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Mobile money expected to revolutionize banking in developing world
September 27, 2009
The Economist reports that mobile phones have quickly become tools of economic empowerment for the world's poorest nations, overcoming infrastructural challenges that have previously hindered economic development.
The advent of mobile, however, now allows information to move freely, making markets more efficient and opening doors for entrepreneurial companies that are thinking outside the confines of traditional economic avenues.
According to the World Bank, an extra 10 phones per 100 people in a developing country boosts GDP growth by 0.8 percentage points. More than 4 billion handsets are now in use worldwide, three-quarters of them in the developing world, The Economist reports. In Africa, four in 10 people now have mobile phones. And mobile money is making its mark, since it allows cash to move at the same speed as a text message.
In developing markets, mobile-money services allow small retailers to act like bank branches: They accept cash and can credit that cash via text message to a mobile-money account. M-PESA, which launched in 2007, today has nearly 7 million mobile users in Kenya, a country of 38 million people, 18.3 million of whom have mobile phones, according to The Economist.M-PESA first became popular as a way for young, male urban migrants to send money back to their families in rural areas. It is now used to pay for everything from school fees to taxis. Similar schemes are popular in the Philippines and South Africa.
And the advent of M-PESA has boosted economic growth: The incomes of Kenyan households using M-PESA have increased between 5 percent and 30 percent since they started mobile banking, according to a recent study.
The progress of mobile banking, however, has been impeded by banks, The Economist says, because they fear competition from mobile operators. Regulators also have concerns, since many worry that mobile-money schemes will be abused by fraudsters and money launderers.
But M-PESA's success in Kenya has proven mobile money's potential, and its benefits are starting to be more widely appreciated. More enlightened regulators are no longer insisting that these services meet the rigid rules for formal banking. And some banks have come to see mobile money as an opportunity, offering them a chance to partner with operators.
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