FocusNote_48[1]_BancaMovil.pdf - FOCUS NOTE No 48 June 2008...

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I f you are a small bank thinking about doing mobile banking, 1 then you are where Abbas Ali Sikander, the group executive director of Tameer Microfinance Bank in Pakistan, was a year ago. He wondered then: “How does Tameer get to market rapidly without the burden of physical infrastructure investments, especially in rural areas?” 2 Branchless banking looked attractive, and mobile phones could help. With subscription numbers at over 50 million, mobile phones were already reaching rural Pakistanis who have no formal banking access. But which rural mobile phone users should he target? And how can he use mobile phones as a channel and as a service? Abbas knew that, without a clear strategic direction, he easily could get swept away by mobile phone operators who were already well- known retail brands. An even larger issue confronting him was developing an agent network, especially in rural areas, for customers to get access to cash in their accounts. With a few exceptions, the road to implementing mobile banking is littered with discontinued mobile banking projects, failed new technology vendors, and shelved deployment plans. For customers, mobile banking presents a delicate balance between a conceptually powerful opportunity (being able to transact any time, anywhere) and practical challenges (finicky menu sequences on a small screen and tiny buttons). Many banks launched into mobile banking without a well-articulated idea of what customers’ problems were and how to address those problems. Ivatury and Mas (2008) predicted that poor people are more likely than rich people to use mobile phones to undertake financial transactions. People in developing countries have less options (if any) for transferring money and accessing banking services, because there is less deployed formal banking infrastructure— fewer branches, automated teller machines (ATMs) generally co-located to relieve branches, and low Internet penetration. So a branchless banking channel using mobile phones could be far more preferable to poor people than the available options: traveling to and queuing at distant branches or saving in cash or physical assets. This paper examines how banks can translate the potential of mobile phones into greater financial access for poor people. Although mobile phone operators have been able to use the mobile phone for mobile remittance and bill payment services in several countries, banks have had little success in using mobile phones as part of a growth or outreach strategy. This paper focuses on smaller banks or microfinance institutions (MFIs) that face a much higher cost-of- service delivery because of the smaller transaction values they handle and the likely more remote and dispersed location of at least some of their customers.
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