Print

Comment

Email

Digg

Del.icio.us

Reddit

Reserve Bank of India's (RBI) latest guideline allowing non-banking finance companies (NBFC) to issue semi-closed system pre-paid payment instruments will boost the growth of m-commerce in India. Industry sources estimate that, in the next 3 years, India could have 25 mn m-commerce users up from the current 5 mn. The industry currently stands at a market size of $10bn.

"The new guideline will increase the reach of the services to the people at the bottom of pyramid. Now, people not having any bank account could pay their utility bill by electronic transfer. We expect a five fold increase in number of people using m-commerce services," said Anil Gajwani, Senior Vice President - Technology, Comviva Technologies.

After the new guideline, entry of a few NBFC MNCs into the segment could not be denied. However, the most viable business plan would be for telecom operators, as the guidelines will allow them to operate as a pre-paid payment instrument as well. Considering the reach of the telcos, in urban, rural and semi-urban areas, their entry will increase the penetration of the services among the masses. Further, these telecom operators already have a large network of agents, who are selling pre-paid recharge coupon to the end customer. As per industry estimate every service provider has around 50,000 such agents. Telcos could use these existing agents for m-commerce as well.

"This will certainly bring more people into the eco-system. Even people not having any bank account would be able to do some basic financial transaction," said Probir Roy, Co-founder and MD of Paymate. Paymate has currently half a million users in the country. The company expects to grow manifold, in terms of the users, by the end of current FY.

However, the new guidelines still have some bottlenecks, which the industry people wanted to be removed. RBI restricts the maximum value of such payment instruments that can be issued by the institutions/companies to Rs 5,000. Further, these pre-paid payment instruments up to Rs 5,000 can be issued by accepting any 'officially valid documents' defined under Rule 2(d) of Prevention of Money Laundering Act, as proof of identity. Such instruments shall not permit cash withdrawal. The utility bills/essential services shall include only electricity bills, water bills, telephone/mobile phone bills, and insurance premium, cooking gas payments, ISP for Internet/broadband connections, cable/DTH subscriptions and citizen services by government or government bodies.

"The KYC norms should be relaxed and cash out should be allowed, so that people could sent and receive money via using m-commerce as a service," said Gajwani.

Mobile banking had picked up in India after the RBI issued operating guidelines for mobile banking in India in September 2008.