Your SlideShare is downloading. ×
Mobile Banking for Equitable International Development
Upcoming SlideShare
Loading in...5

Thanks for flagging this SlideShare!

Oops! An error has occurred.


Saving this for later?

Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime - even offline.

Text the download link to your phone

Standard text messaging rates apply

Mobile Banking for Equitable International Development


Published on

Leveraging mobile phone ubiquity, high entrepreneurship, and mobile banking to catalyze sustainable development. This paper looks at international dynamics and offers recommendations for improving …

Leveraging mobile phone ubiquity, high entrepreneurship, and mobile banking to catalyze sustainable development. This paper looks at international dynamics and offers recommendations for improving access to finance in the developing world.

Published in: Economy & Finance, Business

1 Like
  • Be the first to comment

No Downloads
Total Views
On Slideshare
From Embeds
Number of Embeds
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

No notes for slide


  • 1. Mobile Banking for Equitable International Development 1 MOBILE BANKING FOR EQUITABLE INTERNATIONAL DEVELOPMENT: Improving Access to Capital Markets for the Unbanked MOBILE BANKING FOR EQUITABLE INTERNATIONAL DEVELOPMENT: Improving Access to Capital Markets for the Unbanked Justin Bean, Jake Blackshear, SeMe Sung A Capital Markets White Paper May 12, 2011
  • 2. Mobile Banking for Equitable International Development 2Table of Contents1.0 Executive Summary 32.0 Introduction 4 2.1 Capital Markets in the Developing World 4 2.2 Mobile Phones and Mobile Banking 6 2.3 Entrepreneurship Rates 63.0 Capital Markets and Sustainability 74.0 Regional History and Current Context 9 4.1 Africa 9 4.2 Asia 11 4.3 Latin America 125.0 Analysis 14 5.1 Regulatory Environment 14 5.1.1 Issues in India 14 5.1.2 Success in Kenya 14 5.1.3 Regulatory Questions 15 5.2 Operations in Mobile Banking 16 5.2.1 Liquidity Management 16 5.2.2 Interoperability 18 5.3 Fraud 186.0 Recommendations 19 6.1 Organizational Recommendations 19 6.1.1 Regulation Innovation 19 6.1.2 Operational Innovation 19 6.1.3 Misrepresentation Innovation 20 6.2 Strategic Recommendations 20 6.2.1 Partner with ATM Networks 20 6.2.2 Penetrate Impoverished Economies 20 6.2.3 Leverage Trends in Socially Responsible Investing 21 6.2.4 Educate Potential Customers 21 6.2.5 Promote Sustainable Phones 21 6.2.6 Allow Interchange of Foreign Currency 21 6.2.7 Get Involved in Political Lobbying and Advocacy 22 6.2.8 Create a Dedicated Organization 227.0 References 238.0 Additional Resources 27
  • 3. Mobile Banking for Equitable International Development 31.0 Executive SummaryAccess to capital markets is essential for economic development. Mobile communications technology hasthe potential to increase access to capital markets and mobile financial services (mobile banking) in thedeveloping world. High entrepreneurship rates in emerging markets represent potential for growth withincreased access to capital. This growth creates a more sustainable world by increasing social andfinancial equity.The regions of Africa, Asia and Latin America are all representative of the developing world. In theseregions, entrepreneurship and mobile penetration rates are high, but access to financial services is low.Capital markets exist in these regions, but the majority of individuals and entrepreneurs lack the basicfinancial infrastructure necessary for adequate access.While mobile banking represents a significant opportunity for increased access to financial services andcapital markets, there are substantial barriers to successful worldwide implementation. These barriers canbe divided into three categories: regulatory, operational and fraud.In order to overcome these barriers, it is recommended that governments: 1. Embrace innovative regulations to encourage and allow widespread access to mobile banking 2. Require standardization of operating platforms and procedures 3. Create and enforce anti-fraud, anti-theft and privacy legislationIn order for mobile banking to be exceptionally successful, it is recommended that key players: 1. Partner with ATM networks 2. Penetrate markets in impoverished economies 3. Leverage trends in socially responsible investing 4. Educate potential customers 5. Promote sustainable phones 6. Allow interchange of foreign currency 7. Get involved in political lobbying and advocacy 8. Create a dedicated organization to address mobile banking and poverty alleviation
  • 4. Mobile Banking for Equitable International Development 42.0 Introduction2.1 Capital Markets in the Developing WorldAccess to capital markets has given developed countries an edge in creating business markets,economic prosperity, and equity. However, in the developing world access to capital markets has beenexpensive and troublesome for entrepreneurs and owners of small to medium-sized enterprises (SME’s).This has been reported to be one of the most, if not the most detrimental barrier to launching and scalinglocal businesses, and differences in access to capital can have an enormous impact on the ability to growbusiness and production (World Bank, 2008). Figure 1. Percentage of Firms Reporting Finance as a Problem. Source: World Bank (2008).
