This is an excerpt from a recent CGAP paper, Banking on Mobiles: Why, How, for Whom? In it, Kabir Kumar and Ignacio Mas examine the business case and deployment options around mobile banking for smaller banks and microfinance institutions. With effective partnerships and technical choices (which affect customer uptake), we believe there is a strong market opportunity to reach poor people with a broad range of financial services.

The technology elements embodied in a phone may not be new, but what is new may be the way customers relate to the technology. Mobile phones are personal devices. The value of the device is so high for some of us that we even decorate and personalize it like we do our cars or homes. One study indicated that mobile phone users were not without their phones for more than 30 minutes. The device gives us a sense of immediacy. It’s not so much about anytime/anywhere, it’s about here and now. It gives us a feeling of possibility, convenience, and control.

Beyond the cost saving of using an existing deployed base of terminals, how can banks exploit this sense of immediacy to develop a deeper and more meaningful relationship with a customer who happens to have a mobile phone? How can these attributes of the relationship between the customer and their mobile phone be used to create new banking services or service models?

At the very least, mobile phones provide banks the opportunity to send personalized messages to all their customers—messages that serve to market a new product, introduce a new feature to a service, or alert on specific account activity. Customer could immediately verify account balances and recent account activity when needed. Moreover, because it allows for two-way interaction, the phone also makes it possible for customers to take immediate action from wherever they are, for instance when they are reaching a low-balance threshold or when there is unusual activity on their account so customers themselves can be a part of fraud prevention.

This enhances customers’ sense of control. Interactivity can go further into tailoring services as the relationship between banks and their customer matures. For instance, customers could request a higher credit ceiling on the fly, when needed, with verification happening over the phone. In any case, it is probably fair to say that we have only begun to imagine the possibilities of exploiting the mobile phone in creating new service experiences.