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A weapon against poverty 13 Jun, 2008

Many people in rural communities don’t have enough money saved to start a regular bank account. And even if they had an account, getting to the bank office could take days.

So it’s no surprise that smart new mobile banking services have taken off like wildfire. If you have a phone, you can save money and transfer your savings just like if you had a regular account. And it’s all in your pocket (providing that you have coverage – something which WorldGSM™ aims to solve).

Tom Standage recently summarized the value of mobile banking in the Economist:

Lack of access to financial services increases the cost of borrowing and hampers entrepreneurship. Carrying large amounts of cash around, or storing it under the bed, is insecure. And sending remittances [...] is subject to high transaction costs. Mobile banking and payment schemes can address all of these problems.”

The mobile banking revolution started in 2001, and was spearheaded by Smart Communications in the Philippines. Since then, the ideas have spread all over the world.

Aside from the more established mobile banking players, there are also grassroots initiatives based on a creative take on prepaid airtime, as mentioned in the New York Times article “Can the Cellphone Help End Global Poverty?“:

Ugandans are using prepaid airtime as a way of transferring money from place to place, something that’s especially important to those who do not use banks. Someone working in Kampala, for instance, who wishes to send the equivalent of $5 back to his mother in a village will buy a $5 prepaid airtime card, but rather than entering the code into his own phone, he will call the village phone operator (“phone ladies” often run their businesses from small kiosks) and read the code to her. She then uses the airtime for her phone and completes the transaction by giving the man’s mother the money, minus a small commission.”

We’ve researched and compiled a list of the most popular mobile banking (M-banking) services.

Most of these are based around the most basic need: sending and receiving money. But some are also connected with a standard debit card that can be used for retail purchases.

SMART COMMUNICATIONS

Smart Communications – one of the major Philippine mobile operators – offers two mobile banking services: Smart Money and Smart Padala.

Smart Money is one of the world’s first M-Banking services. It enables Smart subscribers to manage their money from their mobile phones. Person to person fund transfers only requires a mobile phone, and an additional debit card is used for ATM withdrawals and retail purchases.

Smart Padala is an international cash remittance service linked to the mobile phone.

Learn more at smart.com.ph »

GLOBE GCASH

Globe GCash, from Globe Telecom in the Philippines was launched in October 2004.

It gives subscribers access to “a cashless and cardless method of facilitating money remittance, donations, loan settlement, disbursement of salaries or commissions, and payment of bills, products and services, with just a text message”.

Apart from a wide range of personal services, GCash also offers partnerships for retailers and rural banks.

M-PESA

M-Pesa, developed by Vodafone and offered through Safaricom in Kenya, is a simple mobile money-transfer service that has become wildly popular since its launch in 2007.

The Guardian wrote about M-Pesa a year ago, and described how simple it is to use:

There is no need for a new handset or SIM card. To send money you hand over the cash to a registered agent – typically a retailer – who credits your virtual account.

You then send between 100 shillings (74p) and 35,000 shillings (£259) via text message to the desired recipient – even someone on a different mobile network – who cashes it at an agent by entering a secret code and showing ID.

A commission of up to 170 shillings (£1.25) is paid by the recipient but it compares favourably with fees levied by the major banks, whose services are too expensive for most of the population.

You can find more info about M-Pesa at Safaricom.com »

WIZZIT

South African banking service Wizzit has been in operation since 2005 and offers person-to-person payments, airtime top up, electricity vouchers and payment of accounts.

Aside from the regular mobile banking services, Wizzit also offers the iWizz internet banking service.

Learn more about Wizzit at wizzit.com »

MTN BANKING

MTN Banking is a South African joint venture between the mobile operator MTN and Standard Bank.

Very similar to Wizzit (mentioned above), the MTN MobileMoney Account includes person-to-person payments, make payments to and receive payments from any bank account in South Africa, and make account payments to various municipalities and other service providers.

More info at mtnbanking.co.za »

VNL and M-banking

WorldGSM™ from VNL helps mobile operators reach rural markets profitably.

Billions of people still don’t have access to a mobile phone. Simply because mobile coverage hasn’t reached them yet. When it does, mobile banking becomes possible.

Want to learn more?

Here are some good places to start:

And if you have something to say – join the discussion!

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2 comments to “A weapon against poverty”

  1. In the case of Smart Communications’ SMART Money, actually dates back to 2001, predating Globe’s G-Cash by three years. It received an award from the GSMA that year:

    http://www.gsmworld.com/news/press_2001/press_releases_5.shtml

    SMART Money is often advertised as a card-based service – but strictly the person to person fund transfers only require a mobile phone. The Smart Money card is used for withdrawals over ATMs and purchases in establishment that aren’t strictly Smart Money merchants but accept Mastercard payments.

    This shows the wireless transfer procedure at work:

    http://smart.com.ph/money/moneytransfer.htm

    Written by jim ayson on June 14th, 2008 at 1:52 am

  2. @Jim: Thanks for shedding more light on the topic! Much appreciated. Have changed the post to reflect your comments.

    The Smart website describes Smart Money as “The first and most innovative card linked to a wireless phone (Smart phone) and is being offered as a value-added feature to all Smart subscribers.” If Smart wants to position the service firstly as a mobile banking service, and secondly as a card, the communication surrounding it could benefit from some tweaking. But since the mobile banking market in the Philippines is one of the world’s most mature – considering that Smart pioneered the field seven years ago – it perhaps makes more sense to center the service around a card.

    Out of curiosity – do you have any market data around m-banking usage in the Philippines, e.g. total number of users, amount of funds transferred etc.? Would be very interesting to know.

    Written by Pär Almqvist on June 14th, 2008 at 5:58 am

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