19. Mobile Banking

Mobile banking (also known as M-Banking, mbanking, SMS Banking etc.) is a term used for performing balance checks, account transactions, payments etc. via a mobile device such as a mobile phone. Mobile banking today (2007) is most often performed via SMS or the Mobile Internet but can also use special programs called clients downloaded to the mobile device.

The mobile phone itself has unique features that make it a close substitute to other banking channels but unlike those channels it is everywhere. Phones on the most common standard in the world have both a highly secure “smart card” (the SIM) and a “card reader” in one device. And all phones have “native” technologies (SMS and USSD) that can be used to create banking interactions. To be sure, mobile phones are likely to always be limited in functionality than a PC that is online or a specialized point-of-sale (POS) device, but because of inherent functionalities and its ubiquity, the phone is seen by providers as a possible lower-cost alternative to banking via internet or ATM or point-of-sale. Early results from CGAP’s experiments with providers show that using branches could cost 30 times more to set-up than using third-party agents equipped with point-of-sale. Replace the point-of-sale device with a cell phone and you have further cut cost in half.

As we explain in a forthcoming paper, the use of cell phones, however, does not mean the end of cash, at least not yet. Over time electronic money could replace cash with mobile phones as more commonly accepted payment devices like cards or internet terminals. But for now, a mobile banking platform needs to be supported by a cash conversion platform – whether bank branches, ATM terminals or banking agents. In fact, in our review of the early experience of branchless banking, we find that financial services providers view substantial retail presence as a key competitive strategy.

According to this model Mobile Banking can be said to consist of three inter-related concepts: Mobile Accounting, Mobile Brokerage and Mobile Financial Information Services. Most services in the categories designated Accounting and Brokerage are transaction-based. The non-transaction-based services of an informational nature are however essential for conducting transactions - for instance, balance enquiries might be needed before committing a money remittance. The accounting and brokerage services are therefore offered invariably in combination with information services. Information services, on the other hand, may be offered as an independent module.