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Mobile and Agency Banking on Technology By Peter Ongera Extending the reach of financial services in emerging markets is a challenge and opportunity for traditional banks. Telcos have led the relatively recent development of mobile money products with great success; achieved through the use of innovative technology and agents on the ground. M-PESA is a good example. M-PESA is a mobile payments system developed in Kenya which effectively offers a banking system based on mobile phones. The name comes from the Swahili pesa meaning money .The original idea began as a development aid project by the UK’s Department for International Development (DFID), the foreign aid arm of the British government to enable microfinance repayments. Launched in 2007, it is now used in Afghanistan, Tanzania, South Africa, Philippines, Bangladesh, Pakistan, India, and Romania. Estimates suggest that the system processes more payments than Western Union does across its entire global network.
Mobile Money for the Unbanked (MMU) indicates that around 80 similar services are now in operation around the world. Mobile money customers are able to, by using their mobile phones, pay bills, make and receive money transfers. Local merchants are used as agents and mini branches or ATM’s for the financial institutions with the role of facilitating the registration of new customers and serving as Cash Deposit and Withdrawal access points. The system is simple in concept; users deposit and withdraw money in to one of the agents (who usually operate in small corner shops). It also offers a gateway to loans, salary payments and bill payments – effectively offering a banking system for the traditionally unbanked. Users to transfer money between the service and a bank account. There are significantly more M-PESA outlets than ATMs, for example. In particular, its short-term Pay Bill Account service allows users to fundraise for a variety of purposes, including expenses
relating to medical needs, education, and disaster relief. M-PESA's impact in Kenya put mobile money services on the map; there are a number of successful mobile money services around the world that are similar to or resultant from M-PESA. According to the Global Mobile Systems Association (GMSA), approximately 255 mobile money services were operating across 89 countries in 2014. They are now accessible in more than 60 percent of developing markets. Sub Saharan Africa is the region where mobile money is most widely spread, followed by South East Asia and Latin America. The number of mobile lines in service is projected to surpass the global population at some point this year, and developing markets will continue to drive growth in mobile subscriptions for the foreseeable future. While M-PESA and other services like it do expand opportunity and financial inclusion, mobile transfers are not a complete answer to fully participating in formal financial systems. To win back important share from Telcos, a number of banks have embarked on agency banking. Simply put, agent banking (or “agency banking”) allows humans to act as ATMs. In remote areas where people don’t have access to a bank, these agents can deliver financial services using devices such as card readers, point-of-sale (POS) terminals or mobile phones to process real-time transactions. Banking services offered by agents include registering customers, taking deposits, dispensing withdrawals, funding transfers, processing payments (e.g. utility bills) and providing mobile phone airtime top-ups. As agency banking technology advances, banks are able to offer more services such as loans, mortgages and savings accounts – without having to invest in ‘bricks and mortar’ bank branch infrastructure. These huge savings in time and money can be put towards developing agency banking technology and training, allowing agents to become financial advisors to the community. New skills and up-to-date technology will enable agents to up-sell products within their local region and increase business for the banks. *Peter Ongera is a social entrepreneur, consultant and writer
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