While mobile banking has recently been getting some high end exposure (see the recent posts on the Clinton Global Initiative), a recent conference sponsored by CGAP provided a welcome counterpoint by getting into the nitty gritty of actually implementing the m-banking model on the ground. Titled Banking on Mobiles: Why, How, for Whom?, the conference really should have been called The Good, the Bad, and the Ugly (per the subtitle of the Powerpoint presentation). Why? Because a number of obstacles still remain to widespread adoption of this technology, even though presenters Kabir Kumar and Ignacio Mas are enthusiastic about our ability to overcome those obstacles.
Kumar and Mas placed m-banking in its appropriate context - it is part of the wider world of branchless banking, which requires networks of retail agents to handle transactions. And despite the hype, the numbers of people with access to branchless banking are still not that impressive. The only country that has really achieved the vision of 'banking in every village' is Brazil.
So what are the obstacles to bringing banking to every village? The seminar provided plenty of fodder for technophiles on the various technological challenges, and all this is available in the conference materials. It seems to me, though, that the real trick is creating trust, or what the presenters call "trust through technology." How do you persuade someone who has never had a bank account to place their money in a savings account with perhaps only a text message as confirmation?
There are no easy answers to this question; what is required is for companies to first offer services that are relatively easy to trust and for which there are few alternative providers. The prototypical example is transferring money to your family in some other village - the transaction is immediate, and you can call your family to get confirmation. Once a person becomes comfortable with this kind of transaction, he may over time become willing to take greater leaps of faith, e.g. setting up a savings account. Word-of-mouth can also help a great deal.
For much more on this topic, you can watch the whole presentation yourself by following this link.
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