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Appropriate Technology Choice

A guide to mobile banking

19 December 2008

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Banking on Mobiles: Why, How, for Whom?, a paper published by the Consultative Group to Assist the Poor discusses the strategic value of mobile banking to expand financial access for the poor.

Authors: Ignacio Mas, Kabir Kumar
Publisher: Consultative Group to Assist the Poor (CGAP), July 2008

For customers, mobile banking presents a delicate balance between a conceptually powerful opportunity (being able to transact any time, anywhere) and practical challenges (finicky menu sequences on a small screen and tiny buttons).

Many banks launched into mobile banking without a well-articulated idea of what customers’ problems were and how to address those problems.

This paper examines how banks can translate the potential of mobile phones into greater financial access for poor people.

Although mobile phone operators have been able to use the mobile phone for mobile remittance and bill payment services in several countries, banks have had little success in using mobile phones as part of a growth or outreach strategy.

The authors focus on smaller banks or microfinance institutions (MFIs) that face a much higher cost-of-service delivery because of the smaller transaction values they handle and the more likely remote and dispersed location of at least some of their customers.

The opportunity seems particularly great for them, but implementation challenges also loom larger because of their small scale. This discussion assumes these banks and MFIs have adequate back office and transaction switching capability and sufficient internal controls, whether managed in-house or outsourced.

Without that, mobile banking is not possible because it is fundamentally a front end to a financial institution’s information technology system.

The paper does not offer a single, generally applicable solution. Instead, it suggests that the bank first identify the fit of mobile banking within its overall customer strategy. It also stresses that implementation will be fraught with adoption hurdles. The paper recommends that financial institutions:

  • Make correct technology choices

  • Involve operators in designing mobile banking operations

  • Use agents to provide easy liquidity to customers

  • Develop efficient channels to increase customer awareness of services

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