Saturday, November 4

Phone Banking at the Next Level

Have you thought about settling your bills, checking balances and transferring money via your mobile phones? It's already a reality in Japan and Korea, but it has the greatest potential in developing regions such as Africa, Eastern Europe and Asia.

There are already half a million people in South Africa using the mobile phone as a bank*. Encouraged by the uptake, banks are teaming up with mobile companies to offer mobile banking services to those who have never touched an ATM machine nor visited a bank. Meanwhile in Philippines, mobile phone banking is available locally and it has a great potential to cater the thousands of Filipinos who work abroad and remit money to their homelands on a regular basis.

Great for banks and mobile companies...
This is certainly good news to innovative banks and especially to mobile companies, which has seen mobile phone usage reaching saturating points in many countries. Think about the millions of migrant workers looking for cheap(er) ways of remittance: Eastern Europeans working in EU, Mexicans in the US, Chinese from inland provinces working in big coastal cities... According to a UN estimate, the global remittance amount is more than US$230 billion, of which 20% is lost through bank charges and fraud*. What an inefficiency (and opportunity)!

... but bad for Western Union
If mobile phone banking is a success, it would be a big, big challenge to Western Union (ticker: WU), which specializes in remitting money to remote places and charges a hefty fee (can reach 30%+ of remitted amount). The company is still enjoying a double-digit growth and a >20% profit margin, but the threat is obvious.

Not happening in mass scale yet
For mobile phone banking to take off across countries and continents, there are still a lot of hurdles, e.g. infrastructure, standard platform, security, money laundering issues and time needed for the general public to accept this radical technology. No one knows when it will happen, but when it does it is going to be huge.

* source: The Economist (Oct 28 edition)


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