Friday, May 13, 2011

Bringing mobile banking to the masses

Posted by Mark Brousseau

The number of unbanked or underbanked mobile subscribers around the world is projected to reach ~2 billion by 2012, according to research from Oliver Wyman and PlaNet Finance Group. Today, only around 50 million subscribers use mobile money services. Most of these deployments have been focusing on first generation mobile money products such as remittances, airtime top-up, bill payments and loan repayment.

The transformational impact of mobile money is expected to come from second generation financial services such as micro-savings, micro-credit and micro-insurance, especially in countries with less than 10 percent retail banking penetration, according to Oliver Wyman. Both telcos and financial institutions should benefit from the take-up of these products, as they reap expertise from complementary skills and deliver more value to customers, the research firm says.

However, the formula for success is not straightforward.

Two distinct models are emerging:

... The distribution of microfinance through mobile money via existing microfinance banks

... The distribution of microfinance through a virtual microfinance bank, operating as a pure mobile player.

“The benefits of these models include a more than twofold increase in access to banking, 20-50 percent lower operational costs for the microfinance institution and revenue or market share benefits for the Mobile Network Operator,” says Arnaud Ventura, co-founder and vice president of PlaNet Finance Group.

In a report, PlaNet Finance Group and Oliver Wyman conclude:

... Mobile Microfinance can have a significant impact on increasing financial services access for unbanked subscribers by eliminating all the disadvantages of physical bank branches. The benefits of this service are both social and economic.

... It is a cost-effective way for banks and MFIs to reach the masses by capitalizing on the widespread penetration of telecom distribution networks. PlaNet Finance and Oliver Wyman also see a new breed of intermediaries emerging that allow partners on both sides to interact smoothly by playing the “interconnection” role, making money on transactions rather than the spread.

Greg Rung, partner at Oliver Wyman said “PlaNet Finance and Oliver Wyman are convinced that, agreeing on a long-term vision, all stakeholders, from banks to distributors to regulators, need to come together to design an adequate offer and build a win-win model that can address all challenges successfully.”

What do you think?

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