Dial M for Money

Sam Pitroda foresees a banking revolution in your cellphone

Most of us know Sam Pitroda as the man who ushered in the first telecom revolution in India and as Rajiv Gandhis telecom tsar of the 80s. But,as he reminds us in the preface to his new book,he had actually made a name for himself in the 70s by inventing the digital diary commercialised by companies like Toshiba,Texas Instruments and Casio,which helped rid many people of their cumbersome paper diaries with names,addresses,contact numbers and appointments.

That was then. The inventor-entrepreneur in Pitroda is now focused on technologies of the future. The March of Mobile Money,co-authored by business associate Mehul Desai,is a glimpse into the future,a time where technological advances in telecom and internet and economic necessity will lead to a convergence between three key industries: telecom,banking and retail.

Pitrodas own contribution to that convergence is the development of a digital wallet,which will make credit cards and other payment mechanisms in their present physical form irrelevant,and will instead enable consumers to simply conduct all transactions digitally,over a mobile phone with mobile money. The savings made by eliminating various transaction costs will be significant. And the very nature of money could change if we begin spending through mobile phones.

The big problem,of course,is achieving scale. And,of course,overcoming vested interests,mostly in the transactions industry. Pitroda and Desai try to figure out ways to overcome those problems. The book deals with these possible solutions and the story so far. It is interesting and impressive in its own right.

The authors delve into the history of telecom,banking and retail in three well-written chapters. They start from Alexander Graham Bell,for example,and arrive at the present,highlighting all the massive technological leaps made in each industry. There are fascinating case studies of path-breakers in each industry; BT in telecom,Citibank in banking and Walmart in retail. And as might be expected from the technically-accomplished Pitroda and Desai,there are solid chapters on the evolution of the technology of smart-phones and digital wallets.

Where the book is more uncertain is in the final two chapters,but particularly the last one. Pitroda and Desai expect the revolution in mobile money to unfold in China and India primarily in the form of mobile banking,partly because the number of mobile phone users in these countries exceeds the number of those who own bank accounts or use the internet. In the West,on the other hand,people will use the internet more to conduct transactions.

The problem of course is that the regulators in India ,RBI and TRAI,have been risk-averse and locked in turf battles over the rollout of mobile banking something that could delay it for a while. The authors give too much credit to the role that the regulators have played so far. Curiously,they make no mention of the UID programme,which might hold the key to the successful roll-out of mobile banking in India by providing the foolproof method of authentication so important for mobile banking.

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However,this book is really about a big idea,not policy detail,and Pitroda at least gets his ideas right. Just for that,its worth a read.