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Making payments on the go

K.S. Rajgopal
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Inter-bank Mobile Payment Service can benefit both citizen and society.

Over the last decade, one very visible change in the Indian communications landscape is the advent of the ubiquitous mobile phone, which is now a universal device. Mobile phones have become part of our daily lives. Taking advantage of this, a new mobile value-added service has recently been introduced in India: Interbank Mobile Payment Service (IMPS). It is a new method that enables mobile payments. One can use it to transfer money from one account to another, whether an individual or a merchant, using only the mobile phone.

How does it work?

A user (person or merchant) registers once for mobile banking with his or her respective bank. The bank issues a 7-digit Mobile Money Identifier (MMID) corresponding to the bank account and the mobile number. A mobile number can have multiple accounts linked to it: each bank account will have its own MMID number. The combination of mobile number and MMID uniquely identifies a bank and the bank account in the entire ecosystem. To make a transfer, one would need the recipient’s mobile number and MMID, and an MPIN (Mobile PIN, like an ATM PIN) for security.

Indiahas opted for a bank-linked model, as the intention is to work towards the delivery of a range of financial services using the mobile phone. The concept of MMID based payments has been designed for India. IMPS is currently implemented only in India, but can be used in other economies as well.

For the last few years, the Reserve Bank of India (RBI), the Mobile Payment Forum of India (MPFI), the National Payments Corporation of India (NPCI) and the Indian Institute of Technology Madras (IITM) have been working with all the stakeholders to construct interoperable and security standards for mobile financial payments and services. Today, over 50 banks and financial institutions have adopted the common standards and architectures which such a service requires.

For widespread operation, these standards must ensure interoperability, security and performance which will permit instant money transfers. The mobile payments solution was developed by Dr. Gaurav Raina and his team at IIT Madras over a two-year period.Dr. Raina is a member of the faculty at IIT Madras, Visiting Research Fellow at the University of Cambridge, and is the chair of the MPFI Committee for interoperability and security for mobile payments.

Explaining the concept of Interoperability, Dr. Raina told this correspondent: “Interoperable means the solutions do not depend on the handset, the technology, the telecom provider, or the particular bank of the sender or the recipient. The end-to-end transactions are secure, and the transaction is done in about 5-10 seconds. Both the sender and the recipient get an acknowledgement SMS, and the recipient can use the money as soon as the transaction is completed. Each transaction will have an IMPS ID.” He added, “With the same architecture, one can pay another person, or a merchant, or pay utility bills.”

Encryption for security

With the bank’s application the MPIN is encrypted end-to-end, so security of the transaction is ensured. At the user end, even if the mobile is lost, another person cannot execute a transaction without the MPIN; just like an ATM transaction. As the payment is from one account to another account, there is complete traceability.

There are clear advantages for the banks: greater customer reach, and a vast reduction in capital and operating expenditure as compared to servicing customers at a branch or an ATM. For the individual also, this mode of payment would be extremely convenient in non-proximal and remote payments in numerous situations: person-to-person, payments to merchants, bill payments and booking tickets, to name a few. For merchants, cash management is often a pain and has an associated cost.

Another benefit of a mobile platform is that it also enhances customer reach and convenience. The Indian Railway Catering and Tourism Corporation (IRCTC) has launched IMPS for its users in the e-ticketing site www.irctc.co.in. Also, United India Insurance Company (UIIC) has recently introduced payments of insurance premiums through IMPS. A host of new merchants and utility companies are going live on IMPS.

Enormous benefits could be achieved by the government, as such payments facilitate efficiency, traceability and transparency, and advance financial inclusion. Finally, there is a sizeable carbon footprint associated with the production of money, its distribution, and the maintenance of cash.

If 100 million people were to use 10 currency notes less and issue one cheque less a month, on average that would translate into 12 billion fewer notes, and 1.2 billion cheques.

At the level of the individual it may not seem a lot, but collectively it can have a sizeable impact. Dr. Raina emphasises, “Technology-based solutions, which address societal needs are precisely what India requires today. The mobile phone is a truly democratic and universal instrument, and IMPS can benefit both the citizen and society.”

The Indian Railway Catering and Tourism Corporation (IRCTC) has launched IMPS for its users in the e-ticketing site www.irctc.co.in.

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