Mobile phone banking (m-banking)- a key note in promoting development today

Though features vary, generally customers are able to purchase credit for their mobile phones which they can use for phone calls, text messages, retail purchases, bill payment and remittances. Customers can also have their paychecks deposited directly to their mobile phone account.

M-banking has already made it big in countries like Japan, Korea and Singapore, though it’s still in initial stages in Africa. It has brought millions of poor people with no banking services into the world of cashless purchasing; to most which is a dream come true.

It is also a good option that offers great potential for reaching poor people because most of them already have access to mobile phones. Mobile networks can reach remote areas at low costs and the headset can easily be adapted to handling banking transaction as compared to procedures in formal banking institutions.

According to the International Telecommunications Union, African mobile phone subscribers grew from 8 million to nearly 80 million from 1999 to 2004; and is expected to increase to 250 million in the next 4 years (Progressive Policy Institute).

Though currently at a young stage, things are moving fast with m-banking worldwide. In the Philippines, the two largest mobile phone operators, SMART Communications and Globe Telecoms already launched mobile banking solutions aimed at the poor. In March 2006, Globe Telecoms had approximately 1.3 million registered users for its G-Cash payments system, which allows customers to use their mobile phones to make financial transactions including repaying loans, transferring money to friends and relatives across the world and paying for goods and services. G-Cash now handles about US$100 million of transactions per day. SMART Money offers many of the same features as G-Cash, but the most popular feature, SMART Padala (send), enables over 1 million Filipino overseas workers to transfer almost US$50 million per month to their relatives in the Philippines (DFID).

In most American and European countries, customers already seem interested. The real potential of m-banking is to make basic financial services more accessible to millions of poor people across the world.

Good news is that the mobile phone became the first I.T to have more users in developing countries than in developed ones. So chances are high that m-banking will make it big in such nations.

It also has potential of serving as a travel replacement since people no longer need to move long distances to access banks or other formal financial institutions. In South Africa and Botswana, one third of people who do not have a bank account (most of whom are poor) do own a mobile phone or have access to one (FinMark Trust 2004 and FinMark Trust 2002a).

In Uganda, financial institutions like StanChat Bank, Mobitrix and United Bank of Africa launched m-banking. This will enable customers to access banking services 24/7. MTN, the largest telecom in the country, already launched the service and its being fully enjoyed by of its customers to make financial transactions.