As recently as two years ago, mobile banking in the developing world was an object of skepticism among financial insiders. While proponents argued that cell phones could revolutionize personal finance in poorer countries, regulators warned of money laundering and most bankers worried that low customer balances wouldn't be worth the transaction costs. Many thought of "m-banking" as a niche product that, at most, could maintain the loyalty of existing traditional bank customers. Few imagined it might bring savings, credit, and liquidity to those who don't belong to a bank in the first place.
The M-PESA cell phone finance company offers clients financial transfers and withdrawals via mobile phones. The spontaneous and unplanned explosion of m-banking in the developing world has gone well beyond expectations. Photo: Brent Stirton/Getty Images.
Now, however, the doubters have been proved entirely wrong. The spontaneous and unplanned explosion of m-banking in the developing world has gone well beyond expectations. And the effects for development could be monumental.
Three years ago, Safaricom, the Kenyan subsidiary of Vodafone, launched "M-Pesa," a mobile money-transfer service that essentially allowed vendors of mobile airtime cards — there are apparently 100,000 such vendors in the country — to institutionalize what they had been doing informally. M-Pesa wasn't the first service of this kind, but it has become the most successful by far. Today, M-Pesa has roughly 10 million customers in Kenya, 40 percent of the adult population. [snip]
Other m-banking products that have met with surprising success are Celpay in Zambia and Gcash and Smart Money in the Philippines.
By 2012, mobile banking operators could see nearly $8 billion in revenue just by expanding their services to the currently unbanked, according to an estimate by the Consultative Group to Assist the Poor (CGAP). In the developed world, m-banking is gaining traction in Australia, Britain, Korea, and Singapore, as well as in the United States.
One scholar who has studied M-Pesa, Olga Morawczynski of the University of Edinburgh, estimates that rural households that are mobile money subscribers see their incomes increase 5 to 30 percent. And though an increase in income is often only a short-term poverty solution, savings and asset-building, as encouraged by programs like M-Kesho, move people toward sustainable economic independence in the long term.[snip]
No matter what happens, however, in the context of global development the financial success of m-banking is already one of the greatest success stories of recent years. As U.S. Secretary of State Hillary Clinton said in January, these technologies are "allowing billions of people to leapfrog into the 21st century after missing out on 20th-century breakthroughs." And all it takes is a keystroke
Jamie Zimmerman is director and Jamie Holmes is program associate of the Global Assets Project at the New America Foundation.