Introduction
Technology advancement has resulted in making a lot of time consuming easy and quick. Mobile banking is one such activity which is possible due to technological advancement. It helps customers to access their bank accounts 24/7 and at any time or place through their mobiles, with or without the aid of the internet. Nowadays, several banks have come up with apps in order to help ease the process of mobile banking, examples of such apps or mobile applications are SBI’s YONO App, HDFC Mobile Banking apps, ICIC iMobile etc. This article will focus on understanding the prospects and problems of mobile banking in India.
Concept and Use of Mobile Banking
Mobile banking is a form of electronic banking which permits customers to avail banking services without having to physically visit the bank. It is performed between the bank employees and their customers through the Short Message Service (SMS) service or through the internet. The Reserve Bank of India had recognised the importance of providing such services to Indian customers. They came up with the first set of rules to regulate mobile banking in 2008. In India, ICIC bank was the first to introduce mobile banking in 2008 itself. Mobile banking services can be used by bank customers for several services like, receiving mini bank statements on mobiles, accessing card and loan statements, managing insurance and pension plans, details on recent transactions, alerts in case of unauthorised access to one’s account, notifications on last payment dates and change of PIN (Personal Identification Number) and reminders through the internet.
RBI’s Guidelines to Regulate Mobile Banking
The guidelines by RBI were influenced by the bank’s power under section 18 of the Payment and Settlement Systems Act, 2007 and were last updated in 2014. These guidelines are applicable to all commercial banks (this includes Regional Rural Banks too), Urban Cooperative Banks, State Cooperative Banks and also District Central Cooperative Banks. Only banks which hold license, have been supervised and have a physical presence in India hold the permission to give out mobile banking services under the guidelines. Also, such services are restricted only to customers and debit or credit card holders of the bank giving the service. The guidelines provided by RBI through the ‘Risks and Controls in Computers and Telecommunications’ circular issued in 1998.
Advantages of Mobile Banking in India
Mobile banking has immense benefits. Its introduction allows customers to access their bank accounts to make payments of bills and other things, transfer money, get alerts in relation to loans, payment of EMIs and the customer is also alerted through notifications in case of unauthorised access of their bank accounts or in case of credit card fraud. The alerts provided can prevent cases of fraud and extortion. All of these services of banks are now available at the fingertips of customers and the transactions happen much quicker compared to doing them by physically visiting banks. Customer service from banks is also easily available through mobile banking. Micro-ATM is a form of mobile banking which is often seen in shopping malls can be useful in situations where one does not want to carry cash or does not have enough of it at hand. Instead of having to visit the bank they can simply swipe their cards on micro-ATM machine and make payments.
Initially, RBI had put up transaction limits on mobile banking in 2009. The cap was of Rs. 50,000 per day but was removed and currently, banks can freely change the limit based on their own risk-taking capabilities. [1]
Disadvantages of Mobile Banking in India
Mobile banking might have made banking much hassle-free and quicker but it is still not used by a lot of bank customers due to questions of safety. Customers are often worried about financial frauds, bank account hacking, theft of passwords or PINs. There is also risk of malware and virus attack which might lead to third party accessing an individual’s private data and details such as their usernames, passwords etc. There is also risk in mobile banking through SMS. SMS services do provide end to end encryption of messages being exchanged. It is vulnerable to SMS spoofing, wherein a third party may pretend to be the original user and send messages to the bank and might in turn lead to financial frauds.
All mobile banking aided by the use of Wireless Application Protocol (WAP) or just wireless there is security concerns. Wireless applications use microwave signalling network to transmit communications but if the network is not secure or has any weakness then it can be easily attacked by hackers. Most mobile banking services are accessed through PINs or passwords of the digital bank accounts but since it’s an old method of securing accounts it leads to easy unauthorised access to these private accounts. The PINs and passwords can get stolen and a third party can easily use it to access an individual’s digital bank account. There are also disadvantages steaming from demographic variables like people above a certain age group do not indulge in mobile banking even if they are aware of it because they aren’t tech-savvy and there are circumstances were they aren’t aware of its availability. Also, it can be observed that, Indian youths, mainly students are more open to adopting mobile banking than their older counter parts. This could be because of their dependence on technology from a young age. The older section of the population through more awareness and knowledge can take the decision of welcoming the use of mobile banking.
Regulation of Mobile Banking in India
To regulate some of these above mentioned privacy concerns in India, the RBI issued the ‘Statement on Developmental and Regulatory Policies’ on December of 2020 and on 18th February, 2021 they posted the ‘Master Direction on Digital Payment Security Controls’[2], which shall be commonly known as Reserve Bank of India (Digital Payment Security Controls) directions, 2021. They are applicable to Regulated Entities such as Scheduled Commercial Banks. Small Financial Banks, Payments Banks and Credit card issuing NBFCs. These security controls have also brought in mobile banking in its purview along with other forms of digital banking options. It was introduced to device control in areas like Security control, Fraud Risk Management, Reconciliation mechanism, Customer Protection etc. The RBI under the directions contained in the master direction asks customers to immediately remove the copy of a mobile banking application if they spot an anomaly or exception in the app which is not usual or something that is not built into the app.
The Regulated Entities for the types of banks on whom these directions are applicable shall be able to verify the version of mobile banking application which the customer has installed before starting with the transactions. Banks should ensure secure delivery of PINs and Passwords to customers. The mobile banking applications are to be crafted in such a way that they do not retain or automatically save passwords, PINs, Username or any other confidential that could lead to third party or unauthorised access. There are some other important directions for Regulatory Entities to follow under the Reserve Bank of India (Digital Payment Security Controls) directions, 2021, in order to ensure a safer mobile banking experience for their customers. Besides abiding by these guidelines, Indian banks are also being encouraged to implement improved infrastructure as better infrastructure will provide better security to customers’ private data and they will trust the mobile banking services more. There are certain steps that a customer availing mobile banking services can take up to ensure secure transaction and they include installing mobile banking applications from secure and reliable sources, to use only secure network connections while connecting to their digital bank accounts and not revealing their password, keys or OTPs (One time pass) to just anyone. Lastly, customers have to be educated and made aware of proper implementation of these steps so as to enable them to secure their accounts and put more trust on mobile banking.
Conclusion
In conclusion, it can be stated that mobile banking is a blessing in the banking industry. Initially, internet banking or online banking was introduced and people required computer systems to access the service but in developing nations like India not every household could afford to have a computer. However, mobiles were used by a huge percentage of the Indian population; thus, the introduction of mobile banking in India has been a blessing. Online transactions through mobile banking have also been proven to be helpful and have hence, increased during the covid-19 induced pandemic. Although, a chunk of bank customers nowadays have indulged in mobile banking, there are quite a few who are still fearful of security breaches while engaging in transactions through mobile banking. These fears can be somewhat be warded off by the help of the guidelines enshrined under the Reserve Bank of India (Digital Payment Security Controls) directions, 2021. The banks adopting more secure mechanisms for their mobile banking applications and better infrastructure will aid in building up the trust of their customer-base. Making bank customers more aware of the security provisions at their disposal in relation to mobile banking is essential.
References:
[1] Pritam P Hans, RBI lifts Rs 50,000-a-day cap over mobile banking transactions, Business Today.in, Dec. 19, 2021 at 20:01 IST
[2] Master Direction on Digital Payment Security Controls, 2021 available at https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12032#F5
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