Mobile money, or mobile payments/mobile banking, is a rapidly growing industry that serves as an alternative to traditional banking. What is mobile money and why is it important is a question most acutely significant to those in developing countries.
Of the 2.6 billion people in the world who live on less than $2 a day, about 80 percent of them do not have access to a bank account. This is completely understandable due to banking fees and lack of access to banks. Thus, for this population, all transactions are chiefly done through “informal financial tools.”
Payments are made in cash or through physical bartering (e.g., food, livestock, traded goods, etc). Or, for bigger expenses, people are forced to go through other informal means of acquiring money like money lenders and payment couriers although these methods are unreliable, hard to access and can carry even higher fees. Meaning that those living in poverty are further hindered in breaking away from their circumstances.
At the Bill & Melinda Gates Foundation, the Financial Services for the Poor (FSP) team believes that given the right financial tools like mobile money, poor households can capture more opportunities. Mobile phones serve as virtual devices for holding money and making payments electronically, like a bank account and/or credit card. Paychecks can even be credited to mobile devices. Access to mobile phones is widespread in all regions of the world, far more than traditional banks.
In an effort to further develop these technologies, FSP has partnered with the Electronic Transactions Association (ETA) and created an industry-wide competition for finding new and innovative electronic payment methods via mobile banking.
This has “the potential to make a profound impact on the global market, particularly to un-banked or under-banked consumers in the developing world. Thus far, we have seen a large drop in costs and increased access when mobile channels are used,” says Megan Oxman, a program officer with the FSP.
It is expected that the mobile money market will grow from a $13.8 billion dollar business in 2013, to $278.9 billion by 2018. The more the industry grows, the more reliable and accessible this form of “banking” will become, allowing for more stability and development within impoverished communities.
– Mary Purcell