|Issue:||Asia-Pacific II 2009|
|Topic:||Mobile banking – sense, dollars, and cents|
|Title:||Vice President, Sales, Southeast Asia Pacific|
Chris Carr is Nokia’s Vice President of Sales for Southeast Asia Pacific. In his previous role, Mr Carr was General Manager of Nokia Singapore. Since joining the company Mr Carr has worked for Nokia in both Asia and Europe. Chris Carr holds a Bachelor of Business Administration – Major in Finance from Philip Institute of Technology (now known as RMIT).
By automating their services, banks have reduced both costs and errors, and the manpower needed to process transactions and handle cash. Many clients now handle most of their banking needs at home or the office. Automated banking has made it possible to cut costs whilst improving services. Mobile banking takes the convenience and savings to a new level, and economically extends banking services to remote regions that low-income users’ banks were never able to serve before, thereby promoting their economic development.
For many of us, it has been quite a while since our last visit to a bank branch. Millions are already banking online. The on-going substitution of cashless systems over notes and coins is driving this trend. From the comfort of their home or office, people can transfer funds, pay bills, renew fixed deposits, update contact details, and do many more transactions that now help them stay clear of those long-winding queues inside bank branches. With mobile devices taking on more and more functions previously possible only with personal computers, banking conducted using mobile devices, or mobile banking, for short, is the next logical step to take. This is not to say that banks can now shut down most of their branches. We might have seen this happening to a certain extent with online banking and ATM machines becoming the main customer touch points. Rather, we are seeing another trend: banks are keeping their physical branches, but have reconfigured them with more private counters and comfortable chairs, to allow for more personalised services for their customers. No longer are bank branches simply an imposing wall of counters manned by a row of sullen tellers dishing cash to equally sullen customers. We like to think that the most significant and tangible benefits that mobile banking will bring, is for the hitherto ‘unbanked’ people in emerging economies, where the rural, remote, nature of the region makes for a less compelling business case to open a local branch. There is also another reason that might have been easily overlooked: for those with hardly any experience banking, visiting a physical bank branch can be an encounter filled with apprehension. Mobile banking, done in the privacy and comfort of one’s own environment, will go a long way in helping to overcome this barrier. The Consultative Group to Assist the Poor (CGAP), a Washington-based international body that aims to help the poor become more financially savvy, notes that in some countries in Asia, Africa and Latin America, there are already more people with mobile phones than bank accounts. Based on this alone, we do not see the need to make a strenuous argument for mobile banking. Mobile phones have the potential to transform this situation by providing basic financial services to people with low incomes. In many developing countries, people already use pre-paid airtime as a virtual currency. For example, if bread costs one dollar, a customer may pay the baker by transferring pre-paid airtime worth one dollar when they buy the bread. A credit system could also help people access mobile phones by facilitating small loans. The cost of buying a phone is a significant expense for most people, though it is likely to be small in comparison to the running cost. If the barrier to access is cash flow rather than cost, issuing small loans through the phone credit system could help. A good example of how solution providers can meet the banking needs of emerging markets is through the use of mobile technology such as NFC. When Near Field Communications (NFC) are fully integrated into mobile phones, such devices will enable information sharing, service initiation, payment and ticketing capabilities with one simple tap of the device. NFC devices can help to provide social security and banking services in areas where there are no computers or Internet services. Pilot studies in Africa and Asia have demonstrated the potential for mobile devices to deliver basic financial services in developing countries. Many industry partners are also already thick in the action. For example, Bangladesh Bank, in consultation with the relevant industry partners, is putting in place a legal framework covering fund transfers using mobile devices. For this South Asian country, such a system is needed to safeguard the hard-earned money remitted back by its large overseas population; the system, appropriately regulated, will increase the speed with which recipients can access their much-awaited cash quickly, and safely. In a sense, Bangladesh is not the first to the party, and the party will get livelier. To put the immense opportunity in perspective, there are more than six billion people in the world today. Soon there will be four billion mobile phones, but only one billion bank accounts and one billion credit cards. In many parts of the world people still rely on cash and this results in several limitations. With mobile technology, electronic means of payment will be available for the very first time to hundreds of millions of individuals, many of whom will come from rural communities in emerging economies. You might ask: Why should banks bother with these potential users? We can assume that they will not be depositing millions of dollars each, nor taking out similar amounts of loan to begin with. However, let’s not overlook that banks are the hearts of an economy, they help manage the blood circulation – in the form of funds – safe-keeping them for those who do not have immediate needs, while lending to those who need to put the funds to immediate use. Thus, banks grow with the communities that they reside in, and communities can grow in function of the banks that support them. Meanwhile, the growth of mobile banking is gaining momentum, and will continue. Various forecasts by industry analysts point at this. For example, Juniper Research expects 816 million mobile banking users by 2011, a ten-fold difference from 2007. Similarly, Fiserv, Inc, which provides IT services to financial institutions, released a commissioned survey in September 2008, which shows that three-quarters of the respondents (sample size of 1,007, regular American mobile users 18 years and above) will consider using mobile banking services if offered. A similar survey, done in March 2006, put the figure only at 49 per cent. Mobile banking has been around for nearly a decade, but it did not get off to a strong start. But, that is way behind us. Some issues remain, like revenue and cost sharing among the various parties involved, but other equally important ones, like security and ease of use, are already nicely addressed. We can only say that things are always improving. Vendors and industry players have not been sitting on their hands doing nothing, and there has been significant and continuous improvement in the technology, the systems, and the experience. The financial industry is now undergoing some significant changes. The industry – in trying to overcome the current problems – will take long, hard, looks at various spending needs. Obviously, investments in channels and systems that make business sense will get the priority. This is now an opportunity to expand their reach to customers, and mobile platform is an obvious way to do so.