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Mobile banking fast replacing cash and cheque transactions

While cash and cheque transaction are already at half the level of 2003, driven by plastic money and online transactions, mobile banking is going to be the mainstay of this trend going forward.

Financial transactions involving cash and cheque are gradually diminishing with currently only 49 per cent of all deals being carried through this medium. This is happening due to the increasing adoption of alternative channels like credit and debit card, ATM, online transactions and now the mobile.

According to a report by Boston Consultancy Group, the share of traditional cash and cheque-based transactions is to fall to a low 15 per cent by 2020.

Payments through cash and cheques had accounted for a whopping 94 per cent of the total transactions in 2003 and the share has been on the down-slide ever since with currently only 49 per cent transactions are being done through the medium.

While other channels like ATMs, points of sale (Credit card/Debit card) and Internet banking have been steadily increasing their shares over the years, the fastest growth is going to come from the mobile phones, driven by increased adoption of smartphones.

“Mobile phones, propelled by and the smartphone technology, will emerge as an undisputed winner by 2020, potentially accounting for 20-30 per cent of the total transactions,” the report says.

Almost all the banks in India and abroad have launched their phone banking application, which not only allows people to transact in money but also offers services like bill payment, ticket booking, cheque book request etc.

The reason for the interest of banks is two fold – it reduces the cost of transaction, for instance the cost of facilitating ATM transaction is just 27 per cent of the total cost of establishing a branch. Mobile transaction further reduces the cost of banks.

The second reason is that mobile banking offers additional conveniences to the users which helps in retention initially and later on is considered as a basic service by those who have already used such services.

For the end user also, mobile transactions are much cheaper as it helps reduce travel cost and time (which is in short supply these days), and therefore presents a win-win situation for both the bank and its customers.

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