Mobile phones have changed banking faster in emerging markets than in developed countries, so they may provide an indication of where hot tech like the Google Wallet might go if it ever catches up with South Africa, Kenya or Bangladesh. Banks in emerging markets are using mobile phones to extend their services to existing customers and to provide banking connectivity to individuals with no previous banking relationship.
Dutch-Bangla Bank, one of Bangaldesh’s largest, has selected Sybase 365 for its mobile banking platform.
Diarmuid Mallon of Sybase 365 said Dutch-Bangla Bank is a good example of the way banks are going after the unbanked. He distinguishes between mobile banking and mobile money. Mobile banking is about extending a relationship with an existing customer who has a record in core banking’ mobile money reaches out to individuals who don’t have a bank account.
"Sybase 365's platform allows us to deliver the best possible mobile banking services to our customers," said Abul Kashem Md. Shirin, deputy managing director at DBBL. "We hope that efforts to pioneer mBanking will propel other banks to adopt similar services and accelerate the process of financial inclusion in other developing markets."
Of the approximately 160 million people in Bangladesh, only 13 per cent have bank accounts. By using Sybase 365 mBanking, DDBL can now reach the rural and unbanked population -- 45 per cent of them are mobile phone users. With their mobile phones, Bangladeshi expatriates will be able to easily remit money to the mobile accounts of their families, who can then make a withdrawal at the nearest retailer or cash point. The service will be available on all mobile devices with subscription to any of the six mobile operators of Bangladesh.
Banks are playing catch-up in many emerging markets where telecommunications companies and networks of agents have been using SMS and text messaging to transfer funds to phones, with the phone owner then able to turn text to cash at a merchant or agent.
In the cities, banks maintain branch networks which serve the middle class and high net worth customers, said Mallon, although the cities also have a high percentage of unbanked people.
“In the countryside they have no branches and no ATMs, and it’s not commercially viable to extend either of those networks into the countryside. Setting up a branch is very costly with its IT, building, manager and senior staff. Also, the people you need to run a branch aren’t interested in moving out to the middle of nowhere. An ATM doesn’t need staffing, but you need a secure location, have to pay rent and you need to go out on a regular basis to put money into it.”
Mobile operations have less stringent regulation, in part because the sums transmitted are relatively small -- the equivalent of a few hundred dollars at most.
Through some clever use of text messaging, a very basic phone can provide most basic banking services. Although Africa is the fastest growing market for smartphones, it starts from a very low base and banking services have to work on very low end phones, said Mallon.
“You have to support SMS and USSD (Unstructured Service Data) which is one of GSM’s best kept secrets,” added Mallon. “Nobody has ever heard of it in the U.S. and Europe, but it is very popular in Africa and Asia. It is text-based with screens of information and menus and operates over the voice channel.” Literacy is low in many new markets, but numeracy is high, so the phone plans offer a basic menu -- 1 for balance, 3 for bill pay, etc.
“You can get through a menu by remembering the number. They have also developed a solution where at the end of a transaction you get a call back by an automated service to confirm your payment, it reads the transaction through IVR and at the end you type in a PIN to confirm.
“Users can do anything that you and I would be used to via normal Internet banking,” said Mallon. “The two biggest uses are person to person payment and bill pay. Often in these countries a large part of the population works away from home and has no way to send money back to the family. In a lot of countries, they give cash to someone they trust. Person to person payment is a big changer. The other is bill pay -- if you aren’t banked, you can’t cut a check to pay for your electricity. The only way to pay is to go to the office of the electric company and queue up, spending most of your day there to pay. Moving that into a mobile channel is a big change.”
Banks and third party payment operators make it easy to get started. A user can sign up for an account while walking down the street by entering a code from a billboard. Several countries offer cash for phones through a scratchoff card like those used to recharge pay-as-you-go phone plans.
The issue for banks is whether they maintain customers in a separate mobile channel or try to bring them into a full banking relationship, he added. In several of the emerging markets, opening a bank account requires an initial deposit equal to several months’ salary, while opening a mobile money account may requires as little as $1 or $2.
