India’s RBI Hobbles Mobile Payments

While India has the potential to be one of the world’s biggest markets for mobile payments, at the moment the country’s central bank is creating barriers to mobile-payment adoption instead of removing them, according to a blog post by Ensygnia.

The latest issue: The Reserve Bank of India (RBI) has prohibited mobile operators from using their existing national retail networks to offer mobile payments. Instead, operators must set up new channels and networks for a mobile payment offering, which raises costs. Bharti Airtel and Vodafone have already had trouble getting their mobile wallets off the ground because of the strict regulations in India, and these new ones aren’t making it easier.

The new regulations are coming at a time when cheaper Android smartphones are becoming more common in India, and mobile Internet traffic now outweighs desktop computer traffic, according to Amit Agarwal, VP of Amazon India.

Snapdeal co-founder Kunal Bahl has predicted that “within the next 12 months, over 75 percent of our orders will be on mobile,” while Mausam Bhatt, senior marketing director of Flipkart, said that less than 10 percent of his company’s online business came from mobile a year ago. “Now those numbers are greater than 50 percent for us,” he said.

That suggests the demand is there for mobile banking and payments in India. The question is how quickly and easily government institutions will let the necessary platforms develop.