Mobile operators & financial Services

The telecom operators in our country have a really enviable position. They are probably the only ones who have in such a short span created a consumer base that cuts across almost all economic and geographic boundaries. Their elder cousins from the FMCG sector are still way behind in capturing the imagination of the rural consumers.

While it is debatable whether there is a genuine need for high mobile penetration in the rural markets, what we have to accept is that mobile industry can today provide a scaleable distribution platform- something that can be leveraged for very many things.

Mobile operators

One of the most obvious (or so we would want to believe) is the financial services. Telecom co’s have been lobbying with the Finance Ministry to allow the Telcos to operate as NBFCs (or some similar avatar). They have used the argument that the government’s stated objective of financial inclusion can be best achieved through the mobile platform. One cannot ignore the sheer numbers that the Airtel, TATA indicom & Reliance report month on month to TRAI.

The RBI on the other hand has to play the devil’s advocate & so far it has done  a very convincing act, worthy of an academy nomination 🙂 RBI issued its guidelines on August 14th 2009 allowing “other persons” to issue mobile based semi-closed system based pre-paid instruments:

The mobile phone based semi-closed payment instruments issued by other persons shall also comply with the following conditions:-
i) The maximum value of such instruments shall not exceed Rs 5000/-.
ii) The purchase/reloading of these instruments against the value of airtime/talktime shall not be permitted.
iii) This facility shall be enabled only to facilitate purchase of goods and services. Person-to-person transfer of value shall not be permitted.

The mobile phone based semi-closed payment instruments issued by other persons shall also comply with the following conditions:-

i) The maximum value of such instruments shall not exceed Rs 5000/-.

ii) The purchase/reloading of these instruments against the value of airtime/talktime shall not be permitted.

iii) This facility shall be enabled only to facilitate purchase of goods and services. Person-to-person transfer of value shall not be permitted.

Most of us were tempted to assume that the next gradual step would be complete mobile wallets- something that gives a really exciting opportunity to Telecom operators to move into the Financial domain. But just last week RBI came out with its clear instructions that mwallets is an option which it is NOT comfortable with- more from a KYC & regulatory perspective.

Will be interesting to see how this payments space pans out. From what I hear, TATA Indicom is already doing semi-closed pilots with the Rs 5000/- limit by being the merchant on both ends of transactions i.e. the TATA Indicom user walks into a kiosk – pays Rs 5000/- cash & gets his virtual prepaid loaded with that same amount (no news on the transaction or other fees). The same can then be redeemed for transactions where TATA Indicom would play the merchant role again (e.g. a shopkeeper with whom they have a tie-up)