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Banking by phone for the poor

Banking by phone for the poor
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First Published: Fri, Aug 08 2008. 05 36 PM IST
Updated: Fri, Aug 08 2008. 05 36 PM IST
New Delhi: It can scale mountains in a single bound and wend its way down the most wretched roads. It is the mighty cell phone signal and the latest hope for bringing financial services to the world’s masses who don’t have access to banks.
Grameen Solutions, an affiliate of Nobel Prize winner Muhammad Yunus’ Grameen Bank, this week teamed with Obopay Inc., a for-profit mobile payment company based in California, to bring banking to a billion poor people using cell phones.
Pilot programmes to be funded partly by charitable organizations
The joint venture plans to launch pilot programmes in India and Bangladesh in October and aims to reach one billion people globally by 2018, in large part by keeping costs ultra low - possibly through the help of charitable foundations.
Obopay, whose partners include Verizon Wireless, Citigroup, BlackBerry maker Research In Motion Ltd. and AT&T Inc., is already active in the US., where customers who want to send money pay 10 cents per transaction. After opening an Obopay account, you can transfer money between bank accounts, credit cards and phones via text messages.
Obopay founder and CEO Carol Realini did not say what the transaction fees would be for India and Bangladesh. The announcement comes at a time of increasing convergence between telecom and financial services, especially in the developing world, where far more people have access to cell phones than banks. Mobile banking services have proven popular in the Philippines, Kenya and South Africa, for example.
The payoff could be big for companies providing these services. People who are now “unbanked” in China, India and Brazil alone could generate $85 billion in banking revenue by 2015, according to an estimate by the Boston Consulting Group.
India-specific examples
In January, India’s ICICI Bank Ltd., launched a mobile banking system. The State Bank of India, which has more than 100 million customers, many without Internet access, has tapped Indian telecom Spanco Telesystems & Solutions Ltd. to set up its mobile banking systems.
Bank of India, another public sector bank, plans to launch mobile services soon, allowing customers to transfer funds, pay bills and even buy movie tickets over the phone.
Mobile banking guidelines yet to be finalized
All, however, have to wait for the finalization of India’s mobile banking guidelines, which the RBI says will happen soon. Till then, Indian banks are restricted to offering informational services, like account balance and ATM locations.
Mobile banking could be another area in which the developing world leapfrogs the developed world, which is often constrained by expensive, pre-existing infrastructure. For example, countries like India and Cambodia have often skipped land lines in favor of installing mobile phone technology only.
Rural cell coverage easier
Similarly, it’s far easier to bolster rural cell coverage than it is to build countless bank branches to serve a billion people tucked away in remote areas. Already more than three billion people have mobile access, with emerging markets responsible for 85% of new connections, according to the GSM Association, a mobile phone trade group.
Still, hurdles remain for wider use of mobile banking. Mobile carriers must have broad enough coverage to connect urban and rural users, as many remittances come from urban migrants sending money back to their family villages. It can also be hard to convince villagers, many of whom are new to the concept of banking, that a virtual bank is a safe place to stash their hard-earned cash.
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First Published: Fri, Aug 08 2008. 05 36 PM IST