  • 5. Mobile Banking for Equitable International Development 5 Figure 2. Most Frequently Cited Barriers to Scaling for African Companies, by Percentage. Source: Dalberg (2010). Figure 3. Counting the world’s unbanked. Source: McKinsey Quarterly (2009)).
  • 6. Mobile Banking for Equitable International Development 62.2 Mobile Phones and Mobile Banking Figure 4. Mobile cellular subscriptions per 100 inhabitants, 2010. Source: ICT (2010).Over a billion people in Africa, Asia, and Latin America are currently without bank accounts. But, thosebillion people do have mobile phones. The number of people with access to mobile phones reached 5.3billion in 2010. Mobile phone subscription rates in the developed world have reached 116% on average(1.16 cell phone subscriptions per person), but in developing countries rates are still well below this, at68% (ITC, 2010). However, subscription rates in developing countries are growing much faster than indeveloped countries (estimated at 17.0% and 1.6%, respectively in 2010), providing a new platform forcommunication, education, and more recently, access to finance via mobile banking. According toMenekse Gencer, an industry leader in mobile payment and mobile banking strategies, mobile bankingcan be leveraged to jump-start GDP growth in developing countries. This represents an opportunity togain 1.7 billion new customers in 2012 alone, and can have an enormous impact on global GDP growthand equity (Menekse Gencer, personal communication, 2011).2.3 Entrepreneurship RatesEmerging markets represent a majority of the world’s population. As the world becomes a smaller placedue to improvements in technology, trade, and globalization, many of these countries desire the sameliving standards and wealth that developed countries enjoy. Many emerging economies have high ratesof entrepreneurship when compared to developed economies. This may indicate a high level ofresourcefulness of the populations in these emerging countries. However, high entrepreneurship ratesmay also indicate the existence of barriers to formal business creation, or a lack of employmentopportunities (Acs, 2006). Despite this possibility, in combination with access to finance via mobile
  • 7. Mobile Banking for Equitable International Development 7banking, these substantial entrepreneurship rates in developing countries can be leveraged to createlocal economic growth and equity (World Bank, 2008). Figure 5. Global Entrepreneurship Rates. Source: Global Entrepreneurship Monitor (2009).3.0 Capital Markets and SustainabilityDeveloping economies, as described above, often face severe inequality. While the wealthiest individualsin these regions are active in capital markets, the majority of people have little access to basic financialservices. This is represented by the high rates of the unbanked populations cited above. This gap inaccess exacerbates social inequality. Reducing this gap by increasing access to financial services andcapital markets has the potential to create a more sustainable future for the developing world (WorldBank, 2008). Other benefits of regionally-integrated, functional, and accessible capital markets todeveloping countries include (Mensah, n.d.):· Insulation from risks and damages of shocks· Efficiency increases and price assessment· Transaction cost reduction· Increase in investment opportunities for developing country investors· Risk-reduction through diversification of country-specific risk
  • 8. Mobile Banking for Equitable International Development 8 Figure 6. Finance and Income Inequality. Source: Finance for All, World Bank (2008).Even as these developing regions are struggling with wealth inequality, individuals are taking it uponthemselves to create businesses, add value and improve the standard of living in their communities. Theentrepreneurship rates cited above are a prime example of how these communities are helpingthemselves. Entrepreneurship has been cited as one of the primary methods by which economies canimprove (Acs, 2006). While recent years have shown an uptick in micro-lending to the developing world,these loans are relatively small and often intended for specific situations (such as women-owned, etc.).Entrepreneurs with bigger ideas (requiring an investment of $5,000 to $500,000) are often ineligible forthese micro-loans, and are often overlooked, leading them to be called the “missing middle”. Largeamounts of capital are available for multi million-dollar projects and investments, and microloans are alsoa source of funding for very small business funding. However, there is a distinct lack of funds availablefor the middle range of entrepreneurs and businesspeople hoping to scale a successful business or starta medium-sized enterprise. Increasing access to capital for the missing middle in developing countrieshas the potential to spark economic development (Center for International Development, 2011).
