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Mobile Banking: The banks are asleep at the wheel

Ryan Hahn's picture

Last week saw an all-day event at the World Bank on Mobile Innovations for Social and Economic Transformation. The sessions covered the use of mobile phones in everything from governance to education. I attended a morning session on mobile innovations in financial services in which speakers covered issues on payments for ex-combatants in the DRC, Government-to-Person (G2P) payments, and pre-paid value card solutions.

However, the most interesting remark in this session came not from one of the speakers but the invited commentary. Why is it that we see network-centric players dominating this field in some cases (e.g. M-Pesa) or independent firms (e.g., Celpay, the provider of payment solutions for ex-combatants in DRC)? Andi Dervishi, the Global Practice Lead for Investments in Payments at IFC, put it very simply: "The banks are asleep at the wheel."

Why is this the case, when mobile banking should be the natural territory of banks? Andi's explanation is that banks were probably burned in the past trying to extend access to finance to the unbanked when current mobile technologies were not available. The upshot: the World Bank and IFC are now well placed to step into the gap to provide finance for network operators and independent players who want to get into this field.

Here are all the materials from the day-long event. Here is a summary of the innovations in financial services session. And here is video of the whole event (Andi's comments start around 2:20).

Update: The Economist contains a special report in the latest edition on mobile phones in emerging markets

Comments

Submitted by Wesley Parish on
"Why is this the case, when mobile banking should be the natural territory of banks?" I think you've just answered your own question. Banks considered banking their preserve, and to keep their own preserve, they have avoided innovative ideas such as this. Whereas these mobile phone firms have been trying to expand their markets, so they're trying on things that will make their mobile phones more valuable to even the poorest. The comparison that springs to mind is IBM versus Compaq and the various PC hardware and software developers in the eighties - IBM had its market, the mainframe, which it developed the PC to protect. PC manufacturers and software developers wanted to expand their markets, so they set off on a collision course with IBM. IBM duly lost. Frankly I'm glad that it's the mobile operators that have taken this plunge - after seeing the mess the banks, particularly in the US, have plunged us into via derivatives and such, I'm not sure that I'd trust the banks to do anything right. They have their plush offices to preserve, after all, and their huge bonuses, and their bribes ...

Submitted by Nwabu on
The banks are not asleep on the wheel. Banking and Telcoms are two different fiefdoms and each have a closed wall policy on their infrastructure which has made even something as obvious as mBanking even possible. Then there is the regulatory environment which in a lot of countries is not clear.

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