Mobile banking: disruption on a global scale

Twice as many people in developing Africa have mobile phones than have bank accounts. It’s this astonishing fact that’s been the driving force behind a new way of conducting financial transactions.

Smartphone wallets, handy for paying for online purchases in the Western World, take on a whole new meaning in the sub-Continent. There, having cash on your phone is not just a convenience. It’s a way for people to carry their worldly wealth in their pocket, where distrust of the traditional banking industry is rife.

An amazing article in the Guardian describes how three start-ups are banking the unbanked. WorldRemit, DoPay and Coda are following in M-Pesa’s footsteps (still relatively fresh in their own right), taking the concept of local banking to the extreme.

Giving the remote control

In a world where Internet connectivity (let alone a local branch) is sparse, loading a phone with digital dosh is bringing independence to millions of workers in developing countries.

Vodaphone were the first to understand these difficulties, or at least implement a solution. In 2007, the British FTSE 100 telecoms giants sowed the seed for this banking revolution, choosing Kenya to launch M-Pesa.

So successful was this innovation by Vodaphone that today its numbers boast almost 20M mobile users with a virtual account. In a world where technology doesn’t stand still for a second, the above three start-ups are picking the fruit from the M-Pesa tree, making hybrids and providing many more services for those who carry their bank balance in their back pocket.

Here’s a snapshot of the figures from The World Bank’s global database to give you an idea of the challenge that funding the unbankable presents:

  • Africa (sub-Sahara):
    • holders of any financial account whatsoever: 34%
    • mobile phone owners: 80%
  • Asia (South)
    • bank account holders: 46%
    • in the poorer provinces, that percentage plummets.
  • High-earning OECD Countries:
    • account holders: 94%

World Bank's global map of bank account-holding adults, 2014 (representation).

Sowing the entrepreneurial seed

Marking that gap, highlighted demonstrably in Figure 1 from the 2014 World Findex Global Financial Inclusion Map, is important. It’s not only to show the difference in people with bank accounts that mobile technology can now reach with these apps. It’s important from an economic perspective, too.

Financial freedom is a breeding ground for true entrepreneurship. Without some form of funding, there simply is no fertile ground for business to flourish.

With the combination of WorldRemit, DoPay and Coda, this is now possible (listed respectively):

  • sending and receiving money instantly around the globe (no treks for miles to a bank or payment outlet);
  • workers can visualise, plan and manage their earnings, crucial where the labour rate is typically way below the rest of the world;
  • opening up the world of e-commerce for those with cash-on-the-chip (sorry).

Ismail Ahmed, WorldRemit’s founder, remarks that his and other mobile tech start-ups “are disrupting this traditional [banking] business”. He’s not wrong. The crown perched on the head of the world’s local bank is teetering, with a Smarter way of doing business waiting in the wings.

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