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Mobile banking: Govt banks fail to tap the cost advantage

If you go to a bank branch to make a deposit, the bank will incur a cost of Rs 50-Rs 60. If you withdraw cash from an automated teller machine (ATM), the cost for the bank is approximately one-fifth of that incurred through a branch. Needless to say, if you choose to transact from your desktop or mobile handset, the cost to the bank comes down substantially.

The fact that ICICI Bank – that spearheaded retail banking revolution in the country and widely credited for popularizing the EMI culture – has cornered one-fourth of the mobile transaction market is not particularly surprising. In June this year, ICICI Bank clocked transactions worth over Rs 1000 crore per month, up from Rs 350 crore per month about an year back. The mobile transactions market has grown by 3.5 times in the last one year.Other leading private sector banks like HDFC Bank and Axis Bank has also made similar gains over the last one year.

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But the story so far for the public sector banks has not been that encouraging, with the exception of State Bank of India (SBI) – that has clocked Rs 546 crore via mobile transactions in June. Some of the other state-run banks that are known to be tech savvy like Bank of Baroda recorded only Rs 35 crore transactions.

Baring SBI, all the 25 other government banks (including associate banks of SBI) clocked less than Rs 180 crore in June, less than one-fifth of ICICI Bank.

The private sector banks are now talking about minimum 100 per cent growth in the value of mobile transactions over the next one year. This kind of growth is possible since mobile banking has become a core part of their strategy which is evident from their marketing and communication strategies. In addition, these banks have tailor-made apps to suit different technology platforms like android, windows, iOS, etc for the benefit of the customer. These banks are attempting to make the experience of transacting in the digital world device agnostic and as a result, all the features that are available on the web, are mostly available on the mobile handset.

Government banks that have a higher cost income ratio than their private sector peers will be immensely benefitted if they harness technology. Also, at a time when they have the task to reach every village of the country to extend financial services, it will not be easy to meet their deadlines unless technology is adopted and optimised. 

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Manojit Saha is Banking Editor and reports on the RBI and banking industry from Mumbai

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