RESEARCH: Mobile Banking will accelerate microfinance mission
By Martina Rani Microfinance Focus, Feb. 7, 2010: The developing countries strive to give financial access to the poor and vulnerable groups for poverty reduction and social cohesion through their financial inclusion projects which aim at delivery of financial services at an affordable cost to them. People in developing countries have less options for transferring money and accessing banking services, because there is less deployed formal banking structure: fewer branches with ATMs generally co-located to relieve branches, and low internet penetration. So a branchless banking channel using mobile phones could be far more suitable to poor people than the available options like travelling and queuing up at distant branches, forgoing their daily wages. Only about one-third of people living in developing countries have any form of financial savings with formal institutions. Ultimately, the mobile banking using technology has great potential to extend the distribution of financial services to poor people who are not reached by traditional banking networks as it lowers the cost of delivery, including costs both to banks -- in building and maintaining a delivery channel, and to customers in accessing financial services. For example, transaction costs involved in mobile banking as it can be observed from the mobile services of Kenya and Philippines, where a typical transaction through a bank branch costs the bank US$2.50; and it would cost only US$0.50, if it were automated by using a mobile phone. A solution based on mobile phones can therefore substantially reduce the cost of spreading financial services over many retail environments, at least in areas with relatively high mobile phone penetration. Hence, the developing countries around the world concentrate more on implementing the mobile banking access to the unbanked mobile, as a tool of financial inclusion, which is known as Transformational mobile banking. The faster customer adoption is possible through the value proposition formula. Another highlighting observation from Consultative Group to Aid the Poor’s (CGAP) study on Technology is that only one from ten customers of mobile banking services uses the service for cash-in and cash-out transactions, others use the service for transfer of funds, payment of bills, acquisition of cheque books and checking balances. Other than this practice, there are regulatory challenges with respect to security, customer eligibility and identification, trust in technology, high cost mobile sets and technology which are to be noted as there are different parties involved such as mobile network operators, software providers and banks/micro finance institutions. Hence the success factors for mobile banking depend upon the mass customer adoption, utility of mobile service for cash-in and cash-out transactions, interoperability of providers, a country’s defined proportionate regulation and the ability of service providers to meet the regulatory challenges.
3 Comments on “RESEARCH: Mobile Banking will accelerate microfinance mission”
- Mobile Banking in Microfinance – Countries, Services, Risks and the Future « Microfinance Hub
- Mobile Banking in Microfinance – Countries, Services, Risks and the Future | Microfinance Hub
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