Whodunit? The race for m-banking

While thriving in Africa and countries like the Philippines, mobile banking is gaining slow acceptance in developed economies such as the US, where leading banks are still considering its implementation. Asia and Africa are the forerunners leading the race for implementation of a viable financial service infrastructure for mobile phones, as leading banks in these countries are operating mobile banking. The European flavor for m-banking is a more cautious, protected system that is unlikely to break into a sudden sprint. UK's mobile banking network MONILINK was formed in 2003, but clocked up its first 25.000 users as late as last November. Australia has recently introduced m-banking services which are also a far cry from its potential, being one of the strongest internet banking countries.

The mobile phone is increasingly being recognized by banks in Asia and Africa region as a cost effective channel to deliver banking and trading services. A fellow blogger writes about the widespread use of m-banking in Africa. In Asia's technologically more advanced countries like Korea, Singapore, Hong Kong and Japan, mobile phone market penetration is above 40 percent and accessing customers through this unique and highly personal communication tool is proving highly successful. A report by AC Nielsen last year reported that uptake of mobile banking services in China is below par, though it was one of the first to enter the race. As of right now, India is positioned to have the highest growth rate of mobile banking in the world.

Sure enough, India has recent headlines announcing foreign banks such as Barclays having launched these services as recently as this month. Other countries that have joined of late the race are Brazil, Poland, and even Pakistan, but are likely to have to work around snags. European banks are increasingly focusing on efficiency. The Finnish bank NORDEA has reduced its distribution costs by 30 percent using mobile banking, for instance. And the French Société Générale uses mobile banking as a cost-effective distribution and revenue channel, circulating stock exchange news for a monthly fee of four euros. Malaysian mobile operator Celcom has teamed with mobile payment systems provider Paybox to deliver mobile banking and payment services. Nigeria has only 225 ATMs for a population of 129 million, but mobile phone use for banking services has grown dramatically, with some highly advanced functions.

The fact that mobile phone financial transaction are ideally suited for micro-payments and involve smaller amounts or potential loss make it more comfortable for users than using credit cards or disclosing personal information on the internet. Mobile banking is also the solution for the un-banked market of developing countries with a few payment alternatives to cash. For example, in the Philippines monthly salaries are credited to mobile accounts in the absence of personal bank accounts.

Users of mobile banking solutions are mostly our Generation Y, according to a study by Celent. The Gen-Yers are also more likely to be Asian rather than American, since a higher proportion of Asian Gen Y are early adapters, in my opinion. This may be due to easier access to new technology and a wider range of technology to choose from.

However, the winners are likely to have a business model with one key focus: simplicity. Users should ideally not have to download any apps, remember SMS syntax or go through a complex series of processes in order to make a transaction. The services should be able to be accessed from the most basic of mobile phones, hopefully with voice recognition or similar verification technology. The right kind of marketing can then easily build a critical mass of users, but the back end processing capabilities, risk management framework and effectively delivery of services will ensure its sustainability.

The master plan?

This video presents a very interesting outlook for the face of mobile banking in the near future.

Let’s begin with the basics

Many believe that mobile users have just started to fully utilize the data capabilities in their mobile phones.

Mobile phone penetration is very high throughout the world in all major countries in the Asian subcontinent, across Asia, Europe and the United States, as well as Africa and Australasia.

This opens up huge markets for financial institutions interested in offering value added services. With mobile technology, banks can offer a wide range of services to their customers from transferring funds on the go, paying bills, making purchases and even stock trading.

Here in Pakistan, a number of banks offer mobile banking services such as SMS alerts and min statements, though only one progressive bank – United Bank Limited – allows financial transactions through their mobile banking infrastructure.



Like you, I’ll be using this blog to discover more about the mobile banking universe by sharing my research. This plot can be quite an interesting one.