  • 9. Mobile Banking for Equitable International Development 9 Figure 7. The Missing Middle. Source: Center for International Development (2011).The progress of mobile technologies has created a unique situation that may help connect developingworld entrepreneurs with the financial services and capital resources they need to make significanteconomic improvement in their communities. Mobile banking is quickly gaining traction in many parts ofthe world. By reducing geographic constraints and bypassing the bureaucracy of traditional banks, mobilebanking has the potential to increase economic involvement in even remote areas of the developingworld. The mobile penetration rates above are testament to the rapid developments in this area. Thefollowing section analyzes the barriers to widespread adoption of mobile banking as a means to increaseglobal economic and social equity.4.0 Regional History and Current ContextCapital markets in Western society have had years to grow in terms of technology, reach, locations, andfundamentals. However, emerging markets such as Ecuador or Bhutan do not have the luxury of thesame kind of infrastructure for trade and finance. The following section discusses three developingregions and the challenges and opportunities for entrepreneurs wanting to access capital markets.4.1 AfricaLaunching and sustaining an entrepreneurial venture in Africa comes with considerable challenges. Only20% of African families have bank accounts, and Uganda, Ethiopia, and Tanzania each have under onebank branch per every 100,000 people(Spain boasts one per 100 people) (Ondiege, 2010). This makesthe storage and management of money problematic for business owners. These challenges can becomeeven more restrictive when attempting to scale the company from a small operation to a medium-sizedenterprise. African banks are very conservative with lending and often charge high interest rates on loans(19 - 21% in Rwanda) and high transaction fees, making the use of debt to scale a company
  • 10. Mobile Banking for Equitable International Development 10burdensome on its future revenues (Ondiege, 2010). The “missing middle” problem is also very rampantin Africa.Despite significant hurdles facing the African entrepreneur, there are many opportunities and strengthsthat can be leveraged on the continent. Africa generates 15% of it’s GDP from entrepreneurial activities,with Uganda ranking as the most entrepreneurial country in the world in 2003 and 2009 (the US wasranked twelfth), with over one-third of citizens creating wealth from entrepreneurial activities (GlobalEntrepreneurship Monitor, (2009). This shows that many African citizens have the drive and localknowledge needed to start businesses, but much of their potential may be unrealized due to the financialand regulatory challenges facing them. Mobile banking specifically has the ability to catalyze wealthcreation in African economies, with exploding mobile phone penetration rates, which grew from 0.53 to41.4 per 100 people in the twelve year period of 1998 to 2010 (ITU, 2010). Figure 8. Entrepreneurship, Mobile Subscriptions and Unbanked Rates in Africa. Sources: ITU (2010); Global Entrepreneurship Monitor (2009); World Bank (2008).
  • 11. Mobile Banking for Equitable International Development 114.2 AsiaWhile some countries in Asia have developed economies, many countries in East, Central, and SouthAsia do not share the same access to capital markets and are considered emerging markets. Manycountries have a simple stock exchange or two, such as Bhutan and Nepal, but this does not mean thatall of these countries’ people have access to banking or other financial services. As mentioned in thesections above, low access to banking correlates with a greater divide in wealth equality and does notallow the poorest people access to funds for entrepreneurial endeavors. According to a study by theFinancial Access Initiative, almost 60% of Asia (East, South, and Central) is unbanked (Chaia, 2009). In2009, the world average entrepreneurial rate was 10.6%. The Asian average was 11.2%. Developingnations, such as the Philippines, Thailand, and Indonesia had the highest rates of entrepreneurial activityat around 20%, while developed nations Japan and Singapore were very low at around 4% (InternationalEntrepreneurship, 2010). Clearly, the access to funds would make a great impact on the entrepreneurialintentions of the poor.Mobile phones are becoming the new way to bank and receive financing for people in both urban andremote areas, because the access to mobile phones has skyrocketed. Asia accounts for more than halfof worldwide mobile banking (Ho, 2010). By the end of 2010, there were 2.6 billion mobile subscribers inAsia, which is over half of the world’s adult population (TransWorldNews, 2010). China currently hasalmost 900 million mobile subscribers, and India comes in 2nd with 791 million subscribers (Kan, 2011).Subscription rates are also climbing in the emerging nations, which correlates to more mobile bankingcustomers. Greater access to low-cost, reliable financial services promotes greater savings,entrepreneurship, and economic development (World Bank, 2008).
