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Mobile banking for the poor has flopped in India

Nightmare UI and high prices blamed for low take-up of service hoped to replicate success of M-Pesa

India is trying to figure out why it has failed in efforts to replicate the success of mobile banking programs that have succeed in other countries.

The nation noted with admiration programs like Kenya's M-Pesa, which made it possible for people living in rural and remote areas to access banking services with feature phones. Such programs are held to be very useful because it's hard to save or borrow money if you can't access a bank, while cash transactions can be fraught in places where policing is thin on the ground. India's keen to help its many poor citizens to get ahead, so bringing banking to more people was hoped to spur economic development.

Between 2009 and 2014 the nation therefore cooked up standards for mobile banking that could run on GSM and made sure the nation's mobile carriers were ready to facilitate it.

And then very little happened.

As detailed in a consultation paper (PDF) issued this week by The Telecom Regulatory Authority of India (TRAI), adoption rates were poor.

The consultation paper says that in May 2016 only 3.7 million “attempts” at mobile banking transactions were recorded, well short of traffic expectations based on the 450 million mobile connections in rural India. (Note the "attempts" - it becomes important in subsequent paragraphs.)

The paper suggests India got a few things wrong, mostly the prices it allowed carriers to charge for the service. India's system uses GSM's Unstructured Supplementary Service Data (USSD), the side channel for data most often used for “quick codes” to conduct simple transactions. Dialing “*43#”, for example, activates call waiting on many carriers and does so over USSD.

India put a ceiling price of 1.5 rupees (two US cents) on USSD sessions for mobile banking. That's rather higher than the 0.15 rupee average cost of a TXT message in India, where average household incomes in rural areas are about 5,000 rupees a month. Users were even charged for failed transactions.

The paper suggests there were plenty of failures, because the mobile banking system's design imposed a limit of five steps on any banking transaction. That decision was made in the hope it would simplify matters for semi-literate users The paper suggests it did the opposite, as some steps required users to enter up to 29 characters on a feature phone, leading to errors that led to declined transactions that in turn led to users losing interest in the system.

Hence the low rates of adoption and the consultation paper that asks stakeholders to figure out repairs.

Increasing the number of steps allowed for transactions and reducing the USSD session ceiling feature prominently among ideas suggested as likely to improve adoption, along with monthly subscription options for customers or shifting cost of USSD sessions to banks instead of consumers.

Feedback on the Consultation Paper is welcome until August 31st and will be posted to the TRAI's site. Comments on comments posted to the site will be allowed for a further two-week period, until September 14th, after which TRAI will recommend and try to implement useful changes. ®

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