Mobile banking has come to refer to everything from texting account balance updates, conducting bill payment, money transfer and even mobile top-ups – in short, just about everything short of actual financial intermediation. In the thick of the frenzy and excitement around the promise and potential of mobile technologies, it might be easy to miss one area that mobile banking does not yet reliably cover – the core activities of value-adding and the regulated financial intermediation that truly drives financial inclusion. Allowing middle-income and poor families to make payments faster, more safely, and more conveniently certainly is a significant social and economic benefit, and these successes should be celebrated. However, payment facilitation is only the most basic function of banking services – and does comparatively little to expand economies or build assets and employment.
MNOs have brilliantly identified the low-hanging fruit of mobile payment facilitation as a powerful marketing tool to reinforce and strengthen their core business model of selling commoditized airtime. Mobile payments are truly the “killer app” of the MNO business model – building brand and customer loyalty, reducing churn, smoothing liquidity management for agents, and even potentially building a marginal but profitable sideline business line that leverages the sunk cost of their core telco infrastructure. This is a brilliant example of private sector innovation, driven by commercial incentives, and with a tangible social benefit, and should be applauded as it has been.
That said, MNOs will never be, and should never be, banks. Banks serve a core function in an economy and society – transforming public deposits into asset-building investments while ensuring that public deposits are safe through compliance with sound prudential regulation. An economy without banks will never grow sustainably, and there is no more efficient mechanism for financial intermediation than through a well-regulated and soundly managed banking system. It is worth reminding ourselves of this basic fact, even as we are dazzled by the power and potential of the new technologies emerging around us on what seems to be an almost daily basis.
There exists a real danger that well-intentioned, but poorly defined, “deregulation” allowing non-bank commercial entities – including but not limited to MNOs – to effectively hold public savings, can create a dangerously unprotected parallel financial system. Even with small-balance savings, the recent crisis on the credit side in the Indian microfinance sector shows how catastrophic an unregulated systemic crisis can be – which might be the prospect in a major MNO bankruptcy, for example. Are we certain we are not unintentionally moving down the path of creating a “second class” financial system for the world’s poor and unbanked?
Fortunately, a number of initiatives are working toward realizing a customer-focused mobile banking ecosystem that leverages the best capabilities of the telco “rails” and the banking “locomotive.” Commercial bank United Bank Ltd in Pakistan has deployed its versatile Omni e-money platform that can interface with any MNO network, and also supports a range of other branchless technology solutions, including currently supporting millions of G2P transactions and rapidly moving into account opening. BRAC Bank Ltd and a group of technology innovators including the architects of M-PESA and GrameenPhone have teamed up to launch the bKash e-money platform in Bangladesh. And Indian inclusive finance innovator BASIX has launched an innovative “agent aggregator” model known as Sub-K, which facilitates linkages between several banks and several telcos to forge a fast-expanding e-money platform in one of the most elusive and highest potential markets of the world. SBI is pleased to be an implementing partner for all of these ventures, and there are many more emerging in other markets around the world. In short, while “mobile banking” today doesn’t live up to its name, the unbanked may yet be able to look forward to a truly inclusive system that is focused on their requirements, and incorporates appropriate safeguards, without the same prohibitive costs and barriers to use that have kept 2.4 billion of the economically active poor in the developing world from enjoying the benefits of financial enfranchisement.