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MOBILE BANKING Riding the wave
More and more connected customers are choosing to manage their money on the move. Alex Hamilton looks at mobile take up around the world
tirelessly for ways to satisfy that most elusive desire of the customer: convenience. From the ATM in the 1960s to the advent of online banking in the 90s, customer- centric technology has been on a slow march. With the development of the smartphone, however, that march has become a lung-busting sprint. While mobile banking adoption continues to grow steadily across markets like Europe and the US, it has exploded into life in Africa and Asia. What’s behind this disparity, and will we see a similar conflagration in 2017?
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Not many would immediately think of Kenya as a hub of innovation or breeding ground for disruption. The country became the home of M-Pesa, a mobile-based money transfer service, in 2007. Six years after its launch 237 million person-to-person transactions were flying through its systems, with just under half of all Kenya’s GDP going with them.
The service has been transformative for the lives of everyday Kenyans – who use it for everything from remittance to bills, microcredit and payments – and can be seen as a very hefty shot across the bows of the banks. After all, it wasn’t a financial institution behind the mobile money service, it was a telco. In 2007, Vodafone had been considering ways to support microfinance through its platform, as access to banking and credit was limited in Kenya and moving cash was undeniably slow for the underbanked. Following an investment of $1 million in the project, 75% of those living on under $1.25 a day use M-Pesa as their go-to banking service.
Banks in Africa reacted in a predictable manner – by trying to shut it down. At first, regulations were sought to stop this upstart service from taking customers away. Soon the incumbents realised, however, that
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or many decades, banks have searched
there was much more to be gained by creating similar products to offer to the underbanked. Fire was fought with fire with transaction fees the battleground. As more and more firms entered the market, mobile money became accessible to more people. “More regulators are recognising the importance of creating an open and level playing field for mobile money services,” states mobile trade body GSMA. “Although policy improvements are still required to ensure mobile financial services reach the full addressable market and achieve financial inclusion.”
The phenomenal success of mobile money schemes can in part be put down to the explosion in cell phone penetration across the developing world. There are more than 1 billion mobile subscriptions in Africa, and with 1.3 billion in China and 1.1 billion in India, sub-Saharan Africa is not the only region where mobile money is on the rise. In Bangladesh, BRAC Bank subsidiary bKash holds a market share of 80%, while EasyPaisa, launched by Tameer Bank and Telenor Pakistan is among the top five mobile money services across the globe. Fifteen mobile money providers reported revenues of more than $1
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