# Bankless Banking Is Ready for Its Close-Up-Magazine Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2017-06-10 Category: BANKING Category URL: https://financedigest.com/category/banking Meta Title: How Mobile Payments Can Lift Millions Out of Poverty Meta Description: Learn how mobile payment technology is providing financial access to the unbanked population, transforming economic opportunities globally. URL: https://financedigest.com/bankless-banking-is-ready-for-its-close-up-magazinehtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/graphicstock-man-using-digi-1-1736843777180-compressed.jpg) By **Harold Montgomery** ![Harold Montgomery](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/harold-200x300-1736843777066-compressed.jpg) Harold Montgomery More than a third of the global population has no access to traditional financial services. “Access to financial services can serve as a bridge out of poverty,” [says](http://www.pymnts.com/news/2015/unbanked-consumers-on-the-decline-globally/) Jim Yong Kim, President at the World Bank.  “This will require many partners – credit card companies, banks, microcredit institutions, the United Nations, foundations and community leaders.  But we can do it, and the payoff will be millions of people lifted out of poverty.” Even the United States has unbanked households.  7.7% of U.S. households do not have a bank account according to Urban Financial Services Coalition [survey](http://www.ufscnet.com/understanding-the-unbanked-and-underbanked/). However, the vast majority of bankless adults live in Africa, Asia, Latin America, the Middle East and India. In India, at least 50% of the 1.3 billion people are unbanked and have no access to the convenience of electronic payments common in the west, making it the largest unbanked population in the world. There are only 182,000 ATMs across India with only 15% of adults using an account to make or receive payments with 72% of bank accounts showing zero balance. While many Indians are unbanked, mobile phone adoption is on the rise. India has about 200 million mobile [subscribers](https://www.financedigest.com/warner-bros-discovery-adds-2-million-subscribers-in-first-quarter.html "Warner Bros Discovery adds 2 million subscribers in first quarter") and is adding 5 million new users monthly. With more than one-third of the world’s population unbanked and more and more people using [mobile phones, there is an outstanding opportunity for mobile payment](https://www.financedigest.com/the-future-of-mobile-payments-and-e-wallets.html "The Future of Mobile Payments and E-Wallets") technology to bring the financially omitted into the economic majority. Microfinance institutions are able to offer more competitive loan rates to their users to take advantage of lower [costs due](https://www.financedigest.com/dsm-misses-q1-forecasts-due-to-weak-volumes-and-high-costs.html "DSM misses Q1 forecasts due to weak volumes and high costs") to dealing in cash. What are mobile payments?  Quite simply, mobile payments are is a form of payment using mobile phones in lieu of cash, check, or credit card allowing a customer can use a mobile phone to transfer money or to pay for goods and services. A customer can transfer money or pay for goods and services by sending an [SMS](https://en.wikipedia.org/wiki/SMS), using a Java application or other mobile communication technologies. In India, this service is [bank](https://en.wikipedia.org/wiki/Bank)-led with [Mobile Payment Forum of India](http://www.mpf.org.in/), the organization overseeing the deployment of mobile payments in India. Mobile payment technology removes the need for direct access to a bank or credit union. Mobile payments are much less expensive than other money transfer options. The option to tap into the power of mobile payments is readily available on the majority of the devices people own. How is our [global banking world](https://www.financedigest.com/world-bank-cuts-2024-global-growth-forecast-as-rate-hikes-bite-but-lifts-2023-outlook.html "World Bank cuts 2024 global growth forecast as rate hikes bite but lifts 2023 outlook") affected by large pockets of our population that are unbanked? It is being impacted by the growth in mobile network operators and mobile payment platforms, not classified as deposit-taking institutions, who are [acting as banking](https://www.financedigest.com/explainer-why-is-bank-of-england-acting-again-what-next-in-the-uk-crisis-2.html "Explainer-Why is Bank of England acting again? What next in the UK crisis?") agents.  