How mobile banking in emerging markets can combat poverty worldwide

By Jonathan Crowl

| Banking

Mobile banking in emerging markets is evolving quickly as adoption rates continue to rise. That might surprise consumers in developed countries, where the growth of mobile banking and mobile money lagged behind many other financial vehicles for years, but users in developing countries see mobile as a solution to many personal finance problems.

For consumers with limited access to traditional banking solutions, mobile technology opens the door to new possibilities and greater economic prospects. For financial institutions, meanwhile, it creates more opportunities by expanding the global population of communities where banking products and services can be profitable.

In that small way, mobile phones are bringing surprising changes to consumers around the world.

Mobile outgrows traditional finance

In many emerging markets, the challenge for banks is twofold. First, they need a good local infrastructure to facilitate the movement of money to and from institutions. Bad roads and other pitfalls can make this difficult and sometimes impossible.

Add to that hurdle the limited profitability of those banks. In poor regions where savings may build up slowly through small payments made over time — what consumers in developed countries might regard as loose change — the amount of money being handled by banks is too small to make it worthwhile to establish a local presence. Banks don’t see the ability to make money, so they ignore these regions entirely.

Mobile banking can change this, in part because its reach already exceeds the reach of banking institutions. According to data gathered by Percolate, mobile device penetration exceeds bank penetration in many emerging markets. In Kenya, only 75 percent of consumers are served by a bank, but 81 percent have a mobile device. The divide is even greater in India, where 53 percent of consumers have a bank account and 80 percent have mobile devices.


The lowered cost of serving customers tips the scale toward profitability, giving financial institutions an incentive to extent mobile banking in emerging markets.

Why the push for mobile banking?

Potential revenues are enough to convince financial institutions to embrace mobile banking. However, the benefits extend far beyond the bottom line of any bank. Many experts believe mobile can play a central role in combating and reducing poverty in emerging markets. For consumers who lack service by a bank, mobile banking makes it easier to send and receive money and provides much greater security. Instead of depending on cash, which is liable to be stolen, mobile payments are much more secure.

They’re also more convenient. Over time, mobile banking can help lower-income individuals save money without having their savings wiped out by high bank fees. More consumers and families worldwide will be able to build a reliable financial safety net, however small it might be.

Mobile banking can’t usher in the end of poverty by itself, yet it can be a transformative technology for some of the world’s most underdeveloped markets and serve as a platform for financial stability where no such security has ever existed.

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