How Mobile Financial Services are Transforming Livesli
Mobile Financial Services enable mobile phone users to access a variety of financial services, through a mobile phone. Services already offered in different markets include Mobile Banking, where the user needs to have a bank account to access account details via the mobile and perform transactions, Mobile Payments, where the user may or may not have a bank account, yet can make payments using various credit or debit mechanisms, such as a credit card or a mobile wallet and Mobile Money, where the user has a mobile wallet holding an electronic stored value, which can be used to make funds transfers, top up a mobile account and make payments.
Whilst mobile financial services have taken off in some markets, in many markets, initiatives are now underway. A reason for differing levels of growth lies in the complexity of the mobile financial services. The mobile financial services’ value chain is complex, incorporating wholesale arrangements between mobile operators and financial service providers on one side and the retail distribution network, which serves customers, on the other.
In emerging markets – and depending on the regulatory situation, mobile operators and banks have the opportunity to extend access to financial services to unbanked and underbanked segments. Beyond payments, transfers and top ups, providers of mobile financial services can attract new customers to a wider portfolio of financial products — such as deposits, loans, and insurance — deepening access to financial services for a large proportion of the underserved mobile subscriber base. Seen at a macro level, this creates a potentially powerful engine for economic growth – drawing cash into bank accounts, where it can provide low-cost funds for lending and investment.
Mobile operators in many emerging markets have set up an extensive airtime distribution network and have large customer bases, of which a significant proportion is low-income customers. Given the high penetration of mobile phones even in rural areas, mobile operators can leverage their existing network and distribution infrastructure to provide financial services to unbanked subscribers. Enabling convenient and affordable access to financial services has a transformative effect on the lives of individuals – rather than travel several hours to pay an electricity bill and in so doing suffer a loss of earnings, mobile phone users in markets such as Bangladesh and Tanzania, can now make payments via their mobile phone. Similarly, in Cambodia, garment factory workers now receive their salaries into the mobile wallet account, transferring funds to family in the villages simply and affordably.
It is also important to note the factors that will help mobile finance gain widespread acceptance and usage. Key prerequisites are a broad regulatory environment that supports the use of mobile financial services, enforceable financial contracts and the fostering of widespread access to telecom policies. In addition, privacy and data security must be ensured.
Security, reliability and performance are critical factors in ensuring the successful extension of mobile financial services uptake. This is essential as the mobile channel must provide an efficient and timely response for transactions, have adequate capacity to support acceptable performance and be able to recover quickly from disruptions. The provider of mobile financial services must be able to authenticate the identity of customers, ensure transactions are legitimate and appropriately protect the confidentiality and integrity of financial transactions.
From India’s regulatory perspective, last June, TRAI and the RBI reached an initial agreement to ensure a smooth roll-out of Mobile Banking. TRAI was to deal with all interconnection issues while RBI would look into banking aspects, such as daily transaction limits, KY