Indian Banks Introducing Instant Mobile Retail Payments

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A new mobile retail payment system backed by some large banks in India will allow fund transfers between different banks and the use of SMS to make transactions from even low-end phones -- features that are expected to make the system popular with consumers.

Because the Interbank Mobile Payment Service (IMPS) from National Payments Corporation of India (NPCI) can support transactions from even low-end phones, the service will be accessible to a larger number of Indian consumers, A.P. Hota, managing director and CEO of NPCI, said on Tuesday.

Until now mobile phone banking transactions in India were mainly possible between account holders of the same bank, Hota said. The new service will give a boost to mobile phone banking, as customers will be able to conduct transactions with account holders in other banks, he added.

NPCI is being promoted by 10 banks in India. About seven of these banks are in various stages of offering services around the technology. Another 40 banks, that have been authorized by the central bank, Reserve Bank of India (RBI), to offer mobile banking, are also expected to use the service.

While the person transmitting the funds can use SMS or an application on a mobile phone to send funds, depending on the configuration offered by the bank, the person receiving the funds need not run the application on a phone, according to NPCI.

Transactions that transmit funds using SMS are, however, currently limited by RBI to a daily cap of 1,000 rupees (US$21) because SMS data is not encrypted end-to-end, Hota said.

The IMPS service provides an interoperable infrastructure for the banks to offer real-time money transfers to customers through the mobile channel, according to NPCI. Banks are free to use any mobile banking application of their choice, it added.

RBI issued guidelines in 2008 for banks in India to offer banking transactions using mobile phones. The RBI, however, put a daily cap of 5,000 rupees for fund transfers and 10,000 rupees for the purchase of goods and services using mobile phones.

By December 2009, the RBI raised the daily cap to 50,000 rupees for both fund transfers and purchases.

The use of mobile phones is expected to boost banking transactions as there are currently over 670 million mobile subscribers registered in the country, according to the Telecom Regulatory Authority of India.

Mobile Money Identifiers (MMIDs), which are seven digit random numbers issued by banks, are a key element of the technology from NPCI. The remitter sends an instruction from his mobile phone, through the application provided by the bank or through SMS, specifying the mobile number and MMID of the recipient. The request is routed to the remitter's bank for processing and thereafter to the NPCI backbone which routes it to the recipient's bank. Both banks then send confirmatory SMS messages to their customers, advising them about the completion of the transaction.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is

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