  • 12. Mobile Banking for Equitable International Development 12 Figure 9. Entrepreneurship, Mobile Subscriptions and Unbanked Rates in Asia. Sources: ITU (2010); Global Entrepreneurship Monitor (2009); World Bank (2008).4.3 Latin AmericaLatin America has a storied history of colonization and has suffered many economic troubles sincegaining independence in the 20th Century (Bulmer-Thomas, 2003). More recently, Latin America hasbeen called one of the most inequitable regions of the world. The absolute number of people below thepoverty line in Latin America has doubled in the last 40 years (Jochnick & Green, 1998). In addition,100% of the countries in Latin America are considered “developing”, according to the Australiandepartment for foreign aid (“NGOs - List of Developing Countries,” n.d.). In spite of these economicstruggles, Latin America has shown signs of growth over recent decades, maintaining an 8% growth ratesince 1990. However, this growth has been closely tied to worldwide commodity prices. Latin America’sdependence on commodities subjects its economy to the extreme volatility of this market (“Latin Americaand Caribbean - Latin America and the Caribbean Regional Brief,” n.d.).
  • 13. Mobile Banking for Equitable International Development 13There is a great opportunity for economic development in Latin America. The entrepreneurship rate isnearly double the worldwide average, which sets the stage for job creation and increases in grossdomestic product (Global Entrepreneurship Monitor, 2009). However, much of Latin America lacks thefinancial infrastructure for the average entrepreneur to access the capital markets mentioned above. Thislack of infrastructure is represented by the high rate of unbanked individuals in the region ( MobileCommerce Daily, n.d.). A potential solution to the disconnect between Latin America’s entrepreneurs andthe capital they need to grow lies in the region’s mobile penetration data. Latin America’s mobilepenetration rate is significantly higher than the worldwide average and set to break 100% this year(Mansfeild, Cellular News, 2011). Perhaps innovations in the field of mobile banking can help bridge thecapital access gap. Figure 10. Entrepreneurship, Mobile Subscriptions and Unbanked in Latin America. Sources: ITU (2010); Global Entrepreneurship Monitor (2009); World Bank (2008).
  • 14. Mobile Banking for Equitable International Development 145.0 AnalysisMobile banking, as a proposed solution to capital markets access in developing countries faces severalbarriers. This new model is the product of innovation in two industries: banking and telecommunications.These industries are both highly regulated and ingrained in historical practices. The regulatoryenvironment, operational issues, and security issues are the most significant barriers to the success ofmobile banking and its worldwide adoption.5.1 Regulatory EnvironmentAs an emerging technology, mobile banking exists in a contentious regulatory environment. The mainparties involved in this debate are banks and mobile services operators. Generally, banks feel that mobileservice operators are invading their territory and providing financial services without adhering to financialservices industry regulations. In order to more closely examine this dynamic, two case studies will bediscussed. The first is a country that has yet to see significant benefits from mobile banking. And thesecond is a country that has widespread adoption and high usage rates of mobile banking.5.1.1 Issues in IndiaAs with most of the world, mobile banking in India is on the rise. However, regulatory structures in Indiacreate a situation in which mobile banking does little to increase financial inclusion or bank the unbanked.The main issue that prevents mobile banking from increasing financial equity in India is that only licensedbanks can provide mobile banking services. This means that the players are still the same, they are juston a different field. Furthermore, the services are only available to existing customers, and thesecustomers must register in-person. This creates a significant barrier to mobile banking access as a way toextend financial services to the unbanked. Further issues that hamper mobile banking’s effectiveness tospur economic development in India include low transaction limits, inflexible domestic currency rules anda restrictive settlement infrastructure (Reserve Bank of India, n.d.).5.1.2 Success in KenyaKenya’s M-Pesa is frequently cited as a positive example of mobile banking due to its rapid adoption rate,especially among unbanked populations. Whereas India’s regulatory environment makes it difficult forunbanked and rural populations to benefit from mobile banking, Kenya provides the necessary flexibilityto increase financial inclusion and access to financial markets.
  • 15. Mobile Banking for Equitable International Development 15Contrary to India, Kenya allows non-bank companies to provide “payment services”. M-Pesa is a serviceprovided by the telecommunications company, Safaricom. While Safaricom is allowed to run this paymentservice and maintain its non-bank classification, the Kenyan government regulates this portion ofSafaricom’s business through the Financial Institution Supervision Department. One significant distinctiondue to Safaricom’s non-bank status is that the telecommunications provider is not allowed to benefit fromany interest earned on customer balances. Kenya’s ability to provide regulatory flexibility has enabledwidespread adoption of mobile banking and is increasing access to financial services. Additional issuesthat have contributed to M-Pesa’s success include ease of registration, higher transaction limits and apayment infrastructure willing to experiment (Sultana, 2009). Figure 11. M-Pesa Growth and Volume. (Safaricom Annual Report, 2010)5.1.3 Regulatory QuestionsWhile M-Pesa has shown early signs of success, many unanswered questions remain when it comes toworld-wide mobile banking regulation. Since every country has its own regulations of both thetelecommunications and banking industries, it can be difficult to find one-size-fits-all answers.Some of the regulatory questions to be considered include: Who can carry payment instructions? Whocan help dispense cash? Which institutions are liable and what are the limits? And finally, what types oftransactions should be permitted? Governing bodies seeking the benefits of mobile banking will need toevaluate and provide solutions to these questions and others to ensure effective implementation of theirmobile banking program.
