What is the role of mobile operators in expanding access to finance?

by Jim Rosenberg : Tuesday, June 16, 2009

Mobile phones may have a huge role to play in expanding access to finance. But does the company that operates the mobile network need to actually provide financial services? Or should others offer financial services, with the mobile operator merely providing the underlying wireless connectivity? The fact that mobile phones can be used as transactional devices doesn’t necessarily mean that the mobile operator needs to “own” the financial service.

That’s the subject of a new CGAP brief authored by Ignacio Mas and me. Read it here.

TAGS: Access To Finance, CGAP, Mobile Banking, Mobile Phones, Publications, Telecom

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  1. June 17th, 2009 at 6:39 am, Tony Gaunt ()

    I see alot of benefits to keeping the provider of the wireless service separate from the provider of the financial service.

    I think allowing the providers of financial services to leverage the conduits provided for payments and other services allows for a cheap(ish) and rapid to market option to deal with the key issue of proximity. This will allow people previously excluded from access to services by geography to be serviced.

    It also seems likely that the regulatory issues raised by providing these services will be more easily managed if the parties involved are providing a piece of the puzzle that is aligned with their core competencies as opposed to an MNO branching out into the provision of financial services.

  • June 18th, 2009 at 7:14 am, Ben Lydecker ()

    Tony – I agree with you that customers will benefit from a more competitive system in which mobile operators offer access to financial services offered by other institutions. But what is the incentive to the mobile operator to help establish these services? Is a transaction fee sufficient?

    It seems that mobile operators are entering the financial service market because it is a new way to attract and retain customers. I think that’s one reason we see operator-led services in countries with more competitive mobile environments. Opening the system may discourage further investment and innovation.

  • June 18th, 2009 at 7:25 am, Ben Lydecker ()

    To Jim’s question about mobile operators owning the service –

    The two potential owners of these transactions are mobile operator and financial institutions. Operators are able to expand financial services because the phone number becomes the account. However if the operator only provides wireless connectivity and transactions are housed within a financial institution, we return to the challenges of opening bank accounts for poor and remote groups.

    Are there other options that merge the ease of access associated with operator owned services with the benefit of competitive and open services possible when networks only provide connectivity? Can this be accomplished through non-bank agents?

  • July 1st, 2009 at 11:26 pm, Eric Kotonya ()

    Now that financial transaction services offered by mobile operators have gained widespread acceptance – specifically the M-Pesa service offered by Safaricom, the next stage would be partnership with traditional financial service providers.

    Instead of acting as competitors, banks, MFIs and mobile operators can create a synergy to deliver higher value, mature products to their customers, while still retaining their respective competitiveness in their traditional turfs – example – banks have invested in ATMs which can be used in cashing out mobile cash. On the other hand, mobile operators can offer secure customer reporting to bank customers using USSD technology, bank loan application questionnaires via SMS and bank-to-mobile accounts cash transfers.

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