With electronic banking, users can now conveniently carry out banking transactions, but this convenience cannot be achieved if the user does not have access to the internet, hence, in other words, the user Anton carry out a banking transaction while waiting for a bus, or perhaps while having lunch in a restaurant. With m-banking, convenience can be achieved errs a day. This is because a user has access to his mobile phone all day, at all times. So, to effectively achieve a truly convenient banking mode, a truly mobile mode of banking has to be explored, hence the need for m-banking. . 2 Trends in Mobile Banking The advent of the Internet has revolutionized the way the financial services industry conducts business, empowering organizations with new business models and new says to offer 24 hour accessibility to their customers. The ability to offer financial transactions online has also created new players in the financial services industry, such as online banks, online brokers and wealth managers who offer personalized services, although such players still account for a tiny percentage of the industry. Over the last few years, the mobile and wireless market has been one of the fastest growing markets in the world and it is still growing at a rapid pace. According to the GSM Association and Ovum, the number of mobile subscribers exceeded 2 billion in September 2005, and now exceeds 2. 5 billion (of which more than 2 billion are GSM). According to a study by financial consultancy Client, 35% of online banking households will be using mobile banking by 2010, up from less than 1% today. Upwards of 70% of bank center call volume is projected to come from mobile phones.

Mobile banking will eventually allow users to make payments at the physical point of sale. "Mobile contact less payments" will make up 10% of the contact less market by 2010. Many believe that mobile users have Just started to fully utilize the data capabilities in their mobile phones. In Asian countries like India, China, Bangladesh, Indonesia and Philippines, where mobile infrastructure is comparatively better than the fixed-line infrastructure, and in European countries, where mobile phone penetration is very high (at least 80% of consumers use a mobile phone), mobile banking is likely to appeal even more.

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This opens up huge markets for financial institutions interested in offering value added services. With mobile technology, banks can offer a wide range of services to their customers such as doing funds transfer while traveling, receiving online updates of stock price or even performing tock trading while being stuck in traffic. According to the German mobile operator Mobile, mobile banking will be the "killer application" for the next generation of mobile technology. Mobile devices, especially smart phones, are the most promising way to reach the masses and to create "stickiness" among current customers, due to potential to grow.

According to Garner, shipment of smart phones is growing fast, and should top 20 million units (of over 800 million sold) in 2006 alone. 10 In the last 4 years, banks across the globe have invested billions of dollars to build sophisticated internet banking capabilities. As the trend is shifting to mobile banking, there is a challenge for Close and Cots of these banks to decide on how to leverage their investment in internet banking and offer mobile banking, in the shortest possible time.

The proliferation of the 36 (third generation of wireless) and widespread implementation expected for 2007-2011 will generate the development of more sophisticated services such as multimedia and links to m-commerce services. 2. 3 Mobile Banking Business Models A wide spectrum of Mobile/branches banking models is evolving. However, no matter what business model, if mobile banking is Ewing used to attract low-income populations in often rural locations, the business model will depend on banking agents, I. E. Retail or postal outlets that process financial transactions on behalf telecoms or banks.

The banking agent is an important part of the mobile banking business model since customer care, service quality, and cash management will depend on them. Many telecoms will work through their local airtime resellers. However, banks in Colombia, Brazil, Peru, and other markets use pharmacies, bakeries, etc. These models differ primarily on the question that who will establish the relationship (account opening, deposit taking, ending etc. ) to the end customer, the Bank or the Non-Banknelecommunication Company (Tells). Another difference lies in the nature of agency agreement between bank and the Non-Bank.

Models of branches banking can be classified into three broad categories - Bank Focused, Bank-Led and Embank-Led. 11 2. 3. 1 Bank-focused Model The bank-focused model emerges when a traditional bank uses non-traditional low-cost delivery channels to provide banking services to its existing customers. Examples range from use of automatic teller machines (Tams) to internet banking or mobile phone banking to provide certain limited banking arrives to banks" customers. This model is additive in nature and may be seen as a modest extension of conventional branch-based banking. 2. 3. Bank-led Model The bank-led model offers a distinct alternative to conventional branch-based banking in that customer conducts financial transactions at a whole range of retail agents (or through mobile phone) instead of at bank branches or through bank employees. This model promises the potential to substantially increase the financial services outreach by using a different delivery channel (retailers/ mobile phones), a different trade ratter (tells / chain store) having experience and target market distinct from traditional banks, and may be significantly cheaper than the bank-based alternatives.

