CGAP Sees Mobile Banking Growth in Developing Markets

"This financial crisis cannot mean the end of innovation. Let's remember that some of the greatest innovations of the past century -- the pocket calculator, television, the World Wide Web -- were created during times of economic hardship," said Elizabeth Littlefield, CGAP CEO.

The biggest mobile banking success to date has been M-PESA in Kenya, which is 45% cheaper than other transfer services. A forthcoming independent survey finds 83% of users say not having M-PESA would have a "large negative impact" on their lives.

Though these are encouraging numbers, CGAP has found globally that so far m-banking has yet to reach its full potential. Fewer than one in ten mobile phone banking customers are poor, new to banking, and doing anything more than payments and transfers.

"Mobile banking can move beyond simple transaction accounts to offer a flexible platform that will meet poor people's needs, while at the same time providing a new source of growth for providers," said Littlefield. "All the pieces are now coming into place for mobile banking to transform the way people get banking services in emerging markets."

There are other potential opportunities for service providers to help address the needs of the poor while growing new business. CGAP estimates that 150 million poor people around the world receive regular social welfare payments from their governments. Yet fewer than 25% of beneficiaries receive their benefit into a bank account through which they could save, make payments and build assets.

"Imagine if such payments could be delivered using magnetic stripe cards linked to a bank account -- or through a mobile phone. This could mean beneficiaries would suddenly have access to a full range of valuable services, such as savings," said Littlefield.

At the GSM World Congress in Barcelona, the CGAP Technology Program will present its latest findings around client uptake and business models that make mobile banking work for poor people. Learn more at http://technology.cgap.org.

Banking beyond branches -- by the numbers

• In the Philippines, a bank branch transaction costs US$2.50 but only US$0.50 if on a mobile phone, and some m-banking commissions still fall short of what merchants earn from other products -- for example; toothpaste, 10-12% margin; performing a mobile banking cash-in transaction; just 1%.
• In Pakistan, the cost of setting up and operating an agent is 76 times lower than that of a bank branch.
• Brazil is probably the most developed market where correspondent banking has taken hold: More than 70 institutions are currently managing around 105,000 agents reaching nearly 6,000 municipalities.

CGAP's technology program is supported by the Bill and Melinda Gates Foundation.

CGAP is an independent policy and research center dedicated to advancing financial access for the world's poor. It is supported by over 30 development agencies and private foundations who share a common mission to alleviate poverty. Housed at the World Bank, CGAP provides market intelligence, promotes standards, develops innovative solutions and offers advisory services to governments, microfinance providers, donors, and investors. More at http://www.cgap.org.