Business Development Director, mCommerce (AbacusConsulting is a Strategic Partner of Sybase (An SAP company)) According to estimates by the United States Census Bureau, we now have a world population of over 6.7 billion, all of whom require access to basic services. While there is disparity between those that have access to basic services and those that do not; the relative statistics on those who have access to banking services are even more disparate.
Depending on which report you read, the numbers do not differ too vastly, as there are several billion people on the planet who still do not have access to basic banking services. This presents a clear opportunity for laterally minded banks, governments and even non-banking institutions, to look at offering banking services to this vast segment of the population. The big question is how do you offer banking services to a market segment that does not typically have a sustained income of value? You need to offer banking services in a new way, and on platforms and systems that are not only economically viable, but profit table. This is where the mobile phone comes into play - a readymade payment instrument, typically containing 'stored' funds, purchased by the customer, which can be the customer's access device to your bank.
When you look at the penetration of mobile phones, the statistics are encouraging. Almost everybody owns one these days. Even in the poorest nations, mobile phone penetration tends to be significant. While adding millions of low value clients to a core banking network does not seem to excite many bankers, however, if you could implement a low cost 'micro' bank that does not require huge investment, this market immediately becomes more attractive. Millions of small value service fees from payments, transfers, etc, can quickly add up to a large amount of revenue, especially if both the processing and start-up costs are small compared with traditional banking platforms.
Central banks and governments have struggled for years to find ways to include everyone in what is typically being coined 'Financial Inclusion.' While there are some banks that are interested in 'doing good' for the people, the bottom line is that unless the initiative at best breaks even, or can be considered a charity write off, not many banks are willing to venture forth. Banks are in fact missing a huge market opportunity here that could present a whole new revenue stream. Now has come the time for them to revisit the market in terms of penetration and technology.
The vast majority of our unbanked population carry a mobile phone, and have money (albeit not that much, nonetheless it is still 'bankable' money). A typical prepaid phone customer can communicate with his/ her bank in a variety of ways (via SMS, voice, etc). Hence, your cost as a bank to service this customer using this channel - fully automated - is very low. Even if he or she only has the equivalent of USD10 per week income, it is still USD40 a month that he or she can deposit into their 'micro bank account,' then link the phone to this account and manage all transactions from the mobile device. This electronic money in a micro bank account, can be used to pay for goods and services (phone-to-phone, P2P payment), and transfer money to relatives (domestic and international remittance).
Banks may not get too excited about someone spending USD40 a month, but if you have one million customers - customers that typically pay higher service fees than high net worth customers anyway - then the numbers stack up nicely. Customers that today do not belong to any bank, suddenly become part of the banking system. Access to banking services should be the right of anyone with an income, regardless of income level.
Then, the real question is: what does it cost a bank to service these types of customers? The reality is very little. Customers have paid for the mobile device, and are paying for the SMS (the delivery). All the Bank has to do is supply them with an account.
AbacusConsulting is a Strategic Partner of Sybase (An SAP company)
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