Mobile/Financial Services for the Unbanked

"Mobile cellular technology continues to be the main driver of ICT growth, especially in the developing world, where average mobile penetration surpassed the 50 per cent mark in 2009."

-International Telecommunication Union Report, 2010-

If you think that 50% is a low number, let's compare the number with access to sanitation. According to UNICEF, less than 50% of the developing world's population lack improved sanitation facilities. From this statistics, we can safely assume that in developing countries, there are more people who are able to call their friends and family with their mobile phones than people who have access to a toilet.

Investments in mobile technology have enabled services to be delivered in a lower cost and coverage to be expanded. The affordability and desire to stay connected became the reason why people are more willing to purchase a mobile phone. Furthermore, the ability to buy prepaid phone credit in small amounts and transfer it to other mobile phone users when needed also became an attraction for potential mobile phone users.

The deposit and transfer ability of a prepaid phone credit became the idea behind mobile phone money services. Many providers in developing countries have expanded their business based on this technology. Some of the most successful mobile phone money transfer services are as follows:

1. Safaricom with M-Pesa and M-Kesho, Kenya

Safaricom is currently the largest mobile phone operator in Kenya. In 2007, Safaricom launched M-Pesa, a service where users can deposit, transfer and receive money from their mobile phones. Users with a Safaricom mobile phone SIM card can register as an M-Pesa user. Once users register, they can start making a transaction by SMS or deposit and withdraw money at M-Pesa agents throughout the country. In late 2010, M-Pesa has 12.6 million registered users, which is equal to 57% of Kenya's population.

In May 2010, Safaricom partnered with Equity Bank launched M-Kesho. This service allows users to transfer money between their M-Pesa accounts to an Equity Bank account that offers interest. Users are also able to access loan and insurance services. In 3 months, M-Kesho had 455,000 customers.

2. SMART Communications with SMART Money, Philippines

SMART Money, launched in 2000, is a payment card that can be accessed through a SMART mobile phone that can be linked to a MasterCard. Users are able to shop, pay bills, and transfer money between SMART Money accounts by SMS. In 2006, there were over 1 million Filipino overseas workers who use SMART Money to transfer almost $50 Million each month to their relatives in the Philippines. This number continues to grow.

3. Wizzit, South Africa

Wizzit provides a low cost, transactional bank account that enables users to make payments, transfers and pre-paid purchases using their mobile phones. Users can also apply for a Maestro debit card once they already have a Wizzit account.

The innovation in mobile phone services have allowed people who are unbanked gain access to financial services, making business and everyday life more effective and efficient. It is true what Prahalad said in his book, The Fortune at the Bottom of the Pyramid, that innovation for the BOP market must be a hybrid of the most advanced technologies that is creatively combined with existing infrastructure. In this case, it is a hybrid between mobile money transfer technology and mobile phone network.

Check out this video to understand more about M-Pesa and mobile phone money services.

Reference:

http://info.smart.com.ph/money/frequently-asked-questions/
http://www.itu.int/newsroom/press_releases/2010/08.html
http://www.unicef.org/wash/

http://www.wizzit.co.za/

Jack, W., Suri, T. (2011). The Economics of M-Pesa. NBER Working Paper No. 16721.

Prahalad, C. K. (2010). The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits. USA: Wharton School Publishing.

Prior, F., Santoma, J. (2010). Banking the Unbanked Using Prepaid Platforms and Mobile Telephones in the United States. IESE Business School Working Paper WP-839.

Radcliffe, D. (2010). Expanding Customers' Financial Options Through Mobile Payment Systems: The Case of Kenya. Bill and Melinda Gates Foundation: Global Savings Forum.