[kornish]

> In many ways it's similar to how telephony spread in the developing world. They skipped landlines entirely and went straight to GSM.

And also how banking/payment is spreading in Africa: mobile-to-mobile, skipping credit cards entirely.

[danbolt]

I love the elegance and futurism of paying with mobile phones like that, but do the telephone companies operate in a similar manner to financial institutions there?

For instance, if I deposit money, do I receive interest? What happens to my funds if the phone company goes bankrupt? Are there similar regulations to banks?

[fellellor]

I'm guessing the banks are still running the infrastructure. It's just they didn't bother with installing card networks since mobile payments is an evolution over them.

[orasis]

When was the last time you earned a noteworthy amount of interest on a bank deposit?

[kartickv]

Not many in India would see things the way you do. Why lose interest if you can get it, particularly if you don't have more interest coming in from mutual funds or someplace else? If anything, the competition is on to see who'll pay more interest. One payments bank announced 7%: http://economictimes.indiatimes.com/wealth/personal-finance-...

[Retric]

What's the post inflation adjusted interest rate? Because simply moving your money to a low inflation currency does the same thing.

The only catch is that the payments banks, which do not offer loans and several other facilities offered by full fledged rivals, are not allowed to accept deposits beyond Rs 1 lakh in bank accounts, which will have the same number as your mobile number. Bharti Airtel chairman Sunil Bharti Mittal said that the higher interest rate and freebies such as life insurance of up to Rs 1 lakh was an "introductory offer" and the rates would go down in a falling interest rate environment

Ahh, nm. This is just a fixed amount of cash they hand you for switching banks not a full time interest rate.

[kartickv]

Moving money to a low inflation currency sounds good in theory, but is not an accessible solution to the average Indian, and is fraught with bureaucracy and fees even for those it is accessible to. I put my money in a liquid fund (debt mutual fund) to earn 8% nominal interest rate. That's a much more practical solution than moving it to dollars, say.

Airtel's offer may be temporary, and interest rates rarely go to 7%, but the point is that there's always a competition on interest rates.

India's inflation and nominal interest rates are both higher, which means you lose more if you forgo interest. In a hypothetical country with 5% inflation and a 5% interest rate, if you forgo interest, you lose 5% every year. In a country with 2% inflation and 2% interest rate, you lose only 2%.

[greglindahl]

Different countries have different interest rates. While most developed countries have both inflation rates and bank deposit rates close to zero, there are a few countries with high inflation and high interest rates.

[djohnston]

Arbitrage opportunity?

[konschubert]

The higher interest rate covers the higher inflation. Currencies are very well arbitraged already, I wouldn't expect any inefficiencies to profit from.

[mortehu]

But check this out:

http://faculty.chicagobooth.edu/workshops/finance/pdf/Verdel...

"We find that deviations from the covered interest rate parity condition (CIP) imply large, persistent, and systematic arbitrage opportunities in one of the largest asset markets in the world. Contrary to the common view, these deviations for major currencies are not explained away by credit risk or transaction costs."

[akg_67]

Changes in foreign exchange rates usually arbitrage out most interest rate disparities.

[greglindahl]

It's called the "carry trade".

[shriphani]

Indian banks offer very good interest rates and are sort-of backed by the gov (might be wrong on this).

[davchana]

backed in the sense of too-big-to-fail. Otherwise, deposits of only upto Rs 100,000/- are insured, that too per person, irrespective of how many bank accounts. Insured in the sense that if bank tanks, Customers will get back minimum (of deposit or) 100,000 Ruppees back after all the bankruptcy proceedings.

[ian0]

It depends on the country but typically there is a set of central bank regulations which attempt to ensure adequate safeguards are in place when non-banks offer banking services. Example protection of the float for stored value wallets and enforcement of anti-money laundering KYC for peer to peer transfer.

Central banks also tend to (sometimes sensibly) clamp down on services that are closer to core (profitable? :P) banking services like interest & loans, so telco wallets with this functionality built in house are much rarer.

[babayega2]

For example in my country, Burundi, Mobile Network Operators are required to run their mobile money business under a different "legal" entity run like a bank so that there are some security to the client deposit. Even if the MNO collapses, the Mobile business isn't affected.

[jacquesm]

The same happened in Spain, first time I saw someone doing a payment by mobile was at a bus-stop, as if it was normal he paid his electricity bill. It was the result of a collaboration between Telefonica and one or more banks, I forgot what it was called.

Way ahead of the rest of Europe, this probably was early 2000 or 2001.

[scythe]

"Blessed are the meek: for they shall inherit the Earth"