Mobile Money Transfer using Talking Time as Currency


By Aditya K S and Arun Viswanathan,


Microfinance Focus, January 18, 2012: India is a country with well over 1.2 billion people and growing. While the population growth is still a problem over the last few decades, there is a change in point of view now. The increasing percentage of the working population has tilted the population problem in a manner the developed countries look at India with envy. The demographic dividend is paying off with the GDP growth remaining in high single digits, even during the phase when the developed world is fighting a hard battle to stay in positive territory. There has been huge wealth creation in the urban areas where productivity has enhanced people’s earning power. With increasing prosperity in bigger cities and large towns, the influx of people from rural habitations seeking a better life is ever growing. This clearly is creating a perceptible difference in prosperity between the rural and urban habitations. This digital divide is a problem that modern India’s administrators and economists face the most.


Out of the 600,000 habitations in the country roughly 5 per cent only have accessibility to a bank. Only around 40 per cent of the population has a bank account. This ratio is much lower in the country’s north-east. People with debit cards and credit cards comprise 13 per cent and 2 per cent respectively. This means that there is effectively no means of an organized financial sector to half of the population in our country.


Even now, nearly 70% of India lives in the rural areas.  But the better earning opportunities in cities are attracting new inhabitants each day, at a rate that has not been witnessed in India before. The Finance Ministry and RBI have been trying to bring the idea of financial inclusion in the operations of public and private enterprises. This is a slow process, whose success depends on a number of factors; some diametrically opposite to the normal profit-making intentions of the financial service providers. The banks are still very comfortable with the opportunities that are available as part of the growing urban population. This is creating a lack of incentive for the banks to innovate services and products for the rural population.

This means that the rural population at large will have to manage their needs with the current set of financial resources and facilities until, promised ones reach them eventually. The waiting time arguably is going to be years. Of all the important facilities and services, the one to transfer money is the basic. With ever growing migration into urban areas, the ability to transfer money safely using an inexpensive and simple tool is valuable.


Following are some of the critical situations where such a money transfer tool is invaluable


When someone comes to a city to look for job, from a place with lesser opportunities; there is always part of his/her family who has to be supported by the earnings of the person in the city and hence needs to transfer money back home quickly with minimum cost

The lack of banking facilities in smaller habitations combined by the ability/mobility of the family back home to reach and use such facilities

Dependence on informal human channels, to transfer money in cases just described above.

From the above description of the problem there is a need to transfer money in a way that is
Possible in places where there are no banks (in all its forms like the co-operative societies, Self Help Groups that provide these features etc.).
Simple enough to use by most people needing little or no training.
Dependence on middle-men/brokers is reduced or eliminated.
This article proposes the use of SMS based minutes transfer as a mode of transferring money to far flung regions of the country without banks or an informal(read people and trust based) money transfer channel. This particular type of fund transfer is usually small ticket, involving a few hundred rupees at a time. It should be simple and free of bureaucratic interferences, making it accessible to people who do not have the ability to read/write and don’t have paper proofs (required by all banks). The idea presented below is probably being used in at least some form, even as we write about it today. Hence, we don’t claim to be the first to use it practically. The ingenious Indian mind has thought about it for sure. What we propose is very small changes to the facility that is available today at different levels in the value transfer chain. We believe this will make it a viable option. The proposal covers a mode of money transfer and also looks at the various challenges that this mode might encounter. It then proposes a few solutions and some guidelines.

Telecom revolution


It used to take long waits and street smart ability avoiding the red-taping bureaucracy, to get a telephone connection just 10-15 years ago. From those days of waiting for years to get a telephone connection to the present times, there is a huge difference. A careful look at the streets in cities indicates the shrinking number of public telephone booths. Clearly signifying the lack of a public telephone service, everyone seems to have a cell phone.


The mobile revolution in India has set a scorching rate of growth. Even after the urban areas attaining more than 100% teledensity, the growth of the overall teledensity has been consistently surprising. The table and chart below show the growth of mobile phone users in India in the last few years.


Number of Mobile Phone subsribers

Growth in mobile subscribers


Scope for Growth in telecom sector


The urban teledensity in India is well above 1 person. At least from the number of subscribers per person, the urban areas seem saturated. That brings us to a question where will the next phase of growth come from and why are so many mobile players vying for a business in India?


Rural markets are the answer to this question. The table below shows the teledensity in urban and rural areas over the last 5 years. It shows a clear discrepancy in the penetration levels in urban and rural areas.

growth in mobile
While urban areas have more than 1 connection per person, there is a huge potential for growth in the rural areas. And that is the reason why the telecom companies to reach out more and more habitations in the rural areas. As you read through, this fact further strengthens the feasibility of the proposal.
Mobile phones for money transfers

