techdigest

Mobile money (or simply m-Money as it is commonly referred to) is getting lot of attention lately. Businessline today published an article on mobile money. As the article mentioned, Japan already has three providers successfully executing this concept.

There are two different ideas that people are talking about:

• Link the phone with some credit card account and then use double authentication to pay money to the vendor. The actual money gets deducted through your credit card/bank account. The simplest form of this is provided by Citibank India for mobile recharge. You have to register your cell phone on the Citibank website. It generates some random key and sends it to your cell phone. You enter that key on the cell phone and it generates one PIN. Now you can send SMS “RC CITI <PIN> <AMOUNT>” to Citibank and voila, your phone is recharged! Other examples: NGPay , Paymate is trying mobile money and there is one more company that I can not recall right now. Will update it later.
• This is mostly a Japanese concept. Have RFID in the phone. You go to an ATM, place the phone on some contact pad, access your bank account and transfer money from your bank account to your phone. Now you just touch the phone to the vendor’s contact pad and the money is transferred. Japan is using this to buy subway tickets and some grocery shopping kinda activities. It will certainly have the problems if the phone gets lost. But similar problems are with credit card and it can be mitigated the same way.

All of these approaches sound great but will have lot of complexity and integration needed. For micro transactions (upto say Rs. 500), there should be a simpler system. The system that I can actually use to pay the auto driver, to the samosa shop and perhaps to a beggar at the temple Lots of Indians use prepaid mobile accounts. There is a system in place where I can recharge someone else’s phone from my account. Why can’t this simple system be extended for mobile money for smaller transactions? To buy my metro ticket, to buy milk etc ? There can certainly be some basic authentication built into it as well like sending the PIN with the SMS (similar to Citibank mobile recharge) to authenticate the transaction. The mobile providers need to make minimal changes and it will really help everyone. If micro-finance can be such a revolution and success, this simple model will probably help everyone in micro transactions.

Update: Very similar idea is being tried in China: Mobile Money in Rural China

I will just add that, for such a system, since customer sends SMS with the payee number, amount and PIN, there needs to be one more app on the cell phone that will delete the PIN from the “sent message”. This will ensure that PIN is not exposed to the user who steals the cellphone. There should also be one more dynamic-one-time-use PIN to enhance security. It can be the same as HSBC provides for online transactions. This system will work very well in India!