GLOBAL FINANCIAL DEVELOPMENT REPORT 2014
have been pioneered by the traditional financial sector or other players. India’s financial inclusion strategy, for example, relies on providing basic financial services through traditional bank branches and technologically based correspondent banking, both led by the country’s large public sector banks. At the other end of the spectrum, Kenya’s popular mobile payment service, M-PESA, is operated by a private telecommunications provider and has reached nationwide appeal independently of the traditional banking sector. This section discusses the role of technology in financial inclusion. It reviews the growth of mobile banking and payment systems and discusses technology-based business models and the role of improved borrower identification and credit reporting technologies in financial inclusion. The section highlights that technology-based strategies for financial inclusion have varied substantially across countries and examines the features of national market environments that determine which technologies are best suited to enhance financial inclusion, as well as issues related to market structure and regulation that might
FINANCIAL INCLUSION FOR INDIVIDUALS
make the success of some technology-based solutions difficult to replicate elsewhere.
Mobile banking and payments Mobile banking and payment technologies are among the most significant financial sector innovations of the last decades. The wide geographical reach and the rapid growth of mobile phone technology has dramatically reduced communication costs from prohibitive levels to prices that are well within the reach of many low- and middle-income individuals across the developing world (map 2.1; figure 2.1). In the early stages of this technological revolution, users started transferring air time credits as a mode of payment within the network. This soon gave rise to the first mobile payment systems that were formalized by telecommunications providers (such as Safaricom in Kenya) or by banks that began allowing customers to receive, transfer, and deposit money over the mobile phone network. There is still considerable scope for expansion in mobile technology to translate into greater access to financial services. For example, Alonso and others (2013), using data on
MAP 2.1 Mobile Phones per 100 People, 2011
Source: Calculations based on World Development Indicators (database), World Bank, Washington, DC, http://data.worldbank.org/data-catalog/world-development-indicators.
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