Mobile phone banking serves un-banked sector

MANILA, Philippines – Mobile phone banking technology is giving the un-banked, the under-banked and the poor in general, easier access to credit, thus contributing to poverty reduction and improved economic growth.

Based on data accumulated by global institutions, mobile money deployments are increasingly becoming popular for the un-banked and a potential instrument for poverty reduction.

It was revealed in a recent international conference in Barcelona last month that more than a billion people worldwide lack bank accounts but are owners of mobile phones.

By 2012, 364 million low-income, un-banked people could use mobile financial services.

Likewise, the number of people without a bank account but with a mobile phone is estimated to grow from one to 1.7 billion.

The conference was initiated by global institutions for the development of microfinance and mobile technology for poverty alleviation.

These are the International Finance Corp. (IFC) of the World Bank, DFID, GSMA, and the Consultative Group to Assist the Poor (CGAP).

The CGAP is a 33-member, independent institution housed at the World Bank. The consultative group is allied with the Bill and Melinda Gates Foundation run by Microsoft owner and global trillionnaire Bill Gates.

The GSMA represents the worldwide mobile communications industry. Spanning 219 countries, the GSMA unites nearly 800 of the world’s mobile operators, as well as more than 200 companies in the broader mobile ecosystem, including handset makers, software companies, equipment providers, Internet companies, and media.

Zeroing on the Philippines, it was learned that one half, or roughly 1.6 million, of active mobile banking users are un-banked.

Twenty-six percent of active users have incomes below $5 (approximately P250) per day, and that un-banked mobile money users spent $1.90 (roughly P9.50) more per month than peers.

“Mobile money reaches a base of financially active people. In the Philippines, more than half of the people interviewed for the study reported using at least one financial product. This mirrors findings in other countries showing the poor to be active money managers,” it was reported in the conference.

Savings is the most common financial product in the Philippines, with low-income mobile money users and non-users reporting that they save an average of $34 (roughly P170).

Ninety-eight percent of un-banked Filipinos receive their income in cash, and overwhelmingly use informal saving instruments, such as keeping their money at home in a safe hiding place, giving money to a friend or family to hold, or joining a saving club (paluwagan).

The CGAP and GSMA suggest that low-income Filipinos save an estimated $450 million in informal, actively managed with frequent deposits and withdrawals.

Though their financial needs are broad, low-income Filipinos primarily use mobile money to send and receive domestic remittances, on average sending $57, and receiving $48.

“The biggest differentiator between mobile money users and non-users is not income, but the extent to which they send and receive money transfers,” they said.

Sixty-eight percent of mobile money users send money, compared to nine percent of non-users, or 7.5 times more frequently.

Users give their mobile money services high marks: 92 percent would recommend mobile money to friends and family, and 90 percent feel their money is safe in a mobile wallet.

However, one third of mobile money users are not involved in remittances, bucking the prevailing perception of the service.

A significant group use mobile money quite intensively: more than four times per month, with more than half of their transactions going to something other than sending/receiving money - e.g. airtime top-up or cashless purchases in stores.

Surprisingly, 12 percent of low-income mobile money users do not own their phone. These represent sub-segments of the population worth further exploring.

When asked what additional services they would be likely to try over mobile money, low-income users enthusiastically said savings (65 percent).

One in 10 un-banked mobile money users is already storing an average of $31 in their mobile wallet, or about one-quarter of their household savings.

It is generally perceived that the Philippine rural banking system, with the help of the United States Agency for International Aid (USAID) through the Microenterprise Access to Banking (MABS) program, initiated mobile banking.

Started in 2004, the first mobile phone banking transaction was made in 2005. Today, mobile phone banking services include making micro-loan payments (Text-A-Payment or TAP), paying bills (Text-A-BillPayment or TAB), making deposits (Text-A-Deposit or TAD) and withdrawals (Text-A -Withdrawal or TAW), sending or receiving domestic or international remittances (Text-A-Remittance or TAR), and disbursing and receiving salaries (Text-A-Sweldo or TAS).

The key conduits of the easy to access to cash or credit are the telecommunication companies (telcos) like Globe Telecommunications, Smart Communications, and Nokia Philippines, with the Rural Bankers Association of the Philippines (RBAP).