Mobile phone banking takes off


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Man_on_phoneThe positive impact of mobile phones on development has passed into the realm of conventional wisdom. So what’s next for the tiny, powerful gadget? The provision of basic financial services via mobile phone.

Last week I attended a very encouraging workshop on the role of information and communication technologies in expanding financial services to the poor. We studied the business models of several successful telecom firms, who have brought millions of the “unbanked” into the world of cashless purchasing.

Individual features vary, but generally customers are able to purchase credit for their mobile phone, which they can use for phone calls, text messages, retail purchases, bill payment and remittances. An added bonus: customers can have their paychecks deposited directly to their mobile phone account. The secrets to success seem to be: prepaid cards, sachet purchasing (buying very small quantities at a time), and the ability to pass credit from one person to another. And the usage fees are very very low.

Many say that African technology is the most advanced, thanks to the continent's true explosion in cell phone usage – to 100 million users today from just 1 million in 1996. M-banking has already made it big in Japan, Korea and Singapore. Selected pockets of m-banking activity:

What are the primary obstacles to m-banking's further expansion? Lack of interoperability of telecom systems is one. This may explain why mobile banking hasn’t really taken off in Latin America. A bigger challenge is regulation. M-banking perks regulators’ ears in a number of fields: e-commerce, payment systems, competition, deposit taking, telecommunications, consumer protection and AML-CFT (anti-money laundering and combating the financing of terrorism). Stephen Mwaura Nduati from the Central Bank of Kenya, who is the most dynamic regulator I’ve ever seen, proposes fast-tracking payment system-related legislation in every country.

The workshop organizers have more information available - see two short policy notes (1 & 2) from CGAP and a longer report from infoDev. Or see a previous post on embedding credit cards into cell phones.

Update: listen to NPR's Marketplace story on cell phone banking in Soweto, featuring WIZZIT's Richardson. Via Rob Katz.

Update 2: a couple of good resources on the impact of mobile phones on Africa: a Vodafone research paper and a 90-minute IFC seminar discussing it.

Join the Conversation

James Thangaraj
June 15, 2006

I too attended last Friday’s conference and came away fascinated by how the ubiquitous mobile phone is changing so many lives. However, I did wonder how people in developing countries afford their phones (they receive what we recycle and buy pre-paid plans) and master their use for those relatively more complicated financial transactions. For example, was there a correlation between literacy levels and phone banking adoption rates? There might be, but I learnt that no research currently exists to validate it. Of course, the need to access one's own money might be the greatest motivator to learn, but there are also organizations like Microfinance Opportunities (, who among other things, offer financial education to people in developing countries.

Here's another mobile phone story: There is an auto mechanic in New Delhi who sat in front of a spare parts store and earned his business by fitting parts bought at the store onto cars. Being skilled, honest and cheerful, he soon developed a loyal customer base that began to depend on him for help even with problems that didn't involve a trip to the store. He would readily visit your home, office or wherever the car happened to be, but could only be reached during work hours through the store's landline, which happened to be busy most of the time. This young man also happened to be my mechanic, and after many attempts to reach him one day proved futile, I ended up going to the store. Later, while he was working on my car, I asked why he didn't have a mobile phone. He told me that while he could afford a prepaid plan, the cost of the phone was prohibitively high (in India, phones aren't subsidized as in the US or Europe and back in 2002, even the basic ones were quite expensive). I gave him an old phone.

The result? Over the last few years, his business has grown rapidly, has more clients than he can handle, is no longer tied down to the store and his confidence level is at an all time high.

R. Chen
August 10, 2006

I saw an interesting site that allows people to transfer mobile credits internationally called Seems this could be a perfect way to expand mobile banking globally.

Dean Hedges
January 21, 2007

yes ... telecom is interesting ... the deal is that developing countries can "leap frog" with technology ... no need to do landlines/old AT&t when satellites and/or fiber optics can do the work for you ... ... thus national telecos are dead & doomed ... ... then :shhh: it is not a far leap to do away with the national central banks ... ... only need one clearing house


cbi central bank of iraq



John Owens
February 14, 2007

We have been working with Globe Telecom in the Philippines to provide mobile phone banking services for clients of rural banks and we have been amazed by the interest in this new technology and the tremendous cost savings to both the clients and banks alike. This will definitely revolutionize banking services in the developing world. Be sure to check out the video on the applications we developed at

April 08, 2007

Mobile banking allow one to experince meeting the challenge of transaction security, and meet up with the get growth of information technology.

Jim Rosenberg
June 29, 2007

Heaps of mobile phone banking materials, including information about the challenges regulators face are at our website -

John Owens
August 02, 2007

Just wanted to update you on the developments in the Philippines. The Rural Bankers Association of the Philippines and their MABS program have just launched a new website dedicated to mobile phone banking services in the Philippines at:

will Banks III rd generation of mobile services work?
September 05, 2008

Will banks III generation of marketing be successful? That's the question, is it secure for banks to go mobile?

I say it's too soon, but Stephen Mwaura Nduati is a force.

g1 accessories
November 04, 2008

The tmobile G1 has been unlocked, this will allow you to use a SIM card from any network, in any country. Hey guys FYI, T-mobile will unlock any phone for you for free if you are in good standing with the company, so don’t shell out the cash to get that iphone unlocked just call T-mobile.

November 07, 2008

You know what, there are already some online vendors that let you add credit to your phone. Like I have my moneybookers account linked to my xperia x1, and I can pay for any international texts I pay for a discount this way.

mobile banks
September 28, 2009

When will banks 3rd generation of mobile security be implemented? Security for the III Generation (3G) Mobile System requires:

I. Authentication
II. Encryption
III. Confidentiality

What will banks do when data is compromised via emulators? All valid questions.

July 14, 2007

I was presenting on new media at the Emerson Summer Institute for Social Marketing yesterday and flashed the stats I have from Communities Dominate Brands about the use of mobile phones in commercial transactions. 54% of Helsinki public transportation ...

March 12, 2007

Mobile phone banking takes off - PSD Blog - World Bank Group...

November 08, 2006

Nine out of 10 low-income m-banking customers surveyed say m-banking is not expensive or is inexpensive for the benefits it offers, and 93 percent say they feel their money is as safe as with any other bank. However, findings also show most low- income...

October 31, 2006

Click over to NextBillion for the Zambia Journal. Like our own Alex Burger, FINCA's Brian McBrearity is supporting the development of small businesses in Africa. He's just posted a second story - this one about the mystery of Ndola. Why do none of the ...

October 10, 2006

ICICI Bank, one of CK Prahalad's favorites, is headed even further into the $24 billion Indian remittance market. No specifics yet, but expect to see innovative products coming from ICICI over the next six months. Maybe remittances via mobile banking? ...