Peter Vander Auwera, innovation lead
at SWIFT, on the role of mobile
technology in connecting the unbanked
Banking services are unavailable to many in the developing world, in sharp contrast to the massive popularity of mobile phones. Does mobile technology represent the key to connecting the unbanked? And what role could the bank and mobile industries play, if any?
Mobile banking could bring about a fundamental shift in the consumer experience in the developing world, where there is a strong appetite for mobile. Given the huge contrast between bank penetration and mobile phone penetration in the developed, it is clear that, when it comes to reaching the unbanked, mobile is key.
The numbers speak for themselves; of the 6.9 billion people on our planet, just 30% (2.1 billion) have bank accounts. But 75% (5.2 billion people) have mobile phones.
In Africa, bank penetration is between 10% and 50%, while mobile penetration can range from 40% to 100%. Again in Asia Pacific, 20% to 60% of the population have a bank account, compared to 40% to 100% for mobile. The figures are similar in Latin America, with between 30% and 60% bank penetration, next to 60% to 80% in mobile.
Many millions of people who have never
had access to bank accounts or credit
and debit cards could have the
opportunity to pay for goods and
services with their mobile, quickly,
easily, efficiently and conveniently.
Surely, the developed world provides a
well of pent-up demand for mobile
But will the mobile industry or the banking industry emerge as the leading provider of banking services to the unbanked? And for the ‘natural’ providers of banking services, the banks themselves, is mobile an opportunity to generate new revenue streams in new markets, or a threat, a disruptive technology that could unseat the banks and make way for more agile players with a closer relationship with the end customers and a track record of servicing them?
Which players will be able to harness the power of mobile technology to bring financial inclusion to the unbanked? In Kenya, it would seem mobile operators are better placed, as the soaring success of M-PESA, an SMS-based money transfer system, illustrates. M-PESA was launched in March 2007 by Safaricom, the leading mobile operator in Kenya.
M-PESA enables consumers to deposit, send and withdraw funds using their mobile phones. Use of M-PESA has skyrocketed, with the system quickly being adopted by more than 35% of Kenya’s adult population. The winner here is clearly the mobile operator. So where does that leave the banking industry?
Without regulation mobile banking and payment services will not carry the guarantee of safety that consumers demand, and any hint of insecure mobile banking systems will lead consumers to abandoning mobile banking services. Banks have the expertise, robustness and willingness to cope with the rigours of regulation, more than players in the mobile industry.
Indeed, when it comes to overall safety, security and reliability, the banks have by far the best pedigree. They have fail-safe, scalable technology platforms that could meet the payments processing demands of potentially wide scale mobile banking services in the developing world.
MNO V Bank
Of course, the mobile network operators and the device providers have their strengths as well, not least an agility of which the banks are envious, and, most significantly, their existing penetration among the customer bases being targeted.
But are the right elements in place to ensure a sustained approach to financial inclusion? The driving force to greater financial inclusion for the unbanked isnt just altruism. Banks, mobile operators and device providers require solid business cases; for the banks in particular the question of how to approach mobile is a crucial one in the context of how they establish their long term viability.
The obvious conclusion is that banks, mobile operators and device manufacturers need to collaborate to realise the full potential of mobile to enable financial inclusion.
Cooperation is key, to share expertise
and mutual learning, and to help
foster innovation and opportunities
Finally, all players must work together to fully understand the needs of the unbanked, including the fact that the unbanked are not necessarily poor.
To find out more about collaborative innovation in mobile, and for opportunities to put yourself in the shoes of the unbanked to understand their needs – check out the forthcoming conference – Innotribe – Mobile Payments: Connecting the Unbanked, taking place in Mumbai on 1-2 June 2011.