Mobile Finance for Rural Banks

Mobile Finance
For Apex and RCBs

4/3/2012

George Edward Neizer

Table of Contents
Introduction 3 Mobile Accounting 3 Mobile Brokerage 3 Mobile Financial Information Services 4
Technological Platforms that enable Mobile Finance 4 Interactive Voice Response (IVR) 4 Java 2 Micro Edition (J2ME) 4 Short Message Service (SMS) 4 Secured Short Message Service (SSMS) 5 Figure 1 5 Unstructured Supplementary Service Data (USSD) 5 SIM Application Toolkit (SAT) 6 Wireless Application Protocol (WAP) 6
Mobile Finance for the Rural Environment 6 Mobile Finance solution 6 Products 7 Stakeholders 7
Recommendations 8
List of Mobile Finance software vendors and their products 8

Introduction
Mobile Finance refers to the provision of a set of banking and financial services, which are accessible through telephony devices like Mobile phones, Smart phones and Personal Digital Assistants (PDAs), on a telecommunications backbone. The scope of services offered can be categorized into the three (3) main areas listed below * Mobile Accounting * Mobile Brokerage * Mobile Financial Information Services
Mobile Accounting
This is a transaction based service that employs branchless banking model to achieve payments, deposits, withdrawals and transfers.
Examples of services that can be offered through mobile accounting include * Deposits * Withdrawals * Transfers * Mobile Recharging * Payments
Payments can further be broken down into * Person to Person Payment
Payment from one person to another. * Person to Business Payment
This is payment from a person to a business entity.
E.g. Payment of Utility bills * Business to Business Payment
Payment from one business entity to another
E.g. Payment for delivery of goods and services * SMS alerts are sent to notify interested parties when deposits, withdrawals, transfers and payments are made.
Mobile Brokerage
Mobile brokerage refers to stock market services offered via mobile telephony devices. This type of service allows the subscriber to react to stock market developments in a timely fashion, irrespective of physical location.
Examples of Services offered through mobile brokerage include * Stock Trading from anywhere * Stock Price Monitoring
Mobile Financial Information Services
These are non-transactional informational services which are essential for conducting transactions. Examples of such services are a. Balance enquiry b. Last three(3) transactions c. Mini-Account Statements d. Cheque book request status e. Mini-Loan statement f. SMS Alerts Services
Services rendered include * Debit and credit alerts. * Bounced cheque alerts. * Loan repayment alerts
These alerts are sent seven days prior to the repayment date of a loan installment * Investment alerts
Notify investors on rollovers, maturity and payments

Technological Platforms that enable Mobile Finance
Technically, Mobile Finance is seen as an extension of the existing infrastructure of a bank to mobile phones as a channel for leveraging the reach of telecommunications operators to deliver banking and financial services to consumers. Figure 1 below, shows the Mobile Finance technology stack which indicates a range of Mobile devices as well as the communication channels and technologies needed to implement mobile banking. The technologies include IVR, J2ME, SMS, USSD, SSMS and SAT
Interactive Voice Response (IVR) IVR allows customers to interact with a system via a mobile phone keypad or by speech recognition. Through a series of prerecorded or dynamically generated audio IVR directs users to perform enquiries. IVR is suitable for providing informational services and can be accessed by all mobile handsets from the low end Nokia 3310 to the high-end HTC Sensation. Using IVR over a telecommunication network is expensive since it uses the normal voice channel as compared to SMS or USSD which is text based and cheaper.
Java 2 Micro Edition (J2ME)
J2ME is an industrial strength and mature platform for building wireless and multimedia applications on mobile devices. It is supported on almost 80% of mid-range to high-end mobile devices. J2ME can be used to create a secured client application for providing informational services as well as effecting transactions.

Short Message Service (SMS)
SMS is a communication channel for the transmission of short text messages to and from a mobile phone or IP address. Messages are limited to 160 alpha-numeric characters. SMS uses the store and forward approach; where messages are stored before they forwarded to the recipient. Although SMS is not secured, it is very affordable and suitable for providing informational services. SMS is available on all mobile handsets.