  • 16. Mobile Banking for Equitable International Development 165.2 Operations in Mobile BankingThe intricacies of the mobile banking process can be as complicated as the regulatory environment. Onebarrier is within the distribution channels and it concerns liquidity. The infrastructure, logistics, andoperations of mobile banking cause significant costs and risks to the retail agents, because they are notactually banks. Another barrier lies in the interoperability of the mobile technology and its platforms.5.2.1 Liquidity ManagementA brief explanation of how mobile banking works will help illustrate how the money isdistributed. When aregistered customer transfers real cash into the system, it must be converted to virtual cash, called e-float. The e-float is then credited to her mobile money account, also known as an e-wallet, and cansimply be transferred to any other registered customer via text message. All of these cash transactionsare done by agents, such as local stores, that also have e-wallets (or tills) with higher maximum accountbalances. If the agent performs too many cash-in transactions (the deposit of real cash) it will eventuallyrun out of e-float, and if it performs too many cash-out transactions (as is typical in the rural locations) itwill run out of cash. In either case, the retailer needs to rebalance its liquidity – to convert the excess e-float into cash, and vice versa (Eijkman, 2010). Figure 12. Follow the money. Source: The Economist (2010).
  • 17. Mobile Banking for Equitable International Development 17In the case of M-Pesa, cash-in and cash-out transaction balances are different for different locations (seeFigure 12 above). Customers of rural agents are in need of more cash-out than cash-in, so the agentsmust have enough real money on hand to do business. To do this liquidity rebalance, agents must go tothe next rung up the cash distribution hierarchy, which is liquidity managers or distributors, who then, inturn, operate with the network provider (Safaricom in the case of M-Pesa). The network provider thenmakes the final transactions with its custodian banks. This process can take days and has manyconsequences for the agents.Liquidity rebalancing causes significant costs and risks to agents. There are 4 main obstacles for storesin keeping enough cash and e-float on hand to satisfy customers. First, increased travel times and travelcosts are incurred for each rebalancing. Second, agents are at risk of personal harm or robbery becauseof the amount of cash they may have in the store or en route to a liquidity manager. Third, employeemalfeasance is a concern because agents must trust them with large sums of money, and the employeeturnover rate is high. Finally, because of the long processing times, the agent needs to have a sufficientbalance of e-float to accommodate the potential liquidity needs of their stores for up to two days. Thisimposes a high working capital requirement cost on agents who must invest anywhere from US$2,000-$4,000 in e-float and cash. This is a significant sum to generate for many small business owners(Eijkman, 2010). These obstacles must be remedied for mobile banking to effectively operate inemerging nations.5.2.2 Interoperability (Distribution Channels)The next big concern for the success of mobile banking is that of interoperability. This is where bankingplatforms don’t work together, either because of the banks or the mobile devices’ programming.Subscribers to different mobile payment networks should be able to make payments to subscribers onother networks. A workable solution must solve technological problems; clearing and settlementchallenges; legal and regulatory concerns; and consumer protection (including mechanisms to cater fordisputes, warranties, and claims) (Mas, 2011).Successful mobile banking interoperability promises to improve financial inclusion for many. But currentlyclients cannot transfer funds between e-wallets associated with different telecom companies, whichreduces liquidity in the financial system. In Ghana alone, there are 5 different mobile banking platformscompeting with one another (Ajao, 2009). The technology of the mobile phones is another barrier ineffective m-banking. This is called handset interoperability. There are many different types of phoneswith different operating systems that support Java ME, SIM Application Toolkit, or SMS (Mas, 2011). Thislanguage must be standardized soon for effective expansion.
