1. Mobile Banking
for
Economic
Development

2. Agenda
✓ 1 What is Mobile Banking?
2 Amazing growth of mobiles
3 Benefits
4 How prevalent it is in developing countries?
5 What is the potential impact on the economy?
6 Possibilities

3. What is Mobile Banking?
• It‟s a set of applications that enable people to use their
mobile telephones to manipulate bank accounts, store
value in an account related to their handsets, transfer
funds or even access credit or insurance products.
• It‟s about buying and selling products and services
through wireless handheld devices such as mobile
phones, or simply „saving‟ money on the handheld.
• Used to provide financial services to the banked, under-
banked and, particularly, the “unbanked”.

4. Unbanked
• 50% of the world‟s adults do not use financial services
• (Financial Access Initiative – a consortium of researchers)
• In Latin America with a population of 570 million (2006) only 14.5%
of the poor households had a savings account and only 3% had
access to credit.
• In the Caribbean less than 50% of the population have savings
accounts
• (Terjerina & Westley‟s 2007 survey)
• Barriers to financial access occurs due to:
– Need for formal employment
– Need for formal identity documents
– Need to maintain „high‟ minimum balances
– Monthly and transaction fees
– Availability of locations (Beck et al)

5. Banking Agent
• . . . . is a retail or postal outlet
• the owner or an employee of the retail outlet conducts
the transaction and lets clients deposit, withdraw, and
transfer funds, pay their bills, inquire about an account
balance, or receive government benefits or a direct
deposit from their employer.
• Banking agents can be
pharmacies, supermarkets, convenience
stores, lottery outlets, post offices, and many more.

6. A typical mobile transaction

7. Agenda
1 What is Mobile Banking
✓ 2 Amazing growth of mobiles
3 Benefits
4 How prevalent it is in developing countries?
5 What is the potential impact on the economy?
6 Possibilities

8. Current Statistics

9. Amazing growth of mobility
6 in 10 people around the word
now have mobile phone
subscriptions. Its now the
communication technology of Mobile phone
choice particularly in poor subscriptions
countries.
4.1 bn
Fixed-line Mobile phone Fixed-line
subscription subscriptions subscriptions
1bn 1bn 1.27bn
2002 2008
Source: UN Report 2010

10. Mobile Banking Subscribers
In the USA
Internet Banking Users Mobile Banking Users
50
Millions
45
40
35
30
25
20
15
10
5
0
2007 2008 2009 2010
Source: Aite Group

11. Comparison of ‘bricks and
mortar’ penetration with
Mobiles
140
Bank Branches, ATMs per 100,000 people;
120 Mobile Subscriptions per 100 people
100
80
60
40
20
0
Branches ATMs Mobile penetration
Source: World Bank

12. Mobile penetration vs Banked
Mobile Penetration Banked
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Guatemala
India
Argentina
Mexico
Columbia
Peru
China
Kenya
Nicaragua
Brazil
Chile
South Africa Source: World Bank (2007)

13. Current Statistics
McKinsey
Quarterly • 75% of the 4 billion mobiles phones currently in use
Feb 2010 worldwide are in developing countries
McKinsey
Quarterly
• 1 billion people in emerging markets have a mobile phone
Feb 2010 but no access to banking services
McKinsey
Quarterly
• In emerging markets formal banking reaches 37% of the
Feb 2010 people whereas for mobiles its 50%
Based on • Compound Average Growth rate over of Mobiles over the
Nokia 2008
estimates last 15 years has been 27% per annum.
McKinsey
Quarterly
• It’s predicted that in the next decade there will be more
Feb 2010 mobile subscriptions in the world than people.

14. Agenda
1 What is Mobile Banking?
2 Amazing growth of mobiles
✓ 3 Benefits
4 How prevalent it is in developing countries?
5 What is the potential impact on the economy?
6 Possibilities

15. Benefits to customers
• Easy access from mobile phone at low/no additional cost
• Mobile wallets, capable of being loaded up with and storing
money (aka electronic purse).
• Money transfer or simply transferring funds between
accounts
• Electronic bill payments. Becoming a „virtual debit card‟
• Rapid person-to-person payment over distances
• Notification on account changes and time critical information
• Encourages savings instead of putting money in the mattress
• Banking on the go/salaries can be rec‟d directly on the phone.

16. Opportunity to serve unbanked
New
banking
channel
Capture
Security
new
from cash
market
theft
segment
Mobile
Banking
Improve
information Lower cost
flow: to serve
bank/client
Expand
reach of
offerings

17. Mobility will also change
banking and payments
Account Person to Person to Person to Merchant
Manage- Person Physical Online to Person
ment Payment Merchant Merchant Payment
Consumer uses mobile
Payment Payment
to review transactions
on bank account and
credit card Give $5 to my
daughter. Send
relative in US $100
from Peru
Consumer uses Consumer uses
mobile to mobile to purchase a
purchase song from Nokia Merchant uses
groceries mobile to offer
coupons and
targeted ads
User estimate
global 2012 440M 330M 50M 150M N/A
Source: Juniper Research, Feb 2008

18. Overall Impact
Increase
Decrease
formal
Increase the cost
Increase merchants Increase
people’s Decrease to serve
traceability when money in
control use of the un-
in the every circulation
of their cash and
economy phone is a (e-money)
money under-
Point-of-
banked
Sale

