Today as the concept of virtualization is being discovered, the entrepreneurs are thinking of every commodity to be virtual. Now the companies are applying this thought to make the wallet also virtual.

To make this concept to scale up, everyone is eyeing the mobile phone penetration. India has been witnessing the mobile phone penetration out beating the Internet penetration. So there are many players who are betting on mobile banking.

With Reserve Bank of India’s (RBI) sanction for mobile banking, the proactive stance is giving hopes for many companies like mCheck, Obopay, Mumbai based PayMate, which can work towards an ecosystem that is viable and can help people to use mobile phones, as virtual wallets - pay for goods and services.

As per the RBI’s draft, even those with the most basic mobile phones may be able to pay for transactions through their mobile in the future. RBI has permitted the use of SMS-based mobile payments for small transactions up to Rs 1,500 in its draft. The central bank has mandated that SMS be used for small-ticket payments up to Rs 1,500, thus making it possible for even the most basic mobile phone to be used for m-banking. It has also asked banks to make their mobile-banking services available across all phone networks.

Ajay Adiseshan, CEO, PayMate, the company with its less than 10,000 customers is betting on the niche market. Though the company is in initial stage with less than 10,000 customers, PayMate is able to aggregate 3000 merchants on their system in a very short period of time. Hence Adiseshan finds that this move is very compelling so that they can have more tie ups with the banks like IDBI Bank, Corporation Bank, Cosmos Bank, Bank of Ceylon, HDFC, Standard Chartered Bank, Canara Bank, ABN Amro. Moreover, it has also allied with telecom service providers like Tata Indicom and airlines like KINGFISHER to enable its subscribers to book flight tickets anywhere, anytime on the mobile. PayMate’s latest initiatives include utility bill and LIC insurance premium payments. One of the advantages of its services, the customer do not have to download the applications and tweak the handsets. Their services are available through SMS.

With its success of $9 million second round of funding from Mayfield, it seems the company is gaining traction. Though the Indian market is still in a nascent stage, PayMate has to work hard to compete with its some of the rivals like mCheck, and Obopay. One of the challenges for these companies is transforming the customer society is to get used to mobile banking. Adiseshan finds crunching the transformation period and the customer behavior as a big challenge. If you have a look at the credit card industry it took almost 10 years to grow and it was a great challenge for the enterprises to convince the layman about the advantages and the security issues. Observing at the mobile penetration growth trajectory, mobile banking can take off in much lesser period compared to credit industry, if these startup companies can guarantee much security to the customers.