The 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:
- the Philippines: G-Cash and Smart Money
- South Africa: WIZZIT (whose CEO Brian Richardson gave an energetic presentation)
- Kenya: M-Pesa
- Zambia and the DRC: Celpay (site in French)
- southern Africa: MTN Mobile Money
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.