Article

Emerging economies embrace banking innovations

ATMs, mobiles and kiosks play nicely together, enabling financial inclusion in developing countries.

June 27, 2012

When it comes to reaching the unbanked in developing countries, there's room for all players. Worldwide, the unbanked population is estimated at 2.5 billion adults, including 80 percent in Africa, 40 percent in India and 64 percent in rural China.

The established means of reaching out to the unbanked in such markets is the ATM. And research indicates that over the next five years, China, India and Africa will be three of four biggest markets for deployment of new or replacement ATMs — with North America rounding out the list.

But setting up new ATM networks takes time, coordination — and a lot of money. In the meantime, kiosk operators and mobile phone carriers are developing innovative solutions designed to help bank the unbanked now, offering them ways to cash checks, pay bills, transfer money and more — with or without a bank account.

Newer banking kiosks now provide multiple services — cash deposits, check deposits, money-transfer, statement and passbook printing, and gift-card purchasing — all of which drive increased usage.

India-based Cms Info Systems has been providing the country with financial kiosks for the past two decades. Business is still booming for the company, which has projected a kiosk deployment growth rate of 10 percent between 2012 and 2013.

"A major factor in the continued growth of usage in India is due to the increasing market shift towards payment and cash-access of all types, the proliferation of locations, consumer reliance on the added functionality, speed and convenience of the banking kiosks, and the profitable strategic shift away from human-delivered service to 'self-serve,'" said J.B. Lalla, national sales manager for Cms.

Europe-based Genkiosk has seen rapid growth in its bill-pay kiosks in the Middle East and other regions that have a large migrant workforce. 

"We first saw the boom in bill-payment kiosks in Dubai," said James Oladujoye, CEO of GWD Media, the makers of Genkiosk. "Next, it was Qatar and Saudi Arabia, where there are also large populations of migrant workers and people without bank accounts or credit cards. If you could find a way not to make a journey, then line up just to pay cash to a teller, wouldn't you grasp it?"

Genkiosk is now targeting new markets for billpay kiosks that include Indonesia and the Philippines, but Oladujoye noted that the global downturn has changed the financial sector almost everywhere in the world, creating unexpected market opportunities.

"Today, you can go anywhere — even a rich country like the U.S.A. — and you will find people who are having a very hard time. We are seeing users paying their electricity bills on kiosks with cash at the very last moment before they are cut off. This is happening everywhere, not just the countries we first prioritized. It is a sign of the times."

Going mobile

Developing economies are not only embracing financial kiosks, but they are also taking to mobile banking — more so than their North American counterparts. For example, India's My Mobile Payments Ltd., a mobile payment service provider, recently launched its Money-on-Mobile mobile wallet to the Indian consumer market.

The service, which is not tied to any mobile carrier or bank, allows subscribers to pay for a wide range of goods and services by mobile phone,.

Consumers can load their MOM m-wallet with cash at one of 82,000 retail touch points (expected to be 2 million by year's end) and use the wallet to pay for electricity, gas, and mobile bills and top-ups, as well as airline, bus and movie tickets. The service has 500,000 subscribers and does a business volume of 20 million rupees ($358,422) daily.

"In a country like India where mobile phones are more widespread than the financial systems, mobile payment is the next big alternative payment method," said Shashank Joshi, managing director of Money-on-Mobile. "MOM does all paperless transactions and it is in line with RBI's vision of making 70 percent of the financial transactions paperless by end of 2012."

Another approach is being offered by Paddy Micro Investments, which last month launched a new platform to deliver financial services to Africa's unbanked. "Pesa Pata" kiosks provide low-income Kenyans access to quick loans, said an article about the service.

"We realized that there are times when people need instant cash, and going to a bank or micro-finance institution for a loan is not an option," said Joyce Wangui, a director at Paddy Micro Investments. "Other people who work in the informal sector at most times cannot even qualify for bank loans."

At the kiosk, the customer obtains a Pesa Pata scratch card valued between $3 and $59. Each card has a unique number, which is loaded onto the customer's mobile phone. An amount associated with that card number is then credited to the customer's Safaricom M-Pesa mobile money account. The borrower then has two weeks to pay back the loan at an interest rate of five to ten percent.

M-Pesa itself is a story of alternative banking success. The program was launched in 2007 by mobile airtime reseller Safaricom and now boasts 17 million users. M-Pesa ("Pesa" means "money" in Swahili) allows customers to move funds through a network of airtime resellers and retail outlets that act as banking agents. Customers can deposit and withdraw money, make transfers to others, pay bills and, of course, purchase airtime.

Mobile provider Orange operates another mobile money startup; Orange Money targets not only Africa, but also the Middle East. Orange recently announced that more than 4 million customers now use Orange Money, which provides access to basic financial services through their mobile device. Unbanked customers can transfer funds, set up a savings account and make payments using the service.

Orange Money is available to consumers in 10 countries, including Botswana, Cameroon, Kenya, Madagascar, Mali, Niger and Senegal. Eventually, Orange plans to offer the service in all of the 22 countries it serves in Africa and the Middle East.

The growth of Orange Money indicates a strong consumer appetite for a simple and practical mobile payment service where people have limited access to bank accounts but are widely equipped with mobile phones, Marc Rennard, Orange's executive director for EMEA operations, said in the announcement:

 "Orange Money plays an important role in driving growth in our activities in emerging markets, allowing us to contribute to the economic and social development of these countries, while improving our customers' loyalty."

For more on this topic, visit the mobile banking research center.