In Kenya and Tanzania, over 25 million people use the M-Pesa mobile payments platform, operated by Safaricom and Vodacom, with money sent via text message. In India, there are about a dozen mobile payment players in the field including Paytm, Mobikwik, Oxigen, Citrus Pay, Freecharge, M-Pesa, ItzCash, Itzcash, Airtel Money, mRupee and MoneyOnMobile which has serviced over 170 million cumulative unique mobile phone subscribers through over 306,000 retail distribution points across India. These mobile payment platforms provide a financial tool which allows retailers to easily and quickly assist [consumers who pay physical cash to complete bill](https://www.financedigest.com/uk-consumer-mood-sinks-to-new-depths-despite-energy-bills-help.html "UK consumer mood sinks to new depths despite energy bills help") payment and money transfer services.  Retailers have a variety of methods from which to generate transactions: using SMS text messaging, mobile application or the web. Bill payments include prepaid/postpaid cell phone time, prepaid television time, utility bills, travel tickets, assisted eCommerce and transit cards. As the industry is being transformed with “fintech” companies disrupting banking, there is uncertainty about the [future of the industry](https://www.financedigest.com/healthy-fat-free-snacks-market-2022-outlook-current-and-future-industry-landscape-analysis-2031.html "Healthy Fat-Free Snacks Market 2022 Outlook, Current and Future Industry Landscape Analysis 2031") and how it will look in the decade.  Does mobile money pose a threat to the banking industry?  Accenture Consulting “estimates that bringing unbanked adults and businesses into the banking sector could generate about $380 billion in new revenue for banks.”  There’s no doubt that mobile money presents an exciting symbiotic platform for the global banking community.  The reality is that the unbanked community is the most natural place for banks to look for their next 100 [million customers](https://www.financedigest.com/crypto-broker-genesis-owes-geminis-customers-900-million-ft.html "Crypto broker Genesis owes Gemini’s customers 0 million – FT"). As _The Wall Street Journal_ [reported](http://www.wsj.com/articles/mobile-networks-are-key-to-global-financial-inclusion-report-1474453800), “the ubiquity of cellphones could allow a rapid expansion of financial services throughout the developing world with major implications for growth and credit accessibility, a McKinsey & Co. report concludes.” McKinsey [Global](https://www.financedigest.com/bacillus-coagulans-market-research-report-2022-global-forecast-till-2028.html "Bacillus Coagulans Market Research Report 2022 – Global Forecast till 2028") Institute’s report found that about 1.6 billion people could gain access to financial services by 2025 without major new expenditures on physical infrastructure. Mobile money provides a democratic gateway to banking which doesn’t care where you live or the amount of money you have.  It is a great [marketing tool for the banks to uncover people who are using money services](https://www.financedigest.com/nanotechnology-to-spell-the-growth-quotient-gq-of-drug-designing-services-market.html "Nanotechnology to spell the growth quotient (GQ) of Drug Designing Services Market") but are unknown to the banks. Banks can leverage their regulatory experience, infrastructure and consumer trust to capture the unbanked mobile [money market](https://www.financedigest.com/frothy-stock-market-valuations-a-dash-for-cash-and-digital-money-all-on-bank-of-englands-risk-radar.html "Frothy stock market valuations, a dash for cash and digital money – all on Bank of England’s risk radar"). Mobile money platforms feed cash into banks and act as a virtual branch [network without the costs](https://www.financedigest.com/exclusive-with-eye-on-big-tech-energy-crisis-eu-telcos-call-for-shared-network-costs.html "Exclusive-With eye on Big Tech, energy crisis, EU telcos call for shared network costs") of an actual brick and mortar facility. Deloitte [predicts](https://www2.deloitte.com/us/en/pages/financial-services/articles/banking-industry-outlook.html) that “cost pressures and the drive toward simplification will create a new organizational paradigm. Reliance on third parties for noncore infrastructure and talent will be a common phenomenon.  