By Tony Mwai
Ten years ago, if workers in Kenya wanted to send money to relatives across the country, they had two options – either pay a courier to take their wages back to their village or travel themselves, often spending a hefty portion of the wages on bus fare and then losing a day’s pay.
Today, in a just under a second, over 14 million Kenyans can send and receive money to each other in whichever part of the country they are, all thanks to mobile money transfer solutions.
Over the last five years, more than $16 billion has moved between phones in this country, indicating the untapped demand for access to reliable and affordable financial services in the palm of Kenyans.
With similar stories being replicated across the continent, it is not far-fetched to say that over the last five years, mobile financial solutions have allowed Africa to leapfrog its developmental hurdles to become one of the most advanced adopters of mobile money solutions globally.
Mobile banking has taken off in many African countries, but especially where it can take a significant amount of time and money to get to the nearest bank branch office. Furthermore, the cost of traditional banking in Africa is high for many citizens and banking regulations are strict. For example, many banks require proof of regular income before an account can be opened – preventing many people from obtaining and maintaining bank accounts.
The high growth and penetration rates of mobile telephony inAfricaare transforming cell phones into “mini” banks. Mobile banking is becoming an increasingly affordable and cost effective means of bringing large portions of the population, heretofore excluded, into the financial services market.
According to the World Bank, the vast majority of African families – close to 80 percent – do not have formal bank accounts. Mobile phones, however, are almost everywhere. By some estimates mobile penetration in South Africa alone is at about 90 percent.
In developing countries with a low banking and high mobile phone penetration, mobile wallets can bring basic payment services to those under, as well as un-served, in banking. Mobile banking provides a powerful way to deliver services to citizens who have a cell phone but no bank account – breaking down geographical constraints and offering consumer advantages such as immediacy, security and efficiency.
Often starting with money transfers, mobile banking services become more sophisticated over time to include paying for bills and goods, pre-paid debit cards, ATM withdrawals and salary disbursements.
As mobile banking continues to rise in popularity, financial institutions will have to focus on making the consumer transition from mobile, to branch, to call center, as seamless as possible, which can be a difficult proposition. And with so much competition and no universally-accepted delivery model, how can banks compete for the individual consumer?
For starters, mobile banking technologies that provide a strong return to financial institutions enable businesses to address the security concerns of consumers. New business models are also emerging that address consumer needs, while delivering banking services through mobile money platforms.
Furthermore, partnerships between banks, financial institutions, microfinance institutions and the mobile industry are emerging to support a single integrated framework to cut costs in order to provide consumers with the convenience of banking from home, the farm or other remote areas.
An effective mobile wallet solution can help banks grow and generate new sources of revenue, help merchants reduce payment processing costs and fraud risk, and make the payment process safer, faster and more convenient for consumers.
Customer account information stored directly and securely in the cloud, instead of shared over the phone and passed into the POS terminal, can enhance the level of security as well as reduce the risk of fraud. The cloud-based approach gives consumers peace of mind that their information is private and their transactions are safe. In addition, retailers don’t need to contend with the cost and complexity of maintaining PCI compliance for cloud-based mobile wallet transactions.
As banks are recognizing the potential of reaching millions of prospective new customers, the popularity of mobile banking in Africa could have implications beyond linking the non-banking public to financial networks.
Not only is mobile banking filling the gap in the financial services market, it is enabling a growing number of people to access financial services for the first time, enlivening the entrepreneurial spirit to drive economic growth throughout the continent.