Telecom Financial Inclusion Convergence

Telecom, Banking and e-Governance are converging in India, thanks to policy intervention of the Indian Financial Regular, RBI. 

In its guidelines document, RBI defines four categories of pre-paid instruments:
Closed: These are the pre-paid charge cards issues by Telcos, commonly known as top-up cards.
Semi Closed: These instruments allows for paying for goods in pre-defined establishments having explicit agreement to accept the card with the Telco.
Semi Open: These instruments can be used in any establishment accepting Credit or Debit Cards. But no cash can be withdrawn from ATM.
Open: These cards can be used in any establishment as well as cash can be withdrawn from ATM.

The Telecom operators can only apply for Closed and Semi-Closed payment instruments. Thus Telcos are forming 51-49 Joint Ventures with Banking Institutions to overcome this limitation. In near future, all Telecom operators will have Open payment instruments

Telco Offering Phases:

A Telecom Operator can offer these services in three phases:
  • Phase-I : Semi-Closed Payment Instrument.
  • Phase-II : Semi-Open and Open Payment Instrument
  • Phase-III: Financial Inclusion Transaction Switch 
You can find the details of the business models of these offerings along with a Solution and Technology Architecture  in the white paper attached with this blog entry.

The Phase-III is detailed in the second whitepaper attached below.

Transaction Instruments

  • Mobile number is the most commonly used transaction instrument for the Phase-I (Semi-Closed). In some cases, like China Telecom, RF-SIM is also used, also known as "Touch & Go" devices.
  • In Phase-II (Semi Open and Open ) the user needs to transact on a regular PoS (Point of Sale) terminal that accepts Debit/Credit Cards. Thus an additional card needs to be issued. see proposed National Card Numbering Scheme.  
  • The third Phase involves Financial Inclusion and thus the Financially Included customers would need to transact using biometric enabled SCOSTA compliant contact-less cards needs to interact with UIDAI specified Micro ATM terminals. Further details are available in the attached whitepapers below.

Ashish Banerjee,
Feb 25, 2011, 9:43 PM
Ashish Banerjee,
Feb 25, 2011, 9:42 PM