It can scale mountains in a single bound and wend its way down the most wretched roads. It is the mighty cell phone signaland the latest hope for bringing financial services to the worlds masses who dont have access to banks.
Grameen Solutions, an affiliate of Nobel Prize winner Muhammad Yunus Grameen Bank, this week teamed with Obopay Inc., a for-profit mobile payment company based in California, US, to bring banking to a billion poor people using cell phones.
Today, its difficult to reach these people, Obopay India executive director Aditya Menon said at a news conference in the countrys financial capital, Mumbai. If you solve that problem, you are enabling them to enter the economy. The joint venture plans to launch pilot programmes in India and Bangladesh in October and aims to reach 1 billion people globally by 2018, in large part by keeping costs ul tra lowpossibly through the help of charitable foundations.
Obopay, whose partners include Verizon Wireless, Citigroup Inc., BlackBerry maker Research in Motion Ltd and AT&T Inc., is already active in the US, where customers who want to send money pay 10 cents (Rs4.20) per transaction.
After opening an Obopay account, you can transfer money between bank accounts, credit cards and phones via text messages.
The announcement comes at a time of increasing convergence between telecom and financial services, especially in the developing world, where far more people have access to cell phones than banks. Mobile banking services have proven popular in the Philippines, Kenya and South Africa, for example.
The payoff could be big for companies providing these services. People who are now unbanked in China, India and Brazil alone could generate $85 billion in banking revenue by 2015, according to an estimate by the Boston Consulting Group.
In January, ICICI Bank Ltd, Indias second largest bank, launched a mobile banking system. State Bank of India, which has more than 100 million customers, many without Internet access, has tapped Spanco Telesystems and Solutions Ltd to set up its mobile banking systems.
Bank of India, another public sector bank, also plans to launch mobile services soon, allowing customers to transfer funds, pay bills and even buy movie tickets over the phone.
All, however, have to wait for the finalization of the mobile banking guidelines, which the Reserve Bank of India (RBI) says will be announced soon.
RBI spokeswoman Alpana Killawala says she cant specify when soon might be.
For now, then, Indian banks are restricted to offering informational services, such as account balance and auomated teller machine locations.
Killawala emphasized that RBI supports the nascent technology. She cited a pilot project with a womens group in a remote district of Andhra Pradesh, where the participants, most of whom could not read and write, found the technology convenient to use.
Mobile banking could be another area in which the developing world leapfrogs the developed world, which is often constrained by expensive, preexisting infrastructure. For example, countries such as India and Cambodia have often skipped landlines in favour of installing mobile phone technology only.
Still, hurdles remain for wider use of mobile banking. Mobile carriers must have broad enough coverage to connect urban and rural users, as many remittances come from urban migrants sending money back to their family in villages. It can also be hard to convince villagers, many of whom are new to the concept of banking, that a virtual bank is a safe place to stash their hardearned cash.
The trust must be there, Dean Tong, a managing director at Boston Consulting Group, said. Put your money here, and oh, by the way, theres nothing actually there. Thats a bit of a hardsell.