have realized the value proposition and the only sustainable business model is where these stakeholders work together to deliver true value to customers and effectively share the costs saved and new revenues generated. hence, it is imperative that all the three while being cognizant of their strengths, do not lose sight of their weakness and find ways to integrate their offerings without losing their individuality. the broad regulatory approach of rbi has been to permit such entities to provide payment services that are fee based without access to funds of the customers. customer service issues have been pain points in efficient delivery of services. the use of agent networks and the use of sms channel mainly for transactions have associated customer service issues. 11. in particular, i would like to mention some of the important measures taken by the rbi aimed at customer protection mandating online alerts for all card - based transactions irrespective of the value or the delivery channel. this would include transactions effected through the mobile wallets. mandating a second factor of authentication for all card - not - present transactions based on information not available on the card. m - pin, which is mandatory, serves as the second factor authentication for mobile banking transactions. in case of prepaid instruments including mobile wallets issued by non - banks, an escrow arrangement whereby the issuers do not have access to the funds collected from the purchasers of such instruments. this also ensures that the amount held in the escrow account is protected from bankruptcy of the issuer and the card holder has prior claim over other creditors. payment system operators have been prohibited from entering into any agreement with an agent with an “ exclusivity ” clause preventing the agent from doing a similar business with another payment system operator. mandating minimum security standards for mobile transactions one of which is to insist on end to end encryption of messages except for small value transactions. f. how does india envision the goal of financial inclusion and inclusive growth? there are over 600 million active wireless telephone subscribers in india. reserve bank has acknowledged the importance of mobile banking channel as a critical element to achieving inclusive growth in india and has been taking several important steps, the recent being enabling the mobile companies to partner with banks as business correspondents. the twin challenge in our country would be to succeed in reducing the use of cash while encouraging the spread and use of mobile wallet and mobile banking to reap the full benefits of this ubiquitous product. the stance adopted by rbi is to restrict deposit taking activity to banks while promoting the branchless banking

k c chakrabarty : convergence of mobile banking, financial inclusion and consumer protection - trend remarks by dr k c chakrabarty, deputy governor of the reserve bank of india, at the financial consumer protection network ( finconet ) meeting, oecd headquarter, paris, 9 november 2011. * * * assistance provided by ms radha somakumar in preparation of this address is gratefully acknowledged. ms ursula menke, commissioner, financial consumer agency of canada and chair of the international financial consumer protection network ( finconet ), distinguished participants, ladies and gentlemen. 1. i thank the finconet for including a special session on financial inclusion, mobile banking and consumer protection in today ’ s agenda and inviting me to share the indian perspective. further, given the extent of financial exclusion that prevails in india where out of the 6, 00, 000 habitations in the country, less than 30, 000 have a commercial bank branch, only 55 % of the population have deposit accounts, and the proportion of people having any kind of life insurance is as low as 10 per cent, the rbi and the government of india are in recent times aggressively focussing on financial inclusion as one of the most important drivers of inclusive growth. 2. in a technology driven financial sector scenario, although intermediation is probably more tiered, it should eventually result in lower costs, greater financial inclusion and customer protection. customer protection becomes more important and perhaps more difficult due to such an intermediation. given this scenario, the rbi makes a conscious evaluation of the customer service and financial inclusion issues while approving any new innovation in the financial sector in general and payment system in particular. the fact that the rbi had appointed a high level committee on customer service in banks headed by mr. m. damodaran and representations from both the industry and the public to examine the entire gamut of customer protection issues indicates the importance which we attach to customer service and protection. the committee incidentally has come out with more than 100 recommendations for our consideration. 3. let me now turn to specific issues i have been asked to speak on viz. mobile banking, financial inclusion and consumer protection. a. bank - led vs non - bank led model of mobile banking 4. we were confronted with the question “ which model of mobile banking should india go for – a bank led model or a non - bank led one? ” protagonists of the non - bank led model referred to the success of such models