Following up on last week's Business Times story regarding the Draft Mobile Banking Guidelines N0.1 of 2010, issued by the Central Bank of Sri Lanka (CBSL) and made available on its website's homepage for the public to comment on by October 18, an attempt was made by the Business Times to find out what representatives of the pertinent industries had to say about the issue.
Speaking to the person identified in the draft document as the recipient of public comments, CBSL Director of Payments and Settlements Ms. R.B. Weerasinghe; the Business Times was notified the uploaded draft was discerned from regional cases. However, it was also revealed prior consultation was not carried out with outside parties, including banks, telcos, etc., before the draft was made public.
Further noted was comments from representatives of all parties would be accepted up to the October 18 deadline set by the CBSL, which would be followed by a review of comments leading to a revised draft. No information was given as to how long this process would take or whether banks would be contacted should their comments not be received in time.
As such, the Business Times contacted banking and telecommunications sector personnel to determine industry opinion regarding the content of the CBSL's Draft Mobile Banking Guidelines No. 1 of 2010. Or at least find out what areas of mobile banking proved to be of special concern to the relevant industries.
While not yet familiar with the details of the draft document, officials at a local telco suggested that of particular concern to telcos were any requirements associated with offering services in conjunction with banks. Since access to customer accounts was not always easily forthcoming, any standard put in place by the CBSL had to be able to function separately from bank accounts otherwise telcos could not offer their services in a manner suiting their customers.
Meanwhile, Bank of Ceylon Head of Research & Development, Dr. Lionel Siriwardena, suggested the custodian account base facility should be more greatly considered since this area opened up a number of issues, especially as service providers did not have the expertise to identify irregularities that came into play with money laundering, etc. He also noted that customers may lose confidence if mobile banking went beyond the control of banks, which would also be further impacted by security concerns as other service providers did not have the same competency or goodwill in this area when compared to banks.
One industry source, speaking on the condition of anonymity, noted the following: "Guidelines do not give specifications for tier 1 and tier 2 services. Tier 1 implies that it is less secure and hence would be restricted from doing fund transfers. Ideally tier 2 should have encryption and dual authentication to be fully secure".
"Custodian accounts would need to provide a receipt from a [Licenced Commercial Bank] in real time to ensure we do not open the flood gate for 'Sakvithis'. This is a essential improvement. The Reserve Bank of India has banned non bank payment and systems. [CBSL] had severe restrictions with caps on transaction value and [CBSL] certified agents. It appears that [CBSL] has turned 180 degrees in this regard and paving the way for non banks in mobile banking. Let's hope they do not live to regret this decision", added the source.
The source also suggested that they could not "see how the banks would facilitate non banks by providing custodian accounts. Telcos would have to find [quack banks] to entertain them".
As to the benefits of a properly thought out mobile banking platform, it was suggested this would lead to easier access to withdrawals and payments, particularly no queues or time and place restrictions as this process would be offered on mobile phones. Also noted was "should the product have encryption and dual authentication, it is as safe as it gets and more safe than most Internet sites.”
It was also further revealed that "transaction cost of a bank is the total cost of operating branches divided by number of transactions done. This is approximately Rs. 30 to Rs. 40 depending on the bank. [Using] the mobile phone would reduce this to about Rs. 0.35. Should mobile become a mainstream method of transactions, there would be reduced demand on branches and banks could reduce their operating costs. This would [lead to] higher interest rates to depositors such as pensioners and facilitate lower interest rates to borrowers who create employment through investment".
The case of e-Channelling, where this company's profitability was significantly reduced due to excessive cost taking by the associated mobile operator and bank was also highlighted as a scenario where both service suppliers had got too greedy and "[killed] the goose that [laid] the golden egg".