  • 18. Mobile Banking for Equitable International Development 185.3 FraudFraud is a concern for the mobile banking industry and has the potential to have a major impact onvarious actors within the mobile banking system. However, at this point only .006% of all M-Pesatransactions have been fraudulent (Telecompaper, 2010). Although this amounts to over 21 millionKenyan Shillings (KES; $331,787 USD as of 5/12/2011 market rates) for MPESA alone, total transactionsin the month of March, 2010 were 28.59 billion KES ($331.79m USD), and Safaricom has annualrevenues of nearly 84 billion KES ($974m USD) (Safaricom Annual Report, 2010).The most common forms of fraud are “tumbling” and impersonation, or “subscription fraud”. Tumblinginvolves creating a program which constructs a database of stolen serial numbers and matching phonenumbers. Normally a system can trace the fraudulent account using unique serial numbers, but due to asupply of phones from a cheap Chinese source without unique serial numbers, investigators cannot tracethe fraudulent accounts. M-Pesa inspectors are impersonated using extremely accurate badges and IDs,inspecting logbooks and extracting account information, which is then used by another fraudster tocomplete a counterfeit transaction (van Heeden, 2005;gmeltdown, 2010). In order to protect agents andreduce the risks of theft, steps should be taken to reduce the risk of fraud. These steps will be highlightedin the recommendations section below.6.0 RecommendationsIn order for mobile banking to live up to its potential for increasing access to financial services and capitalmarkets, the following actions will be necessary to address the previously mentioned barriers.6.1 Organizational RecommendationsThe following recommendations are best implemented by a governing or regulatory body that desires theeconomic benefits associated with mobile banking.6.1.1 Regulation InnovationThe real opportunity with mobile banking is to leverage the pre-existing network established by mobilecommunications companies. It is often the telecommunications company that is best positioned to run themobile banking service. Regardless of what type of institution runs the service, mobile banking operatorswill be functioning in two highly regulated industries: banking and telecommunications. Therefore it isimperative that governments work to adapt existing regulatory structures to the innovative banking model.As shown by the example of Kenya above, innovative regulatory structures can lead to quick adoption ofmobile banking. This opens the door to increased access to the financial services and capital marketsthat can drive economic development.
  • 19. Mobile Banking for Equitable International Development 196.1.2 Operational InnovationAs discussed in section 5.2 above, there are two areas in the operations side of mobile banking that mustbe addressed to create a smooth and successful system.Liquidity management (getting money to and from the e-wallets) creates extra costs and risks to theagents as well the customers. Telecoms and banks should work together to protect the cash, the agents,and therefore, the health of the m-banking system. This could be done by creating a secure infrastructureto manage the large cash transactions in high-risk areas that would protect the agents from the danger oftheft or harm. Security trucks could be one option to address this. The concern of high working capitalrequirements for agents could be addressed by providing registered agents with secured loans to makethe initial investment.Interoperability within banking platforms is crucial. Customers must have equal access to different m-banks so they can make transfers to subscribers on other networks. Mobile banks must work with eachother to create policies that solve these platform problems. These policies will address technologicalproblems; clearing and settlement challenges; legal and regulatory concerns; and consumer protection.For handset interoperability, a standardized handset programming language must be created to supportthe different types of mobile phone operating systems.6.1.3 Misrepresentation InnovationWhile fraud poses a nuisance to mobile banking companies, agents can bear a greater share of theburden. Agents should be provided with information about how to identify fraudulent transactions, as wellas insurance and incentives to turn in fraudsters. Coalitions of mobile service providers, mobile bankingcompanies, and local governments and law enforcement agencies can also provide assistance. Theseentities can mandate that cell phone with unique serials be used to prevent tumbling, provide support foragents who are victims of fraud, install surveillance systems (which have recently become veryaffordable), and provide community incentives to turn in violators.6.2 Strategic Recommendations for the FutureThe following recommendations are best implemented by companies or non-governmental organizationsthat are interested in participating in mobile banking or encouraging mobile banking as a means toachieve social equity.
