M-commerce in India: feasibility and sustainability; the best medium for banking ubiquity across the country

Abstract

Mobile Commerce (M-Commerce) is a fast growing in India today. With the extent of Mobile penetration in India much higher than even television and fixed telephone reach, it is expected that M-Commerce will be the most economic way to reach the masses and carrying out business across the length and breadth of the country. According to Census of India 2011-12, out of 1.2 billion population of India, 0.8billion people are in rural areas that include to 600,000 villages (inclusive of both inhabited and un-inhabited villages). According to RBI, only 39% of the population has access to any form of banking and financial system in India. That means almost 50% of the total Indian population does not have any standard means to grow their wealth and economic status. RBI has been belaboring the mantra of financial inclusion for achieving high economic growth and transforming ourselves into a developed nation. In order to achieve this target, it is quintessential that every citizen has access to all means to invest and divest their money. However banks and other financial institution have found it very expensive to open and manage banks or ATMs in these sparsely populated rural areas. The transaction amount and transaction volumes in these places are not even sufficient to cover the operational cost of bank. Hence, there is need constant need to find innovative means to serve this financially excluded population and at the same time bring down the Cost to Serve (CTS) them. Mobile industry has been growing rapidly over the years. TRAI has long been driving Universal Service Obligation of telecommunication connectivity to all. Similar attempt has been tried out before for fixed line telecommunication. However, TRAI realized that cost to achieve that with fixed line is too high and has now shifted its focus to wireless (mobile) as the means to achieve it. Provisions have been made to fund supply of mobile devices and services across the country. This has been a huge success with stupendous growth of subscriber base in rural areas. Considering the above factors, we feel that mobile based banking and financing solutions are the way ahead for providing financial inclusion. However, given the demographics, cultural and socio-economic diversity of India, RBI regulations and Government guidelines, there has not been a clear and successful business model yet catering to and satisfying the needs of all the stakeholders involved. Feasibility and profitability are among the major concerns. In this paper, we have proposed the business model catering to the needs of all the stakeholders, followed by revenue model catering to the financials. We have arrived at Cost to Serve number for the banks and various ways to make the whole financial inclusion feasible and sustainable.