Mobile Banking: Overview
More than half of the more than three billion mobile users live in developing countries and many of them are among those with limited access to formal financial services. People in developing countries have fewer options (if any) for transferring money and accessing banking services, as there is less formal banking infrastructure (fewer branches, ATMs generally co-located to relieve branches rather than stand-alone, low internet penetration). So a branchless banking channel using mobile phones could be far preferable to poor people than the available options: travel to and queuing at distant branches, and savings in cash or physical assets.
So what is the “it” in mobile banking? The mobile phone itself has unique features that make it a close substitute to other banking channels, but unlike those channels, it is everywhere. Phones on the most common standard in the world have both a highly secure “smart card” (the SIM) and a “card reader” in one device. And all phones have “native” technologies (SMS and USSD) that can be used to create banking interactions. To be sure, mobile phones are likely to always be limited in functionality than a PC that is online or a specialized point-of-sale (POS) device, but because of inherent functionalities and its ubiquity, the phone is seen by providers as a possible lower-cost alternative to banking via internet or ATM or point-of-sale. Early results from CGAP’s experiments with providers show that using branches could cost 30 times more to set-up than using third-party agents equipped with point-of-sale. Replace the point-of-sale device with a cell phone and you have further cut cost in half.
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