New infoDev Report on m-Commerce

The proliferation of mobile communications in developing countries has the potential to bring a wide range of financial services to an entirely new customer base. The infoDev report, which focuses on the use of mobiles for micro-payments in the Philippines, found that mobile-enabled commerce, or m-Commerce, can address a major service gap in developing countries that is critical to their social and economic development.

In many developing countries, particularly in rural areas, access to financial services is limited. A large proportion of the population is excluded from formal banking systems and makes payments entirely using cash, which is far less secure and flexible than electronic payment mechanisms. However, in the Philippines, 3.5 million people are using a service that allows them to transfer money over the two major mobile networks operated by SMART Communications and Globe Telecom.

The experience in the Philippines shows that m-Commerce has the capability to bring advantages to all stakeholders:

• For users - an opportunity to become engaged in the formal banking sector, to facilitate and reduce the costs of remittances, and to enable financial transactions without the costs and risks associated with the use of cash, including theft and travel to pay in person
• For operators - a significant increase in text messaging revenues and a large drop in customer churn
• For the banks - an increase in their customer reach and the added cash float available to the bank
• For the retailers - added business opportunities through the sale of prepaid account credits
• For micro-finance institutions - the ability to advance funds into remote areas and have regular repayments that do not significantly inconvenience the user
• For service industries and utilities - the ability to get payments electronically from a significant portion of the overall population

In addition to providing many answers about this new service application, the report raises many interesting questions about the users and how they are benefiting from this service. These questions will be explored during the next phase of infoDev’s work in this area, the scope of which will be decided in consultation with IFC, the GSM Association and its donors and other partners.