Recently we caught up with Damdinjav Dorjdamba, the Director of the E-banking Department at XacBank. Based in Mongolia’s capital Ulaanbaatar, XacBank is a community development bank and microfinance institution working to extend financial services to poor and underserved people, including nomadic groups, in both remote and urban areas in Mongolia.  It is providing electronic banking and payment services through a combination of cellphones and cash-handling agents. XacBank is also aiming to create the first nationwide payment system using mobile phones in Mongolia.

How is your mobile banking service faring?
In February 2009, we began piloting mobile banking and payment services in three locations and, the following month, we expanded into more places, including Ulaanbaatar. These pilots, along with several stress tests and focus group discussions with the first users of the mobile banking services, have contributed to the development of the m-banking platform. We went fully live with the commercial launch of our m-banking service AMAR (EASY in Mongolian) in July. By the end of September, the Bank had reached 11,200 clients served via around 1,000 agents.

What is the most surprising thing that has happened in the past year?
The successful adaptation of our current banking activities to provide a non-branch bank service, supporting the ability to make transactions during “bank closed” periods, is quite a surprising thing. With AMAR services, the Bank is extending its outreach, especially in the rural areas. Almost 70% of the customers who have registered for the service are outside Ulaanbaatar City. Considering the small population of the country and the number of financial institutions in Mongolia (16 commercial banks, around 200 non bank financial institutions), the number of registered clients is increasing fast. In the month of September 2009, around 3,700 demand deposit accounts were opened at our bank, mostly specifically to register for AMAR services, comparing to 1,100 such accounts in September 2008.

How would you describe the response from clients?
Our current demand deposit and current account holders are very interested in AMAR services. When we sent them information by SMS, the bank’s call center received more than 100 calls per hour, which reflects our customers’ interest in electronic banking services.

Are there interesting changes happening in the market that may prompt you to change your business strategy? What are they?
We had expected that, of all the transaction types that AMAR services offer, sending remittances would be the most widely-used transaction. But now, we see that account-to-account transfers are likely to be the most widely-used transaction and the largest driver of revenue. The payment service is also very popular with our customers, because it is convenient for both the customer and the merchant to make and receive payments through their mobile phones. Therefore, we consider both wholesalers and retailers, as well as petrol stations and postal offices, to be some of the most strategically important agent types for our services.

How is this project helping people in your country?
XacBank’s AMAR service is bringing convenient banking services to our customers. Our clients no longer need to travel more than 100 kilometers just to transfer some money to their children who are studying in Ulaanbaatar. Instead they use their cellphones to access their accounts and transfer money to their children’s accounts easily.
If more banks and mobile operators started developing mobile banking and mobile money services that would lead to increased competition, not only among themselves, but also competition for conventional banking and financial services. The people of Mongolia would greatly benefit from these services.

-Jim Rosenberg