Mobile Banking: A Tool of Financial Inclusion for India

Abstract

Financial inclusion denotes delivery of financial services at an affordable cost to the vast sections of the disadvantaged and low-income groups. People in developing countries have less options for transferring money and accessing banking services, because there is less deployed formal banking structure: fewer branches and ATMs generally co-located to relieve branches, low internet penetration and easy access to fast and immediate sources of loans but at high cost. So a branchless banking channel using mobile phones could be far more preferable to poor people than the available options like travelling to and queuing at distant branches, forgoing their daily wages. Only about one-third of people living in developing countries have any form of financial savings with formal institutions. It is proven fact that it lowers the cost of delivery to banks in building and maintaining a delivery channel and availability of funds to customers of accessing services. Hence, the developing countries around the world concentrate more on implementing the mobile banking access to the unbanked mobile users, as a tool of financial inclusion, which is known as Transformational mobile banking. Hence the success of mobile banking in micro finance depends upon the mass customer adoption, utility of mobile service for cash-in and cash-out transactions, interoperability of providers, a country’s defined proportionate regulation and the ability of service providers to meet the regulatory challenges.