Mobile Phone Banking and Low Income Customers
The Consultative Group to Assist the Poor (CGAP), United Nations Foundation (UN Foundation), and The Vodafone Group Foundation (VGF) have released the first public findings of a study titled "Mobile Phone Banking and Low Income Customers: Evidence from South Africa" (PDF) that studied on how low-income individuals in South Africa use mobile phone banking ("m-banking"). The findings show that m-banking can be up to a third cheaper for customers than the current banking alternatives, and users value the service for its security and easy use. However, this study shows more needs to be done to address negative perceptions about the cost and effectiveness of mobile phones and m-banking. The study concludes "with millions of mobile phones already in poor people’s hands, CGAP, UNF, and VGF see tremendous potential in the power of network operators, banks, and new entrants to deliver financial services through this channel.
"Mobile phone ownership is exploding in developing countries, presenting a tremendous opportunity to deliver financial services cost effectively to the nearly three billion people who do not currently have bank accounts," said Elizabeth Littlefield, CEO of CGAP. "And that matters because financial services can help poor people increase household incomes and build assets, making them less vulnerable to crises so that they can ultimately plot their own paths out of poverty. Globally, there are more than 2.5 billion mobile phones, more than half owned by people in developing countries."The study, "Mobile Phone Banking and Low Income Customers: Evidence from South Africa," is based on surveys of 515 low-income South Africans, including 300 who do not use m-banking and 215 customers of WIZZIT -- a "virtual bank" that has no branches of its own, but instead offers a bank account which is accessible via mobile phone and debit card. The company targets the 16 million South Africans (48 percent of adults) who do not bank or have difficulty accessing formal banking services.
The study shows low-income m-banking users value the service for its affordability, ease of use, and security. The study also finds m-banking is up to one-third cheaper for the customers surveyed than the cheapest full-service account offered by South Africa's "Big Four" banks. Nine out of 10 low-income m-banking customers surveyed say m-banking is "not expensive" or is "inexpensive" for the benefits it offers, and 93 percent say they feel their money is as safe as with any other bank. However, findings also show most low- income people who are not customers have negative perceptions about banking and know little about mobile banking.
"Once people start using m-banking, though, they are enthusiastic about its value," said Mark Pickens, a Microfinance Analyst with CGAP and co-author of the study. "Banking needs to be affordable, convenient and trusted for poor people to access it and reap the benefits. The study shows that compared to bank branches and ATMs, most m-banking users say m-banking falls closest to their ideal way of doing banking."
"This study lays the groundwork for a deeper exploration of how perceptions about banking, m-banking, and technology should be addressed to offer the latest banking opportunities to the developing world," said Andrew Dunnett, Director of The Vodafone Group Foundation.
"The UN Foundation was pleased to work with VGF and CGAP on this study as part of its larger goal of building public-private partnerships that utilize technology to address challenges such as reducing poverty, improving health surveillance, and supporting emergency response," said Timothy E. Wirth, President of the UN Foundation.
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