March 2019
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Integrate Financial Services and Mobile telephony

ICTpost Governance Bureau

Two major problems confronting the country are financial inclusion and poor rural mobile and broadband wireless penetration. The former has proved intractable because extending banking services in the traditional brick, mortar and people mode to the rural areas is unviable. Equally, extending telecom services, including wireline to rural areas on a financially sustainable model has proved to be a monumental challenge. There have been certain fledgling efforts to provide certain limited financial services through mobile telephones. However, several regulatory hurdles remain to be overcome if such services are to proliferate and have widespread impact. The remedy would appear to be in converging banking and mobile services and allowing mobile service providers to provide a range of banking services either on their own or through suitable business arrangements with banks on terms approved by regulators. The result required is, however, clear. A person should be able to use his mobile device as a banking instrument to pay and receive money, at least small sums of say, up to Rs. 10,000/- per transaction.

Secondly, a person should be able to not only run up a telephone bill on his mobile but also accrue positive cash balances on his account through payments received which can, in turn, be used to make payments through the mobile itself or converted into cash at a conventional bank branch. It is highly desirable that as far as the individual user is concerned, he should not be required to open a conventional bank account for these services to be availed of from the mobile service provider. Initially, the amount that could be accumulated in this manner without the need to open a separate bank account could be capped at say Rs. one lakh.

Three immediate benefits accrue from such an arrangement. The first is a huge leap in financial inclusion. The second is a sudden spurt in coverage of mobile services because of better profitability at far lower population densities due to the superior business mix. The last, but by no means the least, is the transfer of a mind boggling volume of financial transactions that are currently off the tax radar onto it by creating a record of each such transaction. The tax buoyancy that could result from the latter should be more than enough to overcome any reluctance to abandon conventional methods and practices.

Integrate ID services with mobile telephony

The creation of an ID database in the country and the creation of an array of ID related services around it leads inevitably to the question of an identity card– smart or not so smart – that can be used by an individual as a proof of his or her identity. The explosive  growth of mobile telephony, the suggested merger of limited banking services  and mobile telephony and the creation of an enabled ID database for the  country leads to another breathtaking possibility: the merger of identity card and  mobile telephony device. Of course, this does not preclude some persons from having a  simple paper or non-smart card ID. The utility of the mobile telephone increases  manifold when it serves all three purposes and it is not difficult to envisage a situation  where every head of household, if not every individual, has such a multi-purpose  device.