Reversing the digital divide Continued from last week

Viraj Mudalige

Is it doable? Yes. Is it risky? Yes, if you do not have expertise to identify the threats and vulnerabilities. We have addressed all the required areas to offer you secure on-line real time banking where the customers' mobile phone is the device used.

It is a shift from bank owned device to customer owned device to harness high penetration rates to reverse the digital divide in banking.

As Thomas Friedman explains in his book "The World is flat" we are now in the version of Globalization 3.0 where the individuals like you and me and our clients are interacting with each other across the country borders seamlessly.

Technology in use, the operating platforms, application software, brand and the model of the mobile phone, network service provider are immaterial for you to interact with somebody else.

Such aspects too should be brought into mobile phone banking solutions to make them popular and worthwhile for the stakeholders.

Is this the right time for mobile phone banking?

It is a known fact that the telecommunications industry which was highly lucrative years ago is now threatened by disruptive technologies. Voice calls are offered through much cheaper channels making future prospects for the industry very bleak.

This can obviously lead telecom firms encroaching to other industries such as banking and it has been happening in several countries.

As the focus of this article is not the threats to banking industry or the effects of disruptive technologies across industries, we would limit our discussion with this point i.e. a threat exists and pro-active approach is required by banks before it is too late.

New mobile phone banking solution suites developed by local technology solutions providers are available for banks operating in Sri Lanka to leverage the extensive penetration and consumer base of mobile phones.

Such solutions will enable financial Institutions and Banks to bridge the digital divide in places where traditional banking services are limited or nonexistent, allowing the extension of facilities and services to consumers beyond traditional markets and geographical boundaries. Needless to say that banks should evaluate the track record of such solutions providers, in-house competencies developed, financial stability, standards maintained, recognitions received and successful implementation of similar projects.

Building of trust on the devices is very important in any financial solution. The EDC POS terminal is a payment device and it is designed and certified for payment transactions. However, the mobile phone is designed primarily for communication purposes and not for secure financial transactions.

The challenge to the technology service provider is to convert the customer mobile phone to a payment device. Local regulators and international authorities have identified the following areas as very important in converting a mobile phone into a transaction device.

* Foolproof user authentication via multi-factor authentication techniques

* End-to-end encryption of sensitive transaction data.

* Encrypted session management for all transactions.

* Comprehensive Audit Trail and transaction event logging facilities.

By using consumer mobile phones to facilitate secure electronic payments, financial institutions and banks are offered significant cost savings, as there is no need for up-front investment to purchase hardware devices or provisioning telecommunications infrastructure.

Instead this mobile phone banking solutions can leverage existing consumer mobile handsets, as well as existing banking and telecommunications infrastructure to facilitate secure payment transactions using mobile phones.

A mobile phone banking solution designed and developed as per the regulatory guidelines facilitates the highest degree of transaction security while complying with industry standards.

The solution can be implemented irrespective of mobile phone manufacturer, model or mobile telecommunication service provider. Furthermore, all services provisioned by such solutions could be offered at no cost to mobile telecommunication service providers. A typical mobile phone banking solution will comprise of following modules:

* GPRS Mobile Banking Module

* SMS Banking Module

* IVR Banking Module

In view of the high mobile penetration rates prevailing in the country, isn't it sensible for banks to tap this market of millions of customers who could be offered ubiquitous banking facilities as cost effective locally developed ICT solutions are available with pioneers of banking solutions? With the rapid evolution of technologies today's market dominance is quite temporary and next year would be too late to plan as competitive landscapes are changing so fast leaving no room for re-active type approaches. 70 percent of the local population is digitally connected.

Be pro-active and act now is the message I would like to leave with the bankers to end this article prepared.

Concluded