Mobile Banking in 2010

Mobile Banking technology has played a huge role in financial service delivery, and therefore financial inclusion. The industry and its players have also moved rapidly to develop partnerships with social enterprises engaged with delivering financial services to low-income markets, be it microfinance institutions, technology enterprises, large-scale commercial banks and so on. In this post Robert Moore, Villgro Fellow 2010, reviews literature that provides insight into the working of the industry.

“Mobile banking may be an industry I would like to start a business in: There are millions of people with phones but not bank accounts – mostly in developing countries”. This quote is from my first blog post of 2008 on www.poorbillionaire.com and marks the day I started taking a big interest in the mobile banking industry.

If you take a lesson from the telecommunications industry you can see that the developing world has “skipped” a step in development: starting with no phones at, skipping land lines, and adopting mobile phones.  If this could influence the banking industry the developing world can go from having no bank accounts at all straight to mobile banking – both a leap in the standard of living for the poor and a leap in the progress of the banking industry.  Think of all the things you can do with your mobile that you can’t do with a landline and you will start to realize the impact this change in the industry will have.

To support the growth of this industry a conference called the Mobile Money Summit was started in 2008.  An example of this conference’s impact is showcased in a paper produced from the 2009 summit titled “Accelerating the Development of Mobile Money Ecosystems ” which talks about how quickly this industry is growing and how the challenges both as a market opportunity and as a poverty alleviation tool are being better understood.

But the paper I really want to talk about is Nexbillion.net Editor Nathan Wyeth’s three part article titled “Report from the Mobile Money Summit”.  His introduction says: “My hope in attending the summit was to share with NextBillion readers the state of the industry and what can be expected in the future outside of places where mobile banking and payment systems have already taken significant hold – namely Kenya and the Philippines (and significant branchless banking in Brazil) – as well as indicate how mobile money systems can be brought into base of the pyramid business models not only for microfinancial services but far outside of the financial services sector – in health, education, agriculture, energy, and more.”

His article brings you up to speed about the potential of this industry and teaches a little about the developing world market.  Part one – “State of the Industry” talks about the industry’s markets structure, business model structure, and the banks’ need/priority of “stability before inclusion”.  The idea that the poor will actually except negative interest on savings accounts if they are able to save their money securely is one of the interesting concepts that he mentions in Part two – “Product Innovations to Reach the Poor” and that credit profiles can be generated based on current mobile banking transactions for future use in microloans.  Part three – “Learning from Agent Networks” discusses the distribution channels involved in making this all happen.

Nathan’s article is a worthwhile read for those interested in Mobile Banking or a glimpse into the world of developing economies and one of the angles that is being used to approach them.