US-based Obopay will shortly unveil India’s first person-to-person mobile payment service, working with an initial six banks in the country. Later this year, building on Obopay’s existing base in the US, the service will be extended for US-to-India remittances.
The Obopay service has been undergoing live trials and, as well as the six banks (which Menon declines to name at present but span public heavyweights and private sector players), it has agreements which cover two of the three major ATM networks. Obopay is providing the settlement engine, with this initially supporting real-time bi-lateral settlement (cross-bank and cross-carrier), with multi-lateral under development. ‘It has taken a little while to do the plumbing,’ says Menon. He joined Obopay at the start of last year, having previously been CIO at Yes Bank (he first encountered Obopay when in this role, when the Indian bank was trying to set up an e-wallet with Times of Money, an initiative that was blocked by the regulators). That ‘plumbing’ includes a call centre; not including staff here, Obopay already has 70 or so employees in India.
Also available from the start will be bill payments (with 3000 utilities) and mobile top-ups. As in the US, the services will support SMS and will use Interactive Voice Response (IVR) rather than PIN. Also as in the US, it supports both GSM and CDMA.
Remitters will have the service linked to their debit accounts and need no more than the recipient’s mobile number to make a payment. Small merchants will be treated as a person, so will receive payment on their mobile phones. Merchants want the real-time aspect because cash is also real-time, (Visa and MasterCard take a few days and incur two to two and a half per cent in charges). Many merchants will still prefer cash, wanting to stay in India’s ‘huge parallel cash economy’ but many others will be attracted in part by economics – interest rates at nine to nine and a half per cent, inflation between five and six per cent, ‘so having loose cash is a bad idea’. Also likely to be enthusiastic are microfinance players, where cash collection and disbursement are problems – a couple of the partner banks will use it in this area.
The cross-border remittances service is likely to be launched in the fourth quarter, allowing users in the US to send money to recipients in India. In the US, Obopay has worked on a co-branded service with Citibank, has a white labelled pre-loaded MasterCard, and has its own branded service. The recipients in India will not need to be registered with Obopay, although this would remove the need to wait one or two days while the funds go through the clearing system. However, for this cross-border remittances activity, recipients will need an Indian bank account, for regulatory reasons. A fair number of Obopay’s Indian employees are in the fraud and risk management team.
The Reserve Bank of India is very tough on KYC, he adds, including applying checks to existing account holders. For remittances from the US, there will need to be KYC and OFAC checks on the receivers, with these checks done for every transaction, hence the need to do account-to-account transfers, at least at the outset.
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