Mobile payment is so far the most popular mobile application and numerous mobile payment applications are available in mobile apps marketplace. Every day, thousands of mobile users perform mobile payment transactions while booking tickets, making online purchases, making tax or bill payments, playing games or registering online for any educational or other services. The fund required for making mobile payment is either supplied by a bank, by mobile service provider or a third party financial institution. Accordingly we have bank-led mobile payment or non-bank-led mobile payment.
In bank-led mobile payment, users must have a savings account in the bank and the mobile device must be registered beforehand in the bank. At the time of making payment using the mobile device, user has to enter a PIN/password (provided by the bank) and after successful verification of the PIN/password, the payment transaction is performed. The amount will be debited from the user savings account and the bank will provide the necessary security arrangements to protect private and sensitive user information against any fraudulent tampering attempt. However, a prior contract has to be made with the mobile network operator so that the payment instruction can traverse through the mobile network towards the bank payment gateway. All the leading banks such as SBI, Axis bank, ICICI bank, PNB etc., offer mobile payment service to their customers.
In non-bank-led mobile payment, banks or other financial institutions such as credit card issuing banks are totally bypassed. The fund is supplied either by the network service provider (under which the mobile device is registered) or a mobile payment service provider which is a special type of non-bank financial institute that specializes in mobile payment. The user, once registered under a mobile service provider (such as Vodafone or Airtel) can make payment using the mobile device. The fund will be supplied by the mobile network operator which will pay directly to the merchant. Later, the amount will be added to the monthly bill of the mobile user and thus the money is recovered from the user. Examples of such service are Airtel Money, Vodafone mPass.
In mobile payment service provider controlled mobile payment, the user will have to open an account (mobile wallet account) with the payment service provider and keep some money in the account. The mobile device will be registered with the service provider and PIN/Password will be provided. Users will be able to make payments using the mobile device and the amount will be debited from the mobile wallet account. Using this service user can transfer money from one wallet account to another wallet account and also can withdraw money from wallet account from a nearest wallet outlet. Examples are m-Pesa, Paypal Here.
The main advantage of non-bank-led mobile payment is the user doesn’t have to open a bank account in order to make mobile payments. It becomes particularly useful when the user is travelling in a foreign country where he/she may not have any savings account in local banks. Also, in developing countries having a huge population of poor people who don’t have the privilege of having a bank account, this model becomes very useful. For poor unbanked people, this model provides an opportunity to enjoy the facilities of mobile payment even if they don’t have a bank account.