May 2010 and posted a deposit growth of Japanese yen 150 billion (approximately $1.95 billion).

It may be too futuristic to think about a similar concept in India, but considering how most of us hardly step into a bank branch these days to perform a transaction, a day will soon come when mobile phones are the main channel for bank transactions.

India, which has 600 million active mobile phone connections, according to the Telecom Regulatory Authority of India (Trai), has one of the highest mobile penetration in the world. But mobile banking as a concept is yet to take off in a big way even among the educated masses. The comfort with which people use internet banking to perform various banking transactions is yet to be seen in using a mobile as a tool for banking.

Mobile banking in India now: Mobile banking as a concept is largely used for two purposes, fund transfer (transfer of funds from one bank account to another) and merchant transactions (purchase of travel and movie tickets, among others). The Reserve Bank of India (RBI) has allowed only a bank-led model for mobile banking and not a telecom-operator-led model for mobile banking to avoid situations like money laundering or terror financing. Hence, the pace in which mobile banking grows in India depends on the pace in which banks prepare themselves to adapt to mobile banking technology.

Most large banks offer mobile banking services and applications to their users through tie-ups with mobile application developers. State Bank of India’s (SBI) mobile banking service is called SBI Freedom, while ICICI Bank’s service is named iMobile and HDFC Bank offers customers mobile applications like ‘ngpay’ and ‘mChek’. Most of these services allow users conduct all basic banking transactions like fund transfers, purchasing tickets, cheque book request and utility bill payments, among others.

But the volume of transactions through these channels is very difficult to find out. Since most of the mobile transactions happen through the internet, they would all be clubbed under the figures of internet funds transfer. According to RBI figures, the volume and value of funds transferred through national electronic funds transfer (Neft) has been doubling almost every year. In 2010-11, the volume of funds transferred through Neft doubled to 13.23 crore and the value of transactions too doubled to Rs 9,39,149 crore.

Mobile banking in other countries: It is not just India where the mobile banking concept has not taken off in a big way yet. According to Capgemini’s World Retail Banking Report 2011, “Mobile banking has yet to make a positive impression. Customers consider mobiles to be the least important and least satisfying (banking) channel across all lifecycle stages, perhaps due to its still relatively immature state.”

In the US, according to a Nielsen Company report, mobile web banking has grown to more than 13 million mobile subscribers, up 129 per cent, in two years, while in the UK, about 37 per cent of the mobile customers use mobile banking. Expectedly, most mobile banking customers are young users in the 25-35 age group.

Will IMPS usher in a mobile banking revolution? A KPMG study released in August 2010 showed that India and China would lead the global take-up of mobile transactions for retail and banking because of their young population with mobile phones becoming the de facto communications standard in the two countries.

It is in this context that the interbank mobile payment service (IMPS) assumes importance. The service, developed by National Payments Corporation of India (NPCI) at the behest of RBI, aims to provide a uniform channel for IMPS. NPCI has tied up with 28 banks, including the biggest names in the Indian banking industry, for IMPS service.

IMPS requires the user to just link his mobile number to his bank account number. Using the seven digits mobile money identifier (MMID) that he is provided, the user can easily send and receive money from anyone with a mobile phone and a bank account.

Unlike other mobile banking services, which require users to have smartphones or Java-enabled phones to transact, with IMPS, the money transfer is SMS-based and requires only a basic cell phone. This will help even the poorest in the country to perform a bank transaction using a cell phone, according to officials at NPCI. Since NPCI has tied up with all the leading banks in the country, it makes IMPS a uniform mobile banking platform for all.

“Any new technology takes time to become popular as people have to try it, get adapted to it and become comfortable using it. ATMs and internet banking have been around for close to a decade now. Our service has been around just for a year. We are optimistic that it will become a popular mode for financial transactions,” says M Balakrishnan, chief operating officer, NPCI.

Once a critical number of banks tie up with NPCI, the body along with member banks, would look at launching awareness campaigns on the benefits of mobile banking and encourage customers to sign up and get their MMIDs. NPCI has so far issued 14 million MMIDs through its 28 member banks.

In a year since its launch, IMPS has seen a number of banks sign up and the usage of the service for money transfers has also been growing significantly. In August alone, about 10,000 transactions, amounting to Rs 2.90 crore, took place through the IMPS channel.

Mobile banking for financial inclusion: Management consultant Rama Bijapurkar, in her book on Indian consumers, We are like that only - Understanding the Logic of Consumer India, reinforces the idea that technology is a great leveller and contrary to popular belief, the poor prefer interacting with machines than men because they are not prejudiced. It is this belief that is reinforced, when we see even the poorest of the poor in the country having cell phones, even if he does not have a roof above his head.

With such high mobile penetration among the masses, banks and microfinance companies are already using mobile phones to reach the unbanked masses.

Kolkata-based United Bank of India, which operations extensively in West Bengal, Tripura, Manipur and Assam, is banking big on adopting mobile phones as an alternate delivery channel for extending banking services and the lender is using it to reach out to the unbanked masses to achieve financial inclusion.

The innovative mobile banking tool Mitra, developed by Mumbai-based technology developer Fino is already being used by banks and financial institutions to enroll new customers in the unbanked regions. A banking correspondent uses the mobile application to capture the customer’s demographic and biometric details, apart from data required to meet know your customer (KYC) norms.

Customers, who live in remote villages with no bank branches around, can still use their mobile phones to perform basic banking operations like withdrawal, payments, remittance, obtain mini statements through Mitra or use their agents’ mobile phone to perform the same operations using ‘assisted transactions’.

The day is not far away when mobile banking becomes the de facto banking channel for an Audi-rider as also a rickshaw-puller.