  • 20. Mobile Banking for Equitable International Development 206.2.1 Partner with ATM NetworksThe operational aspects of cash deposits and withdrawals are one of the most difficult aspects of themobile banking model. Firms should follow the lead of M-Pesa and partner with ATM networks in order tofacilitate this process and eliminate much of the inter-personal cash handling risk. M-Pesa’s current modelallows mobile banking customers to deposit and withdraw cash from affiliated network ATMs by using aone-time access code (“Safaricom -Withdraw Cash - M-PESA,” n.d.).6.2.2 Penetrate Impoverished Economies, Pre-load Mobile Banking AppsPartner with banks and governments to convey the social and economic benefits of mobile banking andcreate policies that encourage the use of mobile banking. One such policy would be to mandate thatphones come pre-loaded with mobile banking apps or at least have the ability to conduct mobile banking.Developing partnerships with banks based on a shared value approach can help bank see the financialopportunities available for them in improving access to finance (Kramer, Porter, 2011).6.2.3 Leverage Trends in Socially Responsible InvestingSince the latent potential in developing countries is in the “missing middle” class of entrepreneurs, mobilebanking stakeholders should strive to facilitate investment. Mobile banking firms and NGOs shouldadvocate for partnerships with organizations such as Kickstarter (crowdfunding platform) or Kiva (micro-lending platform) to extend their services. These partnerships have twofold benefits. On the investor sidethere is an opportunity to direct capital to areas of high need. On the recipient side, the increased capitalcreates jobs and contributes to the community’s economic well-being.6.2.4 Educate Potential CustomersMany potential customers in remote areas may not know or understand what mobile banking is, how touse it, and why it is important for them. Telecoms, NGOs, and governments that are into social equityand/or mobile banking should create entrepreneurship education campaigns for the targeted marketswhere they feel will have the biggest impact. Potential customers in regions with high unbanked ratesand high entrepreneurial rates must be made aware of how they can empower themselves with mobilebanking.6.2.5 Promote Sustainable PhonesOne cannot speak of sustainability measures involving mobile phones without at least a nod to theenvironmental impacts of the phones themselves. The average lifespan of a mobile handset is less thantwelve months and, in the U.S. alone, over 140 million handsets end up in the landfill each year(mobiThinking, 2011). Additionally, the one billion handsets manufactured each year contribute nearlysixty million metric tons of CO2, of which 95% is from manufacturing and 5% from use. Design for
  • 21. Mobile Banking for Equitable International Development 21Environment (DfE) principles in their handset guidelines can influence manufacturers to design handsets,chargers and other phone accessories for disassembly, reuse or recycling rather than for obsolescence.Finally, mobile service providers can play a key role in influencing the industry to adopt a service-and-flowbased business model whereby consumers “lease” phones; enabling complete take-back of phones andtherefore a closed-loop life cycle.6.2.6 Allow Interchange of Foreign CurrenciesAllowing the inflow of foreign currencies can facilitate investment from abroad. These foreign currenciescan purchase local products and virtual services, opening markets in developing countries to globalopportunities. Resources must be made available to prevent and combat fraud, but the benefits of suchan open system of exchange would far outweigh the risks of occasional fraud.6.2.7 Get Involved in Political Lobbying and AdvocacyMany of the barriers to successful implementation of mobile banking as a means to achieve access tofinancial services, access to capital markets and increase social equity are beyond the control of theindividual firms. Therefore, it is important that these firms prioritize political lobbying and collaborating withNGOs to advocate for the appropriate regulatory changes noted above.6.2.8 Create a Dedicated OrganizationIn addition to lobbying at the individual firm level, mobile banking providers and advocates should createa dedicated organization. This organization would campaign for political and societal changes to increasemobile banking’s acceptance and effectiveness worldwide.
  • 22. Mobile Banking for Equitable International Development 227.0 ReferencesAjao, O. (2009, July 22). Ghana: Vodafone, Zain, MTN, Tigo, Glo Mobile and their competition. Retrieved May 12, 2011, from ghana/Americas and Caribbean - World Stock Exchanges - Library Guides at UChicago. (n.d.). . Retrieved May 12, 2011, from, S., & Eichengreen, B. (2007). Plumbing for Latin American capital markets. Bank of Thailand.Annual Report, Safaricom, 2010. Retrieved from: uncement.pdfBeck, Thorsten. (2007). Financing Constraints of SMEs in Developing Countries: Evidence, Determinants and Solutions. World Bank Development Research Group. Retreived from:, Thorsten, Demirgüç-Kunt, Asli, Honohan, Patrick. (2008). Finance for All? Policies and Pitfalls in Expanding Access. World Bank. Retrieved from: 1194373512632/FFA_book.pdfBloomberg News. (2010, August 16). China Overtakes Japan as World’s Second-Biggest Economy. Retrieved May 11, 2011, from passes-japan-s-in-second-quarter-capping-three-decade-rise.htmlBombay Stock Exchange. (2009). Bombay Stock Exchange - BSE site for SENSEX, stock quotes and market trend. Retrieved February 23, 2011, from - A Nova Bolsa. (n.d.). . Retrieved May 12, 2011, from, V. (2003). The Economic History of Latin America (2nd ed.). London: Cambridge University Press.