The bank-led model may be implemented by either using correspondent arrangements or by creating a JP between Bank and Tells/embank. In this model customer account relationship rests with the bank 2. 3. 3 Non-bank-led Model The non-bank-led model is where a bank does not come into the picture (except possibly as a safe-keeper of surplus funds) and the non-bank provision and available of banking- and financial services with the help of mobile electrification devices. The scope of offered services may include facilities to conduct bank and stock market transactions, to 12 administer accounts and to access customized information.

Small Businesses can be defined according to nature and size. In terms of nature a small business as one run by an individual like in a sole proprietorship or a group of between two and twenty individuals like in a partnership. In terms of size a small business can be defined as one with less than 100 employees. 2. 4 Building Blocks of Retail Banking A payment is the transfer of ownership of assets, nearly, but not necessarily, money, to be accepted as a form of settlement of a claim.

Money is a particular kind of asset that has the important features of being, in many but not all countries, a stable store of value and a unit of account that is widely accepted as a means to settle claims. In most economies, money is currency issued by a government mandated authority, such as the central bank, and has no intrinsic value itself, but acts as a placeholder for value and is by law defined as a valid asset in which to settle claims. But it is possible to have other instruments (and issuers) hat are sufficiently stable and widely accepted to act as money.

There are many instances of private institutions issuing claims accepted for payment in limited contexts: corporations issue stocks and bonds, retailers issue gift certificates, airlines issue air-miles, etc. Currency often takes the form of physical notes and coins. But it is increasingly held as a claim on a commercial bank (or script) at which clients hold accounts and from which they can effect payments. These claims on banks are generally backed up by deposit insurance and currency reserves held by the deposit aging institution with the central bank.

The solvency of such banks is important for ensuring that deposits held with them remain a good store of value and can be exchanged for other assets. Currency, like other assets, is of little use without the ability to unambiguously attribute ownership of it. Banknotes and coins are bearer instruments": ownership is generally based simply on possession. But the ownership of value held with banks is established 13 by a complex set of rules, contracts and conventions as well as mechanisms to ensure compliance with them.

Lastly, having ownership of an asset (or a claim hereto) is of little use if owners do not have the means to exchange it for other assets, goods or services. Beyond the simple physical process of exchanging notes and coins, institutions have developed a wide variety of accepted processes for transferring assets in the form of money. Most prominent is a bank-to-bank transfer of units from one account to another, often held with a separate banking institution. This can often be achieved using payments instruments or media (e. G. Debit or credit cards, chips embedded in mobiles) issued by a depositors bank.

In some cases, riveter issuers have experimented with true digital, encrypted cash (or e-money) that can be stored on a smart card and transferred to other cards with the help of specialized card readers. The specific process by which transfers are conducted availability of funds, the identities of the counter-parties, dates for transfer and the units of account being used as well as the possibility of conversion from one unit of account to another (e. G. Foreign exchange). Payment providers are intermediaries which settle financial claims between certain types and scope of transaction counter- parties.

Secondary characteristics of payment services include the kinds of transactions they support, the ease of use of their payment instruments and the costs, risks and speed associated with settlement arrangements. The value of the payment service depends on the way a provider combines these features (World sank 2005). 2. 4. 1 Outreach of Traditional Banking Services A vicious cycle driven by perceived low levels of demand, low levels of bank income, high bank fees, inappropriate products and extremely limited geographical reach, ensure that only a small percentage of people in developing countries use banking services.

Conventional banking business models are essentially driven by income derived from the fees for services and the margin 14 earned between interest paid on deposits and interest receivable on loans. The branch infrastructure is a substantial fixed cost for traditional banks; it is both expensive to maintain and expensive to increase its geographical spread. Any reductions in the essential fixed costs of a bank have the potential to increase profitability and the competitiveness of the bank.

Hence the conventional banking business models tend to concentrate on relatively dense urban areas and relatively effluent areas. In the context of these traditional banking business models, the geographical extension of a banking network is hampered by the high cost of rolling out a physical network of bank branches, by the small average size of customer deposits, by relatively low population densities, and by a lack of documented credit histories (necessary for MUCKY requirements and also to leverage additional bank income from a loan portfolio).

As observed by UNCUT: Building comprehensive, secure banking networks accessible to the under-banked and unbaked segments of population, dealing with very oddest sums of money, can prove to be prohibitively expensive to banks. Building network of bank branches and Tams in remote locations can be unsafe, while providing electronic banking is impossible due to the lack of either fixed telecommunication infrastructure (poor telecoms service penetration rates) or lack of end-user devices.

