Mobile Technology: A Key to Deepening Financial and Payments System Services in the Region

By Seronga M. Wangwe
June 2009

Mobile banking is a fundamental enabler of branchless banking, which is being accepted worldwide as a solution to extending financial and payment system services to the low income populations, majority of whom are in developing countries. Such services cannot commercially be offered to such a population with the conventional bank branches, which are expensive to establish and operate.

Only about 10-15% of the population has a bank account after hundreds of years of banking business, compared to 40% of the entire population currently owning mobile phones in developing countries after less than 10 years of operations of mobile phones in those countries. This suggests that if mobile devices can be adopted as delivery channels to provide financial and payment system services to majority of the low-income populations in those countries, banks would serve those communities without necessarily have to open and run expensive physical branches around those areas.

Mobile technology has proved that it can offer that kind of capability to the financial sector, particularly if such a technology is offered jointly with banks and the traditional electronic funds transfer payment switching infrastructure.

In this paper, a proposal has been given on the appropriate model of m-banking solution for the MEFMI member region to adopt. It is based on a “Bank led-Agent Model” implemented around a shared Electronic Funds Transfer (EFT) Switch. Based on this Model, the Central Banks in the region will be in a better position to achieve financial deepening such that banking and payment system services will be available Anytime, Anywhere and to Everybody – irrespective of whether one has a bank account or not.