  • 23. Mobile Banking for Equitable International Development 23Dalberg Development Advisors. (2010). Access to Finance Challenges and Opportunities Workshop. Retrieved from: Access_to_finance_discussion__Thursday_May_20__-_MT.pdfMansfeild, Ian. (2011). Dual-SIMs Drive Latin America to 100% Penetration Rate As 30% Lack Mobile Phones. Retrieved May 12, 2011, from:, Menekse. (2011). The Mobile Money Movement: Catalyst to Jumpstart Emerging Markets. Presentation retrieved from: money-and-gdpGlobal Entrepreneurship Monitor. (2009). Total Entrepreneurship by Country. Retrieved from: (2010). M-Pesa Fraud, Agents Beware! Retieved from: - Brazil – A Latin American star player. (n.d.). . Retrieved May 12, 2011, from %E2%80%93-A-Latin-American-star-player.htmHSBC. (2011). HSBC’s history. Retrieved May 11, 2011, from Entrpreneurship. (2010). Asian Total Entrepreneurial Activity. Retrieved May 11, 2011, from, C., & Green, M. (1998). Economic and Social Rights Violations in Peru. Center for Economic Social.Kan, M. (2011, April 25). China Approaches 900 Million Mobile Phone Users. CSO Online - Security and Risk. Retrieved May 12, 2011, from 900-million-mobile-phone-usersKramer, M. R., & Porter, M. E. (2011). The Big Idea: Creating Shared Value. Harvard Business Review. Retrieved from:
  • 24. Mobile Banking for Equitable International Development 24 2ef4da5976b5665c5540LatAm Alternatives 3.pdf. (n.d.). . Retrieved from America - Wikipedia, the free encyclopedia. (n.d.). . Retrieved May 12, 2011, from America and Caribbean - Latin America and the Caribbean Regional Brief. (n.d.). . Retrieved May 12, 2011, from,,contentMDK:20340156~ menuPK:258561~pagePK:146736~piPK:146830~theSitePK:258554,00.htmlMas, I. (2011, January 17). A new year’s resolution for the mobile money industry: interoperating. CGAP. Retrieved May 12, 2011, from resolution-for-the-mobile-money-industry-interoperating/Mensah, Sam. (n.d.) Capital Market Development in Africa: Selected Topics. A Training Guide for Policymakers, Regulators, and Market Operators. Retreived from: (2011). Global mobile statistics 2011: all quality mobile marketing research, mobile Web stats, subscribers, ad revenue, usage, trends… | mobiThinking. mobiThinking. Retrieved from Online. (2011, May 8). World Population by continents and countries - Nations Online Project. Retrieved May 11, 2011, from - List of Developing Countries. (n.d.). . Retrieved May 12, 2011, from, Peter. (2010). Mobile Banking in Africa, Taking the Bank to the People. Africa Economic Brief. African Development Bank. Retrieved from:, David. The Enabling Environment for Mobile Banking in Africa (2007). Department for International Development. Reteived from:
  • 25. Mobile Banking for Equitable International Development 25 1.9.25001/36204_file_M_banking_Enab_Env.pdfReserve Bank of India. (n.d.). . Retrieved May 12, 2011, from -Withdraw Cash - M-PESA. (n.d.). . Retrieved May 12, 2011, from, R. (2009). Mobile banking: Overview of Regulatory framework in emerging markets. Bangladesh: Grameenphone Ltd. Retrieved from: content/uploads/drupal/Rasheda%20Sultana.pdfTelecompaper. (2010). Safaricom’s M-Pesa Loses KES 21 mln Through Fraud. Retrieved from: World in 2010, ICT Facts and Figures (2010). International Telecommunications Union. Retrieved From: Entrepreneurial Activity. (n.d.). . Retrieved May 12, 2011, from (2010, May 11). Asia had 2.6 billion mobile subscribers by the end of 2010. Retrieved May 11, 2011, from Heeden, John H. (2005). Detecting Fraud in Mobile Networks. Retrieved from: targets unbanked for mobile services in Latin America - Mobile Commerce Daily - Banking. (n.d.). . Retrieved May 12, 2011, from services-in-latin-america
  • 26. Mobile Banking for Equitable International Development 268.0 Additional ResourcesGencer, M. (n.d.). mPay Connect Mobile Payments Blog | Connecting the world one mobile payment at a time. Retrieved May 13, 2011a, from, M. (n.d.). Menekse Gencer’s Presentations on SlideShare. Retrieved May 13, 2011b, from, J. (n.d.). 38 Infographic Explores Mobile Phone Evolution – Facts & Figures (History & Statistics) | Geraldes’s Blog. Retrieved May 13, 2011, from facts-figures-history-statistics/Johnson, B. (n.d.). The truth about mobile banking in Africa | Technology | Retrieved May 13, 2011, from mpesaJohnson, J. (n.d.). 1 Million Workers. 90 Million iPhones. 17 Suicides. Who’s to Blame? | Magazine. Retrieved May 13, 2011, from, G. (n.d.). Mobile Banking in Africa: An Overview | Mobile Marketing and Technology. Retrieved May 13, 2011, from africa-an-overview/Nerenberg, J. (n.d.). With Mobile Technology Vodafone and the U.N. Improve Health in Brazil’s Remote Communities | Fast Company. Retrieved May 13, 2011, from brazils-indigenous-with-mobile-technoloReboot-Mobile-Money-Infographic-11.gif (GIF Image, 1222x1650 pixels) - Scaled (19%). (n.d.). . Retrieved May 13, 2011, from Money-Infographic-11.gifRosenburg, J. (n.d.). How do you price a mobile banking service? Retrieved May 13, 2011, from
  • 27. Mobile Banking for Equitable International Development 27Simpson, N. (n.d.). Mobile Banking and the Future of Transparency : MicroFinance Transparency. Retrieved May 13, 2011, from mobile-banking-and-the-future-of-transparency/