(Analysis)

Red signal to speeding mobile payment gateways

It's like one of those stories where the referee who was supposed to flag off the players was caught napping even as the more aggressive of the competitors got off the start line. Last month, when the Reserve Bank of India (RBI) announced that those banks which had started mobile payment facilities would have to put them on hold, the mobile payment gateways off on a gallop were stopped in their tracks. After months of getting their infrastructure ready, this is the last thing payment gateway companies would have wanted; yet, no one is openly complaining about the RBI's mandate.

For comparison, while RBI released its draft guidelines on mobile payment as recently as June 2008, the financial regulatory body of Pakistan did so in 2006. Most of the developed economies have institutionalized statutes on mobile payment more than a year ago.

Refraining from being openly critical of the regulator, payment gateways are expressing their discontent in other ways. "Clearly, the uptake of mobile payments is slower than anticipated since the banks have not started promoting the service to customers," says Sanjay Swamy, CEO of mChek. He is quick to add that they have been seeing a very strong demand from the consumer side and that they will be able to serve them once the guidelines come through.

In reality, banks and other financial institutions have been as jolted as the payment companies. One of those affected is ING Vysya Life Insurance, an insurance company. "We are in a fix as to what to do because we are currently already using the mobile payment facility," says Sulocha P., Deputy Manager-Collections with the company.

Other mobile payment companies are putting up an optimistic front. Awaiting the arrival of the final guidelines, Balachandran Unni, VP, Business Development with Obopay's India operations, says that they have been using the time to plug the gaps that might arise between their current security infrastructure and the one that is likely to be mandated in the final guidelines. "We want to ensure that we are 100 percent compliant," he says.

In its draft guidelines, RBI had noted that while under the present regime there is an obligation on banks to maintain secrecy and confidentiality of customers' accounts, in the mobile payments scenario, the risk of banks not meeting their obligations is high. Despite all reasonable precautions, RBI noted, banks may be exposed to enhanced risk of liability to customers on account of breach of secrecy, denial of service etc., because of hacking and other technological failures. "The banks should, therefore, institute adequate risk control measures to manage such risks," the regulator advised.

- Aditya Kelekar