To combat the prohibitive costs associated with roll-out of banking networks, alternative access channels can be considered, all of which have a downside if the basic telecoms infrastructure in a country is inadequate. It is possible to install fully automatic Tams, for example, but these depend on a widely available telecommunications network and the ability to ensure regular cash replenishment. The promotion of e-banking is contingent on the widespread availability of internet access as well as advanced telecommunications infrastructure.

In countries with a poor fixed telecommunications infrastructure but high mobile considered as alternatives to the more traditional banking channels. 2. 4. 2 The Banking Ladder The concept of the banking ladder is a stylized way of capturing the nature of demand for financial services by individuals and households across the hole population, charting the progression the way in which an individual may use them. The banking ladder implicitly defines the conditions under which services need to be offered to the market. The ladder also postulates a relationship between the level of income and the adoption of mobile telephones.

Exploring the relationship between the demand for finance al services and the adoption of mobile phones is fundamental to defining the market in which mobile transaction platforms could play a transformational role in the provision of financial services to all. The main impact of Nanking on low income households is two-fold. On the first steps of the banking ladder, the benefits of access to finance are exclusively improvements in the quality of people"s lives, such as saving time (for example avoiding long queues to pay bills), reducing the threat of crime, and making transactions (such as intra country remittances) easier.

The subsequent rungs of the ladder introduce additional benefits which flow from establishing financial track records. In terms of debt, these higher rungs on the ladder allow for formal acquisition of property rights (through mortgages for instance), the smoothing of income against unpredictable expenditures and the ability to support family-owned entrepreneurial activity. In terms of savings, better access to financial services can lead eventually to access to longer term products such as pension schemes and the acquisition of investment products.

Climbing the banking ladder allows individuals to benefit from the broader processes of economic development. 16 2. 5 Mobile Transactions One view is that mobile technology is Just another, although highly innovative, access channel; an alternative is that mobile telecommunications networks are becoming he front office" for financial services leaving the existing banks as providers of back office functions.

But there is also another view which seeks to define the competitive advantages of the banking and mobile finance business models and then explore the ways in which these could give rise to new market structures within which the existing portfolio of financial services (savings, credits and transactions) can be unbundled. There are a number of mobile transaction initiatives in the developed and developing world. Most are bank-led and largely provide an information and orientations channel which complements existing bank access channels such as branches, telephone banking and online services.

There are, however, significant examples of innovative mobile transaction schemes that hint at a radical transformation of the financial market landscape in that the business model addresses those without existing bank accounts. Examples which are often cited include Wiz in South Africa, Globe in the Philippines and M-PEAS in Kenya. In existing widely-diffused financial service platforms, such as Visa, in order to deliver transaction services to under- served market segments.

Interestingly, the most innovative of these mobile banking models, and those with the greatest potential to bring significant benefits to consumers, are those addressing the needs of developing markets, which hitherto have been the most complex in which to increase access to finance. In both types of approach - mobile transactions as a brand new access channel and as an innovative alternative banking system - the rapidly- growing mobile communications infrastructure and its associated support services (for example, air time agents) provide the possibility of outreach vastly beyond traditional banking networks and at significantly lower costs.

In order to explore the nature of mobile financial transaction systems in more detail, three examples are described below. 17 Each attempts to provide a system that allows a customer to put cash in and take it out, and also make money transfers to other individuals and entities. Each system, however, is optimized" for particular purposes and thus there are significant practical differences between the systems and the user experience. At their core, each of the schemes described offers four basic services.

How these services are offered and charged to the consumer varies. The four core services are: Information - or example account balance retrieval, transactional history of deposits and withdrawals; Transactions - for example, transfer of funds between accounts; Cash- in and cash-out services - the deposit and withdrawal of cash; Payments - a variety of mobile payment applications, such as air-time tops, electricity meter top-ups and in some markets broader services such as entrapments at vending machines.

The differences between the schemes can also be described in terms of the broader system characteristics which may be less transparent to consumers. The systems vary in terms of: their technical platform; who manages the money float and talented mechanisms; who manages the interaction with a customer and how; and whose brand is used to market the product. These broader characteristics fall into the following categories: open or closed systems, interoperability, identity of the deposit holder, tariff structures for consumers, regulatory compliance and mechanisms for deposit making, transfers and cash withdrawal.

Open or closed system - the extent to which a specific mobile scheme allows transactions and/or payments to any account in any other network. The ability to effectively interconnect with the existing bank clearing systems and money transfer networks (such as Visa), ND the terms and conditions of this interconnection regime, is a critical aspect of the design and operation of a mobile banking scheme.