Cell Phone Banking Takes Off in Developing Countries
Mobile banking first took off in 2001, when phone operators Globe and Smart both began offering mobile payment plans to clients in the Philippines. Instead of paying their bills via traditional bank transfers or cash, customers were now able to send money via text message. All they had to do was type the amount owed into an SMS, and send it to the recipient, who could then go to an authorized agent, and withdraw the payment in cash.
Since then, the practice has caught on throughout the poorest corners of the world. In Tanzania, doctors send money to women in need of transportation to the nearest hospital. In Afghanistan, government officials use identical means to pay police officers, thus minimizing the opportunity for corrupt middlemen to get a cut. Since December 2008, more than one million people have subscribed to mobile banking services provided by Orange, a telecom subsidiary of France Télécom. And that was from only six African countries: Mali, Senegal, Ivory Coast, Madagascar, Kenya and Niger. According to Berg Insight, 78-percent of mobile banking clients live in Asia, Africa, the Middle East and Latin America. The U.S. and Europe, meanwhile, continue to rely more heavily on computer-based Internet banking.
With more Western consumers now using smartphones, analysts expect mobile banking to soon take off among American consumers, who now comprise just 10-percent of the sector's global clientele. But, as cell phone prices continue to drop, there's still plenty of room for expansion in the developing world -- where, logically enough, formal banking sectors are comparatively undeveloped. "Because so much of the world is under-banked, consumers want these services very much," said Amit Mattatia, chief executive of Trivnet, an Israeli company that produces financial software for mobile providers. And, with more reliable and affordable financial channels, many of the world's most needy (as the UN reminded us a few weeks ago) might just find that extra economic boost they so desperately need.