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The Mobile Money Revolution is Transforming the Developing World

Ilya Leybovich Writer, KBS

Mobile devices are indispensable to our everyday lives. We use them to connect with friends, schedule appointments, surf the Web and countless other purposes, including shopping and, yes, handling money. But for many people, especially in developing countries, mobile devices represent a powerful economic lifeline.

The use of cell phones to conduct financial transactions has surged in the past few years, and for some people, their phone is now their primary means of handling money. This mobile money trend is having a major impact on regional economies, particularly those in the developing world.

The Groupe Speciale Mobile Association (GSMA) estimates there are 2.5 billion people worldwide who are ‘unbanked,’ meaning they have limited access to traditional banking services, and the majority live in lower- to middle-income countries. Yet more than 1 billion of these people have mobile phones, which can enable them to send and receive currency payments, transfers and credit funding, and gain access to a secure bank account.

Last year, there were over 60 million active mobile money accounts across 84 countries, with the majority of services based around Sub-Saharan Africa. In Kenya alone, billions are exchanged in mobile money transactions each month, and nearly 60 percent of the country’s adult population uses mobile money accounts.

Kenya’s M-Pesa service, which enables users to deposit money and send balance information through SMS technology, is a good example of the rapid spread of mobile money. The number of agents distributing M-Pesa recently reached 79,000, and the service is now expanding across other regions with large under-banked populations, including Europe, which highlights the global nature of this technology and the pace at which it’s gaining traction.

In many respects, Kenya’s economic transformation is emblematic of the way technology can help stabilize and improve conditions in struggling or underserved regions by delivering a wider range of resources than are historically available.

Numerous companies have entered this space, including Monitise, which works with more than 350 banks across the globe to provide tech-based financial services for 30 million users and processes $88 billion in mobile money transactions per year.

“The ubiquity of mobile phones is helping developing economies open up financial access to people who would otherwise be unlikely or unable to open bank accounts or access credit,” said Peri Kadaster, director of strategy and marketing at Monitise. “Mobile money — through payments, banking transactions, remittances and more — is opening doors to millions.”

Taking a tech-focused approach is particularly important in rural areas. For instance, Intel partnered with Grameen Trust, a nonprofit that works to alleviate poverty, to create software applications that address problems like low agricultural output. Farming apps developed by Grameen Intel have already boosted crop production by up to 300 percent in the Indian state of Odisha and increased farmers’ cash-flow by an average of 50 percent. But these financial gains must be tethered to stable banking resources in order to generate and support long-term wealth.

“In many emerging markets, financial services are very limited, with high costs. In regions such as Africa, Asia and South America, where there are large rural populations, many have very little or no access to traditional financial services,” Kadaster noted. “In these markets, mobile take-up leapfrogs desktop Internet usage thanks to an easier-to-implement infrastructure, [and mobile devices are] becoming the key gateway to wider communication and information.”

According to Kadaster, the emergence and spread of lower-cost smartphone models is set to provide the next billion connections to the internet in the developing world, which will continue to drive the mobile money trend upward and open vast new channels of economic activity.

MTN Group is another mobile money provider with extensive reach in African markets, especially Uganda. The company recently reached a high of 18.4 million users, posting a 24.3 percent gain over a six-month period. The firm attributes part of this rapid growth to rising public awareness and adoption of mobile devices.

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“There’s definitely a boom, particularly in developing markets, as more people find out that it’s actually very easy to use mobile money. Also, there are now more merchants where customers can transact,” said Pieter Verkade, MTN’s chief commercial officer. “For our part, MTN is also doing more to educate customers and merchants about mobile money services.”

Mobile money services are poised to become more sophisticated and robust in the near future, as tech advances expand the range of mobile capabilities into other areas traditionally reserved for formal financial institutions.

“In the future, we can expect to see the linking of mobile money to point-of-sale devices and more technologies, such as Near Field Communication (NFC), to facilitate connections,” Verkade added. “We will also launch more remittance corridors and develop financial services (i.e., micro-savings, micro-lending and micro-insurance).”

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For her part, Kadaster considers wearable technology to be one of the most significant areas for expanding the reach and role of mobile money.

“From smartwatches to movement and fitness tracking, mobile devices will increasingly be seen as a repository for data that can be the foundation for mobile money — curated content, predictive modelling, customized marketing and much more,” she said. “Already, Google Glass and Pebble smart watches can be used to proactively notify users of banking updates and stock market information. This evolution of consumer touchpoints will be central to the future of mobile money.”

The next time you look at your phone, remember that it in some places it’s much more than just a device for making life easier — it can also be a conduit for stability, growth and development.

 

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