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Asia-PacificApril 1 2007

Big hitters reach out to the unbanked

Unbanked and underbanked populations of the world are in the sights of companies developing mobile-based banking services. Wendy Atkins reports on the latest services to be launched.
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Champagne and talk of “killer aps” usually dominate the annual 3GSM World Congress, the mobile phone industry’s premier event. But this year’s show in Barcelona highlighted that some of the world’s biggest companies are cultivating their ethical credentials, with a number of telecoms operators and banks making rather interesting bedfellows as they collaborate on projects that will benefit some of the world’s poorest people.

The rapidly growing global remittance market, which, according to the World Bank, was worth $268bn in 2006, and which the UN says involves about 191 million migrants, is suddenly experiencing a surge in global interest. On the first day of this year’s show, the GSM Association (GSMA) and MasterCard unveiled details of a pilot money transfer scheme that allow migrant workers to use mobile phones for international remittances.

And they were not the only ones to make an announcement about their plans for this sector: Vodafone and Citigroup unveiled a Vodafone-branded, mobile-based international money transfer service. Both schemes aim to target developing nations with a low-cost service directed at the unbanked and underbanked populations.

Market expansion

Global reach is a key feature of the GSMA/MasterCard scheme. Spearheaded by a group of 19 mobile operators with networks in more than 100 countries and representing more than 600 million customers, the scheme could double the number of recipients of international remittances to more than 1.5 billion, while helping to quadruple the size of the market to more than $1000bn by 2012, according to the GSMA.

With an estimated one billion people worldwide holding a bank account and 2.5 billion-plus having mobile phones, the potential reach that mobile networks gives banking organisations is appealing. “We view this as a virtuous cycle,” says Dana J Lorberg, senior vice-president, technology strategy and business development, global technology and operations, at MasterCard.

“Mobile operators and phones reach the unbanked and underbanked communities, particularly in the developing markets. And we believe that financial inclusion and being able to deliver some sort of financial product can really benefit their lives.”

Overseas remittances

India could be a major player in the project, having already established its position as the fastest-growing mobile market and the recipient of the largest number of overseas remittances in the world, accounting for 10% of the entire market. The State Bank of India is one of the first banks to take part in the scheme, following a pilot with mobile telecoms provider Airtel in a small Himalayan village. The bank’s chairman, OP Bhat, says: “We have seen tremendous results in this unbanked village. This project has the potential to transform lives and economies across the globe.”

As part of the GSMA/MasterCard scheme, Philippines mobile operator Smart Communications also plans to launch several pilot projects in collaboration with operators and banks in countries such as Bahrain and Italy, where there are large Filipino migrant populations. “Aside from lowering costs, we will provide Filipinos overseas with greater control over the manner in which their remittances are transmitted and used back home,” says Napoleon L Nazareno, president and CEO of Smart.

Vodafone and Citigroup’s international money transfer service is built on the recent M-PESA money transfer pilot by Vodafone’s affiliate in Kenya, Safaricom. Vodafone customers in the UK will be among the first to use it to send money to Kenya.

Vital collaborations

Like MasterCard’s announcement, this scheme carries the commercial endorsement of big hitters from the telecoms and financial worlds; such collaborations are an essential component in delivering services that ensure global coverage, interoperability, compliance and high levels of security.

The service will offer the sender and the beneficiary a range of options for sending and receiving money. The sender can initiate the transfer using either a mobile phone or a secure internet website to give instructions on where to send the funds. The funds can be received in a bank or through the recipient’s mobile phone in the form of a voucher and a secure PIN that will enable the recipient to redeem the cash at a wide range of outlets, typically the airtime distribution points operated by the in-country mobile network service provider.

For these latter services, the beneficiary of funds does not need to have a bank account, will have a wide range of locations from which to collect the funds and only has to possess a mobile phone that can receive an SMS on any mobile network.

Mobile banking: See also Tech Vision on page 118 and Nigeria supplement, page 23

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