Jim Rosenberg is the Communications Officer for the CGAP Technology Program and manages this site. In previous incarnations Jim has been a Web editor at the World Bank, a satellite radio producer, and a business reporter at WAMU-FM, the National Public Radio (NPR) affiliate in Washington DC. As a local reporter he contributed frequently to Marketplace, the public radio business program of record in the United States. He holds a master’s in Journalism from Columbia University.
Mobile banking needs “standardized innovation”
“Standardized innovation” is the phrase used by Dialog Telekom’s (Sri Lanka) Dr. Hans Wijayasuriya at the Mobile Money Summit in Cairo today. In a phrase I think is quite useful, he was summarizing the need to have mobile banking standards, interoperability, worldwide. Right now we are observing many proprietary systems taking shape – most notably, M-PESA in Kenya, Smart Communications, and as they move further into the m-banking space, Western Union. Imagine having hundreds of transaction networks – Visas, Mastercards – that don’t talk to each other. Hopefully, that’s not the direction in which mobile banking is headed. Proprietary is fine, interoperable is essential.
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Mobile banking to transform microfinance
CGAP finds market conditions mean benefits for poor still several years away
A new report from the global microfinance body CGAP predicts that, with the right market conditions, mobile banking could reach large numbers of poor people who are outside the formal financial system. The Early Experience with Branchless Banking calls for the development of interoperable payments platforms, practical and risk-based approaches to regulation, as well as shared networks of cash-handling agents. There is also a need for product development that overcomes the lack of human interaction and reliability concerns that may hinder customer adoption today.
“Market forces are driving down costs. In the Philippines, we see that a transaction on a cell phone or at an ATM costs one fifth that of a traditional visit to a bank branch,” said Gautam Ivatury, manager of CGAP’s Technology Program and co-author of the report. “Yet globally, we estimate that fewer than one in ten mobile phone banking customers are poor, new to banking, or doing anything more than payments and transfers.”
Payments and funds transfers dominate mobile financial services for many reasons, the report finds. Mobile operators in particular prefer to market payments services as this is more aligned with traditional revenue models. These services are also less likely to cause operators to run afoul of banking regulation.
“When it comes to reaching poor people who live outside the formal financial sector, the reality of mobile phone banking doesn’t match the potential, much less the hype, at least not yet, said Ignacio Mas, CGAP advisor and co-author of the report. ”We see opportunities for service providers who move quickly to create new products, especially if they can establish shared networks of cash-handling agents to cover that ‘last mile’ of service delivery.”
The report finds that challenges to the growth of branchless banking include a reluctance on the part of banks to get involved, as well as outdated or inadequate regulations. This is true despite the benefits of branchless banking: convenience, better security, and lower costs for customers. In cases where market conditions are not driving broader banking services such as credit and savings, there may be a role to play for policymakers and those who advocate for increased financial access.
The Early Experience with Branchless Banking will be presented at the GSMA Mobile Money Summit in Cairo on May 14.
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Guest Post: Central Bank of Kenya - branchless banking goes rural
Stefan Staschen works with CGAP’s technology and policy teams.
Kenya’s banking law and regulations look all too familiar: if an institution accepts deposits and uses this money for lending or investment, it needs to have a bank licence. And banks can only transact through their head office or branches. Full stop. But the Central Bank of Kenya has realized that operating through full-fledged branches, which are subject to detailed regulatory requirements, is a very expensive proposition. If the huge gap of banking services in remote and rural areas is ever to be closed, alternative delivery models will be required. Branchless banking models such as mobile phone banking (pioneered in Kenya by M-Pesa, which is run by a mobile network operator and not a bank) and the use of retail agents will be low-cost alternatives allowing for increased rural penetration. The Central Bank Governor, Prof Njuguna Ndung’u, has now pledged to institute necessary regulatory changes allowing banks to offer financial services outside bank branches.
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Do you follow mobile banking? Don’t miss this
Mobile banking, access to finance, and the attendant challenges and opportunities are all on the agenda at the Mobile Money Summit, which takes place May 14 – 15 in Cairo. This is an opportunity to hear from innovators, meet new partners, and engage with leaders from finance, telecom and the development community. CGAP is proud to co-organize this event with DFID, IFC, and the GSM Association, which represents more than 700 mobile network operators.
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Headlines for March 25, 2008
M-Pesa’s bid to enter UK runs into legal hurdles
Ericsson and UNDP Join Forces on Mobile Solutions for Development in Rural China
Good Morning Vietnam! Mobile Marketing Has Arrived.
Kenya: M-Pesa’s Bid to Enter UK Runs Into Legal Hurdles
Fear of Fraud Stops Majority of Consumers from Using Mobile Banking
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