Feb 20, 2009

Mobile Money Transfer(MMT) - Issues and Opportunities

Mobile Money Transfer or payment using mobiles is an application that is being considered to be the new giant step after the ATM wave in the past 2 decades or so.

Mobiles outnumber ATMs and therefore present a great opportunity for consumers, banking and telecom industry to create a completely new business model for last mile in access to money.

I completely agree with the viability of the model. What worries me is the threat, especially in countries like India. Consider this,
1. In India, a paradoxical thing is happening - both high growth rate of mobile subscribers and high churn rate is concurrently happening. What it means is that subscribers do not bother too much about changing the service providers. Number portability is not widely used, implying that these subscribers change there numbers.

2. Also, a lot of people are not yet sensitized about the usage of passwords. They do not worry too much about telling their PINs. By the way, this includes a certain part of educated people.

I see this as a security issue in using MMT.

Scenario a. Someone changes his/her number and/or service provider but does not update that information at the bank. Who covers for the possible loss? Insurance companies can bring out a product for this part. But we still don't have those actuarial tables for such technologies. I would say, still under hypotheses.

Scenario b. Handset is changed. The problem is much lesser here, yet the handset memory may have sensitive data that can be accessed. One can say that this problem still exists. The difference here is that mobile is primarily for talking, when a malfunction occurs, people are more inclined to get it replaced quickly. I see a problem even when folks go and get handsets repaired at unauthorized places. I dont mean to malign anyone, but if something wrong happens, who will be held responsible?

I can list down few more, but let me jump to the possible solution. Some of these are probably already being discussed.

1. Regulation - Banking and Telecom both should apply.
2. Technology - We have technology that allows only genuine callers with enough credit to make calls. Same logic to be applied here.
3. Customer Education - Problems like loss of handset need to be protected as well. Banks and Telecom Service providers need to educate their subscribers a LOT MORE when they offer this service. And these should not be 15 page "handbooks" sent in mass mail. Probably workshops or easy to read pamphlets is the way to go.

Pooling of statistics on fraud by all vendors should also be mandated by the regulatory authorities. That will reduce experimentation and improve quality of post-facto root cause analysis.

Thanks,
Siddharth

P.S. - MWC/GSMA link on MMT http://www.gsmworld.com/newsroom/press-releases/2009/2560.htm

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