Last week we introduced this series that will highlight the different ways mobile phones can combat poverty. This week, we will discuss the first example of a poverty-fighting mobile transaction system. Mobile money transfer services provide financial inclusion benefits for the unbanked, and are the most heralded impact of mobile penetration.
Mobile Money Transactions
Perhaps the most well-known mobile transaction systems that engage the base of the pyramid are mobile money transactions. The various flavors of mobile money transactions (mobile payments, m-wallets, mobile banking, etc.) have revolutionized the way users send and receive money throughout emerging markets, bringing millions of previously unbanked users closer to full financial inclusion.
Safaricom’s M-PESA, the golden beacon of the mobile money industry, set a standard in Kenya that others are trying to follow. The telecommunications company released its mobile money service in March 2007 and currently has 14 million users in Kenya alone. Today, nearly 17% of Kenya’s GDP flows through M-PESA, even though many of these users do not have bank accounts. The resounding success of M-PESA has sent a message across the globe. There is tremendous demand from the unbanked for financial efficiency and cashless transactions.
Inspired by the success of M-PESA, others are quickly joining the movement. Competing telecommunications companies from Manila to Mexico have created similar models and even banks are deploying mobile payments with branchless banking models to serve the rural poor. Whatever the approach, mobile money transactions give the unbanked the opportunity for financial inclusion, including secure, cashless financial transactions. In most cases, users can transfer money, and pay bills with a simple and secure text message, or deposit/withdraw cash at any participating agent.
There are also less obvious benefits that come from the growth of mobile money transactions. Agents, who are usually small shopkeepers, enjoy increased revenue streams and increased customer presence in their stores. Because the money is “e-float” and not cash, the risk of funds being lost or stolen decreases significantly as well.
However, for real financial inclusion, mobile transaction systems are going to have to expand their services beyond simple cashless transactions. Some of this is happening already. For example, Safaricom recently partnered with Equity Bank to develop M-KESHO in Kenya, a product that provides M-PESA users with interest bearing mobile savings accounts. Another example comes from Simpa Networks, an ID portfolio company that leverages mobile technology to finance the costs of solar home systems. The Simpa Regulator allows users to make payments with their mobile phone to pay off the cost of the system over time. In this way, mobile transactions can expand one of the most important aspects of financial inclusion, credit.
Check back next week for examples of information exchanges made possible with mobile phones.
Update: