Research & Analysis

Banking on Mobiles: Why, How, for Whom?

If you are a small bank thinking about doing mobile banking, then you are where Abbas Ali Sikander, the group executive director of Tameer Microfinance Bank in Pakistan, was a year ago. He wondered then: “How does Tameer get to market rapidly without the burden of physical infrastructure investments, especially in rural areas?”

Branchless banking looked attractive, and mobile phones could help. With subscription numbers at over 50 million, mobile phones were already reaching rural Pakistanis who have no formal banking access. But which rural mobile phone users should he target? And how can he use mobile phones as a channel and as a service? Abbas knew that, without a clear strategic direction, he easily could get swept away by mobile phone operators who were already well known retail brands. An even larger issue confronting him was developing an agent network, especially in rural areas, for customers to get access to cash in their accounts.

With a few exceptions, the road to implementing mobile banking is littered with discontinued mobile banking projects, failed new technology vendors, and shelved deployment plans. For customers, mobile banking presents a delicate balance between a conceptually powerful opportunity (being able to transact any time, anywhere) and practical challenges (finicky menu sequences on a small screen and tiny buttons). Many banks launched into mobile banking without a well-articulated idea of what customers’ problems were and how to address those problems.