Mobile-Phone Banking and Low-Income Customers

01 January 2006

Banking through mobile phones has been common in developed countries for years. But the real potential of “m-banking”1 may be to make basic financial services more accessible to millions of poor people across the world. Earlier this year, the mobile phone became the first communications technology to have more users in developing countries than in developed ones. More than 800 million mobile phones were sold in developing countries in the past three years (GSM Association 2006). 

As mobile phone usage expands, so may opportunities to bank the unbanked. With m-banking, low-income people no longer need to use scarce time and financial resources to travel to distant bank branches. And since m-banking transactions cost far less to process than transactions at an automated teller machine (ATM) or branch, banks can make a profit handling even small money transfers and payments (BAI 2004 and Booz Allen 2003). 

Mobile phones are already reaching the unbanked poor: in South Africa and Botswana, one-third of people who do not have a bank account—many who are poor— do own a mobile phone or have access to one (FinMark Trust 2004 and FinMark Trust 2005a). Nevertheless, questions remain about whether poor customers will adopt m-banking. For example, will low-income customers view banking through their mobile phones as reliable? Will limited schooling and unfamiliarity with technology slow their adoption of the service? 

This paper presents the first public findings on how low-income people view and use m-banking, using results of a survey of 515 low-income individuals in South Africa. Three hundred of those surveyed do not use m-banking, while 215 are customers of WIZZIT, a startup mobile banking provider. WIZZIT targets the 16 million South Africans who lack or have difficulty accessing formal banking services. 
The study was conducted in South Africa because it is the only country where an m-banking service is targeted at low-income people and where there are enough identifiable low-income customers to construct an adequate sample. 

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