Mobile Payments [3] is a new and alternative method of payment in comparison to the traditional methods such as cash, cheque, credit cards, etc. Through this method, a user can use an existing mobile phone to pay for real world goods/services or transfer money to another user. The transfer/payment of money can be done through a SMS, thus allowing even a low-end mobile to be used for this method. Using an existing mechanism such as SMS ensures that this feature can be used across any mobile technology and no new mobile software is required to be installed.
This method is currently bank-led in India.  Only Banks are allowed to provide this service in collaboration with telecom service providers [7]. This service however requires that the user be registered for availing it and should have an account with the providing bank. An umbrella organization, Mobile Payment Forum of India is responsible with deploying mobile payments in India [9].
The process currently provided by some banks in association with mobile service providers are as follows:
The customer needs to create a MMID which is a 7-digit number which identifies the bank and the account to which the mobile number has been mapped to.
This allows a single mobile number to be linked to multiple accounts. It also serves to reduce erroneous transactions when a customer inadvertently enters an incorrect mobile number.
To make a payment, an SMS with the receiver mobile number and the transfer amount has to be sent through the SMS Gateway of the bank to which the customer is subscribed to.
This results in transferring of the amount from the sender’s bank account to the receiver’s bank account in the backend.
Notification about the transaction on its completion is sent to the involved parties
A successful transaction will be notified by an SMS to both parties.
The disadvantage with this approach is that such a facility needs to be offered by the banks. The users of this feature would need to have a bank account to avail it. These, we believe, are huge impediments to the goal of making very small fund transfers to far flung regions of the country. Especially to people who simply do not have the means to open a bank account or see the need for one.
Mobile phones for minutes transfer – an alternative approach
An alternative to the above mentioned approach involves using the existing mobile infrastructure to transfer money from payer to payee. The proposal is to use the existing infrastructure with very few changes so that it needs little or no intervention for its successful adoption.
The following is an illustration of how it would look.
A transaction is initiated by using the minutes transfer application with the following details:
Mobile number of the payee
Amount of minutes/money to be transferred
A user (say User-1) pays physical currency to a mobile operator franchisee to buy talking time (in minutes). While buying, a mobile number (of User-2) can be specified to which the corresponding minutes will get allocated. The minutes get allocated to User-2 through the existing means available with the mobile service provider. User-2 should now be able to transfer an amount to another user (e.g. shopkeeper) in exchange for goods bought.
This process can happen through the same application or a wrapper application that can work transparently over different service providers. An option should be provided for a user (e.g. the shopkeeper) to convert the minutes back into physical currency. This would allow the transfer flow to complete a full circle and enable wider acceptance. We suggest a central organization such as the MPF or Government managed Telecom Company to be such an overseeing authority. The minutes purchased by such central organizations could then be sold to a Mobile Virtual Network Operator (MVNO). The MVNO do not have physical infrastructure and buy minutes from all the other service providers which is then bundled and sold under their brand name. By working out a payment structure this transfer from money to minutes and then back to minutes can effectively form the complete circle required for the proposed fund transfer.
The table below summarizes the mobile virtual cash transfer process.
mobile as money
Advantages of this process are many-fold:
The existing mobile service infrastructure can be used
Since the means of communication is SMS, even a low-end mobile can be used
Does not require installation of mobile apps and hence can work in any mobile operating system environment
SMS is one of the most used functionalities. There is no learning curve even for people who are non technical Mobiles have a reach even at the remote corners of India where banks are not yet established.
Potential Challenges and possible Solutions
Despite the benefits, we could think of the following challenges for the mobile payment solution using minutes [4], [10].
Security - Security is a major concern in any financial transaction. The same applies in case of mobile based transaction as well. The information transferred across the mobile network should be sufficiently encrypted.
Scalability - The existing infrastructure should be capable to scale-up to match the performance in case of increase in customers and usage.
Ticket size – This should be restricted to small ticket transaction to avoid it becoming a safe haven for black money its potential money laundering threats
Reliability - The transactions should be reliable in that any transaction should be complete and should not result in loss of money.
Regulatory and supervisory Issues - The service should be regulated and supervised by a central organization to oversee its proper utilization.
Inter-operability between telecom operators - The mobile minutes of one mobile service provider should be mapped with other service providers to avoid loss of value of the minutes.
Clearing and settlement - A robust clearing and settlement infrastructure that operates 24x7 would be required to support a nation-wide mobile banking framework
Despite a huge need for fund transfer to the rural areas in India (akin to the dollar remittances from all over the world to India) the lack of banks and financial service institutions is a glaring reality with no immediate solution in sight. The telecom boom in India has outstripped the reach of the banks making it an ideal vehicle to carry this service. This proposal expects minimal changes to the existing infrastructure. It provides incentives to all players in the value chain. The accessibility and reach is ever increasing with the continued expansion of the telecom networks, thereby extending the service continuously. All these features could indeed be a confluence of factors to help the vast population avail the valuable service of fund transfers over the SMS.

1. TRAI Report  -
2. RBI Report –
3. Mobile Payment, Wikipedia Entry –
4. Challenges of mobile solution
5. Example
6. Problems in telecom companies in India
7. Mobile Payments in India
8. Google Wallet
9. Mobile Payments Forum of India
10. RBI – Mobile Banking Transactions in India
Author Profiles:

Aditya K S is a Consultant with the Financial Services and Insurance vertical at Infosys Ltd. He has over 9 years experience in business and technology consulting for multiple domains, ranging from Insurance, Annuities, Portfolio Management, Brokerage, and Capital Markets. He can be reached at
Arun Viswanathan is a Technology Architect with the Cloud Computing Centre of Excellence at Infosys Labs, Infosys Ltd. He has over 9 years’ experience in Java and Cloud technologies. He has been involved in design, development of applications and providing technology consulting services to clients in the Financial Services domain. He can be reached at

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Mobile Money Transfer System

I think this is a very interesting idea. Have you seen what is happening in Kenya with the MPSEA solution? It allows for money transfer without banking but requires participating vendors. There are other solutions you should look at, maybe this

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