• Source : zunia





What is mobile banking?

In developing countries, two billion people own mobile phones... but have no bank accounts. What if they could finally do banking by mobile phone? One of mobile banking's promises is to reach out to these potential clients. Since the mid-2000s, this service has been on the rise.

In Europe, mobile banking is an extension of Internet banking – it allows customers to check their balances and do transactions. In developing countries, mobile banking meets different needs: the cell phone, in a way, is a substitute for a traditional bank since banks are often inexistent. For example, there is only one bank for every 10,000 inhabitants in Asia. Also, services from traditional banks and services from mobile banking are somewhat different.

Launched in South Africa in 2004, Wizzit was one of the first mobile banking services on the market. They offer electronic bank accounts which come with telephone numbers and debit cards. Like M-PESA from Kenya, which started out three years later and became the success story of mobile banking, Wizzit's most popular service is transferring money from one person to another. For many customers, this is revolutionary. Thierno Seck says, "People who work in the city and have family in the country no longer have to take long and expensive trips back home. Nor are they forced to deal with undeclared moneylenders." Seck (link) coordinates the setup of several mobile banking projects in Africa.

In Asia or South America, similar systems have appeared, sometimes offering payment services for water or electricity bills. Microfinance is the next step; Oliver Wyman, who coauthored a study with Planet Finance, believes that microcredit and microsavings have a promising future. By allowing borrowers to make repayments with their phones, MFIs can greatly cut down operational costs.

Vivian Lu agrees with this analysis. She supervises mobile microfinance projects in Kenya for the MFI Nuru and believes that mobile banking increases efficiency and simplifies administrative duties.

Thierno Seck says that setting up these microfinance services can be quite complex. Even though there are 50 million potential mobile banking customers in developing countries, no more than 500,000 take advantage of this service. Experiments are now being made in Pakistan with Telenor, in Egypt with Masary and in several African countries.

While MFIs cut costs by using mobile banking, mobile phone operators promote customer loyalty. Can they also find additional sources of revenue?

Arvind Ashta believes so. He chairs the microfinance department at ESC Dijon in France. As for Thierno Seck, he says that Safaricom is making profit with M-PESA even though it was financed at the beginning by British public funds.

Vvian Lu sees the situation from a different angle: thanks to mobile banking, loan officers can spend more time with their customers who work in agriculture. In other words, mobile phone banking reinforces human relations and therefore creates trust between the MFI and borrower. This trust sets off the postive cycle of microfinance.

Translation. Catherine Jan

This article is part of the special report: