Global Trend: Mobile Banking

It's interesting to see that developing countries and high-tech countries such as South Korea are all massively outpacing the US and Europe in terms of mobile technology. One important trend has been the rapid proto-typing and evolution of Mobile Banking. To see examples of success, one only has to look at Keny's M-PESA who provides services to "9.5m people, or 23% of the population, and transfers the equivalent of 11% of Kenya’s GDP each year; [and] has inspired more than 60 similar schemes across the world.[1] Additionally, in "2010, mobile banking users soared over 100 percent in Kenya, China, Brazil and USA with 200%, 150%, 110% and 100% respectively".[2]

Mobile banking is really the intersection between 3 main themes happening throughout the world:

• Successful expansion of micro- financial services products to the world’s poorest communities has proven that the ~ 3 billion “unbanked” global population can be reached in a profitable manner. Further, research such as Portfolios to the Poor and others have shown a sophisticated knowledge of personal finance even at the bottom of economic pyramid and a willingness to go beyond simple savings and debt finance. "The biggest market potential, believes Swiss Re, is in the life and health insurance sectors with the commercially viable market numbering some 2.6bn people with daily incomes of between $1.25 and $4. Swiss Re estimates the premium income potential of this income segment at $33bn".[3]
• The rapid expansion of mobile technology in only the last decade has brought 2.5 billion people online enabling a customer base of 1.1 billion mobile bankers by 2015 [4] . Solar powered cell towers, wifi, and other technologies enable even remote places to be connected.
• The search for new markets by all major firms from P&G to Citigroup and the promise of double digit growth in emerging markets has resulted in new and more remote distribution channels, new understandings of rural needs, and large amounts of academic data to guide investment decisions. 

For firms that wish to move into this market, important questions arise around partnership or ownership. In the USA for example, Google is trying hard to launch Google Wallet to allow consumers to use their mobile phones for purchases in stores. Google is a software company, not a financial services institution (FSI) and yet they are pioneering this technology. However, doing so requires partnerships with manufacturers such as Samsung for special hardware, Citi and MasterCard for financial products, Sprint for access to telecom networks, and many other partnerships along the way. And the entire process has been fraught with resistance from major institutions such as Verizon[5] and rumors have said PayPal, Apply, Amazon, and Facebook are all on their way to developing competing systems.[6] In other countries, it may simply be easier for an FSI to simply create the software in-house depending on regulation or even the availability of existing services. In fact, the lines are beginning to blur so much between what a firm categorizes itself as and what products it offers, that it could be said that an FSI now also has to think of itself as a technology company.

There is no doubt that this trend will continue to propagate at incredible rates. The opportunity for customer convenience combined with cost reduction for firms is impossible to pass up. Here is a brief timeline of the action so far:

A BRIEF TIMELINE:

• Pre 1999 SMS based banking in US included ability to check savings account balance and recent transaction history.
• 1999 – WAP internet available for mobile phones, European banks launch internet banking.
• 2003 – Vodafone uses grant from the UK to develop mobile money transfer tech platform M-PESA in Kenya. Launches in 2007 as is the gold standard for proving it can be profitable.
• 2009 – Zain launches mobile money transfer in Kenya.
• 2009 – Telenor Pakistan launched mobile banking solution.
• 2009 – Syngenta Foundation uses M-PESA to launch mobile property (farm crop) insurance in Kenya.
• 2010 – Dutch-Bangla launches first mobile banking in Bangladesh.
• 3/2011 – MTN and Hollard Insurance launch mobile life insurance in Ghana.
• 7/2011 – ZONG launches mobile accidental insurance in Pakistan.
• 9/2011 – British American Insurance (4th largest insurer in Kenya) launches low-cost accident insurance in Kenya with Safaricom (Vodafone) and Equity Bank (JV now called M-KESHO) using M-PESA.

[1] http://www.economist.com/node/16319635
[2] http://en.wikipedia.org/wiki/Mobile_banking
[3] http://www.vrl-financial-news.com/wealth-management/life-insurance-intl/issues/lii-2011/lii-257/micro-insurers-turn-to-technol.aspx
[4] http://www.prweb.com/releases/2010/02/prweb3553494.htm
[5] http://techland.time.com/2011/12/28/looking-forward-to-2012-the-continued-demise-of-cash/
[6] http://technorati.com/business/article/google-fighting-for-our-wallets/