Mobile internet has given even the Great Unbanked an intimate relationship with their money.
As 'technological leapfrogging' -- the phenomenon of developing countries bypassing certain technologies like land-line phones to go straight to cellphones -- occurs, developing countries may simulataneously leapfrog physical currency:
- South African company Wizzit has created a mobile banking service, which targets the 'unbanked' and allows users to perform range of transactions using most mobile devices -- including basic handsets -- and can interact with ATMs to allow cash withdrawals.
- UK mobile communications giant Vodafone has used its expanding presence in Africa to offer users the ability to send and receive remittances.
Mobile banking has enormous potential in Africa, and other developing regions, precisely because mobile telecommunications infrastructures have become far more extensive than banking systems.
More than 80 million Africans now have cellphones, more than twice the number that have land lines, according to the International Telecommunication Union. According to forecasts from analyst firm Gartner, 50% of mobile operators in emerging economies will support mobile payment and banking services and act as essential partners for retail banks in those regions by 2010.
This is likely to drive increasingly sophisticated and innovative systems to allow national and international transactions to be carried out using mobile devices. Users themselves are likely also to come up with innovative ways to send, receive and spend funds. And not a coin need change hands.
Nonetheless, a number of potential problems continue to exist with mobile banking services:
- Usability. Limitations such as small screen sizes and keypads will remain difficult to overcome.
- Regulation. When banking meets the mobile world, two different sets of regulatory environments collide.
- Compatibility. Mobile banking applications are likely to face compatibility issues because of a range of mobile internet standards and platforms. In many developing regions, large numbers of users are likely to continue to have basic handsets, which may not be internet-enabled.
- Security. Banking services for basic handsets, which are often shared and/or rented out, could expose security risks, given mobile phone vulnerability to loss and theft.
- Cost. In the case of services such as Wizzit, users are charged per transaction. This has the potential to be relatively expensive, and may put off consumers, particularly in countries with better developed banking systems.
Issues of cost and security mean that mobile banking is likely to be widely used in contexts where alternatives are lacking, particularly for the 'unbanked'. This is likely to drive increasing use of mobile phones for purposes such as money transfer, which, in turn, will see mobile phone credit being used increasingly to pay for small purchases.