I consider my cell phone an asset. With all those hi-tech capabilities packed into a little handset, it keeps me simultaneously connected, productive, on-time, en route, entertained and informed. And I'm not alone - more than 3 billion people around the world (almost half of the global population) have a cell phone. But what if this gadget that seems capable of reaching almost anybody and doing almost anything could also provide a mechanism for savings and asset building for individuals around the world? Despite seemingly limitless potential and enthusiasm for such an innovation, it will unfortunately be some time before this is a reality.
I've been following developments in mobile banking for some time. For years, excitement has been brewing about its potential to bank the unbanked, reach the unreachable. I've been to the events, the conferences, read the blogs and become a believer that this technology will one day help every person on the planet have a bank account, a financial identity, and an opportunity for wealth creation through access to low-cost, simple financial services. Sound hopelessly optimistic? Just check out the April 13 New York Times article "Can the Cellphone Help End Global Poverty?" or the CGAP announcement of its most recent focus note "Mobile Banking to Transform Microfinance." Pretty exciting stuff.
But after reading the CGAP report "the Early Experience with Branchless Banking," I see that the hype doesn't exactly match reality. Some disheartening observations discussed in this excellent report show that mobile banking is:
- Mainly used for payments, not savings or credit;
- Not actually used by or targeted to the poor, the unbanked, or those lacking access (geographic or otherwise) to the extent expected or hoped (less than 10% of all branchless banking customers);
- Offered to Bottom of the Pyramid (BOP) markets primarily as a result of competition among mobile operators, not by initiatives led by banks or governments;
- For regulatory, cost or other reasons, largely exclusive of MFIs (which are most capable of reaching the poorest of the poor), and;
- Because of strict Know Your Customer regulations (which require specific documentation for opening accounts), is unlikely to reach the poorest and most remote customers in the developing world, particularly those without any proof of identity.
Given all the promise and excitement around mobile banking, imagine my disappointment to read that it has "yet to demonstrate pro-poor, pro-growth impacts for households, communities and national economies."
Nonetheless, my enthusiasm for the potential of asset building via mobile phone is not tempered by these new findings. By most accounts, the capabilities are there, and so is the interest of financial institutions, governments and the development community. And the potential (and the need, and in some cases the demand) outweighs the obstacles. Eighty percent of the global population falls within range of a cell phone network and 68% of cell phone subscribers are in the developing world, but just a fraction of either of those populations have any sort of effective access to banking services. And the industry is slowly but surely finding creative ways to overcome certain obstacles. The CGAP report highlights numerous interesting examples of this, such as how South Africa's Exemption 17 from the Know Your Customer (KYC) requirements resulted in a gangbusters expansion of their mobile-banking poster child, Wizzit. And to be fair, in many cases, outcomes of mobile banking launches have largely surpassed expectations. According to the NYT article, for example, Kenya's m-pesa mobile banking program "aimed to add 200,000 new customers in the first year, but got them within one month." Now, m-pesa has over 2 million customers.
So I realize there is a ways to go before the cell phone can be used to effectively achieve financial inclusion of the poor and excluded, particularly in the developing world, much less facilitate simple, low-cost opportunities for savings and asset building. But my sense is still a hopeful one of not if but when. I encourage the asset-building field to seize upon the opportunities created by momentum around mobile banking to think deeper and more creatively about how to innovate within this space.