Secured Short Message Service (SSMS)
This is SMS over a secured communication channel. Because of the additional security it can be used to provide informational services as well as transactional services. However it is not supported by all telecommunications operators.
Figure [ 1 ]

Unstructured Supplementary Service Data (USSD)
USSD is a protocol used by GSM cellular phones to communicate with the service providers. USSD can be used for WAP browsing, prepaid callback service, mobile-money services, location-based content services and menu-based information services. USSD messages are up to 182 alphanumeric characters in length. Unlike SMS, USSD messages create a real-time connection during a USSD session. The connection remains open, allowing a two-way exchange of data. This makes USSD more responsive and interactive than SMS. USSD is accessible from the low end Nokia 3310 to the high end HTC Sensation and can be used for all mobile banking transactions.
SIM Application Toolkit (SAT)
SIM Application Toolkit makes use of certain features of the GSM standard to create menu based value-added services. SAT enables a higher level security through identity verification and encryption, which are necessary for secure electronic commerce (e-Commerce).

Wireless Application Protocol (WAP)
WAP is a standardized set of communication protocols that enables wireless devices, such as cell phones to access the Internet. WAP is available on all medium to high-end mobile handsets and enables handsets to access email, News Groups and instant messaging. Since WAP provides reliable security it can be employed by J2ME and other Mobile Application clients to effect transactions and provide informational services.

Mobile Finance for the Rural Environment
About 60 to 70% of the population of Ghana resides in rural areas. Majority of these rural folks are unbanked and earn low incomes.
Mobile Finance will be suitable and more attractive for the low income and unbanked population in the rural areas because it is more affordable than traditional financial institutions and is easily accessible within their vicinity.
Mobile Finance solution
A comprehensive mobile finance solution for the RCBs and the rural environment should be limited to the functions of mobile accounting and mobile information services since neither Apex Bank nor the RCBs engage in brokerage services. It must be appropriately tailored to meet the challenges of the rural environment.
From a technological standpoint such a solution should include inbuilt support for the following * SMS and USSD to be accessible by all Handsets(from Nokia 3310 to HTC Sensation) * J2ME and WAP for the corporate clients of RCBs * Flexible and Customizable to enable creation, setup and branding of products for RCBs * Seamless integration with multiple instances of T24 and provide points of extensibility to enable integration with other applications * Cellular interface for Seamless integration with all telecommunication providers * Cryptographically strong encryption mechanisms to secure and safeguard the integrity of transactions * Customer and beneficiary management. * Merchant management * It should integrate with existing email server to send email notification * Possible integration with ATM and POS(E-zwitch)
Products
Products that can be implemented on such a solution includes but is not limited to * e-Statements
Customer account statements sent via email on monthly basis * Account Transfer * Real-time balance enquiry * Mini Statement * Block lost ATM cards * Cheque book request * Cheque book request status * View Exchange rate * Susu collection through the use of scratch cards * Airtime top-up/Recharge Purchase * Utility Bill Payment * Send alerts when the following events occur.
Debits and credits that hit an account.
A cheque is bounced.
Seven days prior to the repayment date of a loan installment * Dual Authorization of Transactions * Bulks SMS to customers * Standing Orders * Person to Person (P2P) Payments * Investment Alerts
Notify investors on rollovers, maturity and payments
Stakeholders
The delivery of mobile finance service to a consumer involves the participation of five primary players; a bank, a mobile network operator, a mobile banking technology vendor, merchants and customers. Merchants are of particular interest to us because they are the frontline agents that will interact with the customers on daily basis. Apex and the RCBs need to identify credible and business friendly merchants to partner in this Mobile Finance endeavour. These merchants should to be adequately trained and resourced to play their roles as customer service and frontline agents. Recommendations * Any Mobile Finance solution that will be implemented for Apex and the RCBs must support SMS and USSD, which in terms of technology, are the lowest common denominators that can work on all mobile handsets. * Since customer care, service quality and cash management depends on frontline agents like merchants, retail outlets as well as staff of RCBs, adequate steps should be taken to ensure that they are trained and well equipped to guarantee the success of any mobile banking product. * Issue out Request for Proposal (RFP) to vendors. * Invite responsive vendors to demonstrate their products.
List of Mobile Finance software vendors and their products VENDOR | PRODUCT | CoreNett | MADIBA | CR2 | Bank World Mobile | mTRANZACT | mTranzact Mobile Platform | Net Concepts | Business Mobility | Temenos | Arc Mobile | Afric Xpress Ghana Ltd | txtNPay | M2M Group | e-Payment | ITSS | e-Banking | DreamOval | ORBanking Suite |