Telecom Financial Inclusion Convergence

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

RBI has issued guidelines for pre-paid payment instrument, under the Payment and Settlement Act 2007.

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 But no cash can be withdrawn from ATM.
• Open: These cards can be used in any establishment as well as cash can be withdrawn from ATM.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.