19. Collateral benefits
Lower prices on
That’s Money Transfers
transformative
Improved Product
and Services
As a direct
result of
mobile
banking
Increased efficiency
of Banks
Increased transaction
velocity

20. Agenda
1 What is Mobile Banking?
2 Amazing growth of mobiles
3 Benefits
✓ 4 How prevalent it is in developing countries?
How prevalent it is in developing countries?
5 What is the potential impact on the economy?
6 Possibilities

21. Use in developing countries
Transformative m-banking models > than half
the adult
Service Location Provider Scope Impact
population
MPESA Kenya Safaricom, a 12 million users out Being used to buy
private company of Kenya’s 38 million goods and services,
jointly owned by 18, 000 MPESA pay bills to insurance
Vodafone and agents, six times the brokers , taxi fares,
Kenyan Govt number of bank school fees,
branches and ATM s microfinance lenders
and utility
companies; used a
savings accounts
Bolsa Brazil National govt Mechanism for govt Reduced programme
Familia social welfare cost and delays in
payments affecting delivery
45 million people

22. Use in developing countries
Transformative m-banking models
Service Location Provider Scope Impact
Smart Philippines Smart and Globe 3 million users Cash deposits
Money currently use the Cash withdrawals
G-CASH service. There is Transfers of credit to
potential for a further the prepaid account
4 to 5 million growth Inward international
in customers if remittances from
penetration rates Overseas
could match best Filipino Work
practice operators
elsewhere.
Wizzit South Division of the 450,000 people use Targets the 16 million
Africa South Africa Bank Wizzit people in South Africa
of Athens who are unbanked or
who have difficulty
accessing formal
financial services.

23. Agenda
1 What is Mobile Banking?
2 Amazing growth of mobiles
3 Benefits
4 How prevalent it is in developing countries?
✓ 5 What is the potential impact on the economy?
6 Possibilities

24. Impact on Economy
By 2012, 360M US$5billion
without US$3billion
annual direct
traditional bank annual indirect
Revenues from
accounts is Revenues from
fees for financial
expected to use voice and SMS
services
mobile money
Source: Vodaphone policy paper

25. Impact on Economy
Increases
Increases Increases effective
employment communications
circulation
of money infrastructure
[e-money]
Growth in An increase of 10
formal mobile phones
financial per 100 people
system boosts GDP
growth by 0.6
percentage points
Source: Vodaphone policy paper

26. Remittances compared with other resource flows
Source: World Bank Migration and Immigration Fact book 2011
Note: Does not include data for Anguilla, Montserrat and Bahamas

27. Remittances to Caricom
US$4 billion
Source: World Bank Migration and Immigration Fact book 2011
Note: Does not include data for Anguilla, Montserrat and Bahamas

28. Remittances
to Caricom
87%

29. Remittances
to Caricom (percentage of GDP)

30. Remittances
to Caricom 2010
% of
GDP
Jamica 13% ↑ > 43%
Haiti 31%
Guyana 33%
Source: 2010
Remittances to Latin
America and the
US$ millions Caribbean/IDB Group

31. Agenda
1 What is Mobile Banking?
2 Amazing growth of mobiles
3 Benefits
4 How prevalent it is in developing countries?
5 What is the potential impact on the economy?
✓ 6 Possibilities

32. Enabling Conditions
Infrastructure
• Need for ubiquity
• Need for availability of high capacity SIM cards
Regulation
• Protection from frauds/secure service
• Protection from money laundering/”Know your customer” requirements
Partnerships
• With banks and retail store
• Microfinance institutions (to offer other added value services)
Scalability
• Volume is Key especially as the targeted market is BoP
Establishing trust/overcoming ignorance

33. Potential Threats
to mobile banking service
• Cloning (coping the identity of one mobile phone to another)
• Hacker gains access to victim’s financial accounts
• Hijacking (hijacker takes control of communication between 2 parties)
• Gains access to victim’s financial accounts
• Malicious code
• virus/worm or other “malware” software loaded onto handset, SMS Gateway or bank’s server
• performs unauthorized processes that affects integrity and confidentiality of financial transactions
• Malware
• Malicious software inserted into system to compromise confidentiality of victims data, applications or operating
system
• Man-in-the-middle attacks
• Phishing
• Tricking victim into disclosing sensitive personal information or downloading malware through email

34. Summary
M-banking Can be additive or transformational
•
Transformational? Kenya and Philippines are
success stories
•
Economic impact Increase money supply/labour/etc.
•
Major features already exist in
Environment developing countries
•
Political will and/or bold
What is required? entrepreneurs

35. "Now this is not the end. It is
not even the beginning of the
end. But it is perhaps, the end
of the beginning.“
Sir Winston Churchill
THANK YOU!

36. Economic Impact
Burgess and Pande (2005) Mbiti and Weil (2011) Mbiti and Weil (2011)
1 “ . . . . branch 2 tA preliminary, . . 3 tThe average over
expansion into rural ., conclusion from the period January-
unbanked locations this exercise is that June 2008 of
in India significantly the currency (M0) was
reduced rural transactions 85.2 billion shillings
poverty. We show velocity of M-Pesa (Central Bank of
that this effect (either 11 or 14.6 Kenya, Statistical
was, at least transactions per Bulletin, June
partially, mediated month) is probably 2008). By
through increased higher than other contrast, our
deposit mobilization monetary calculated value of
and credit components that outstanding e-float
disbursement by are held by in August 2008 was
banks in rural households, particul 757.2 million
areas.” arly cash. shillings.