Banks will be become increasingly connected via a complex network or web of vendors and third parties.” In September 2016, President Barack Obama addressed the United [Nations General Assembly](https://www.financedigest.com/quebecs-elected-officials-must-swear-oath-to-king-charles-to-sit-in-national-assembly.html "Quebec’s elected officials must swear oath to King Charles to sit in National Assembly") and said that, “technology now allows any person with a smartphone to see how the most privileged among us live and the contrast between their own lives and others. Expectations rise, then, faster than governments can deliver.” Governments love mobile money because it allows them to track and tax the commerce and it is an ideal anti-laundering tool because all transactions can be traced.  Governments and regulatory authorities need to work together to ensure that [mobile money regulations](https://www.financedigest.com/polish-regulator-accuses-t-mobile-of-misleading-advertising.html "Polish regulator accuses T-Mobile of misleading advertising") are safe and secure. Governments around the world are looking at mobile money as a way to distribute subsidies and collect taxes without corruption and loss of funds to graft and pilferage. Women, in particular, are excluded from the formal banking world.  In developing countries, only 37% of women have bank accounts, compared to 46% of men reports the [Gate Foundation](http://www.gatesfoundation.org/What-We-Do/Global-Development/Financial-Services-for-the-Poor).  The global revolution in mobile communications and digital [payment systems](https://www.financedigest.com/covid-19-putting-a-spotlight-on-mea-payment-systems.html "COVID-19: Putting a spotlight on MEA payment systems") has created opportunities for women in poor households to gain a livelihood. For example, the Kalighat Society for Development Facilitation in India has trained 75,000 women on the use of Money on Mobile services so that they can take this back to their villages and resell mobile top up and other services to make money. ![Indian woman at Kalighat Society being trained on digital payment system by MoneyOnMobile.](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/1-4-1736843777236-compressed.jpg) Indian woman at Kalighat Society being trained on digital payment system by MoneyOnMobile. The global smartphone market grew 0.7% year over year in 2016Q2 with 344.8 million shipments according to data from the International Data Corporation (IDC) [Worldwide Quarterly Mobile Phone Tracker](http://www.idc.com/tracker/showproductinfo.jsp?prod_id=37).    While smartphone sales have stagnated in many mature markets, India’s smartphone sales grew 23% annually according to [Counterpoint](http://www.counterpointresearch.com/india1q16/).  With 25% of India’s 1.2 billion residents owning a smartphone, most analysts predict that India will continue to register strong demand for smartphones and is primed to the next China in terms of [consumer](https://www.financedigest.com/global-emi-shielding-market-significantly-hit-by-lack-of-consumer-demand-scenario-post-covid-19-crisis-likely-to-remain-gloom.html "Global EMI Shielding Market Significantly Hit By Lack Of Consumer Demand; Scenario Post Covid-19 Crisis Likely To Remain Gloom") demand. Today mobile networks reach more than 90% of the population in developing nations.  Ensuring that this population has access to mobile banking requires an organized, multi-party [investment in the overall digital](https://www.financedigest.com/digital-investment-the-secret-to-keeping-up-with-e-commerce-demand.html "Digital investment: The secret to keeping up with E-commerce demand?") payment infrastructure. To achieve scale, mobile money requires the coordinated participation of governments, the banking community, mobile network operators, the private sector and fintech upstarts all working together. Mobile money allows people from all walks of life to transact business wherever they are simply with the [touch of a mobile phone screen](https://www.financedigest.com/apple-may-add-touch-screens-to-mac-computers-bloomberg-news.html "Apple may add touch screens to Mac computers – Bloomberg News").  With access to this mobile cash digitization network, unbanked consumers can deposit cash and use the cell phone for transactions.  By broadening the reach of low-cost digital payment systems, particularly in rural and impoverished regions, we can offer poor and low-income people the opportunity to capture income-generating opportunities and create efficiencies of scale with equal access to financial services providers, [government services](https://www.financedigest.com/light-at-end-of-tunnel-for-czech-services-as-government-drops-covid-pass.html "Light at end of tunnel for Czech services as government drops COVID pass") and businesses. The Gates Foundation believes that “the combined effect of these interventions will accelerate the rate at which people can [transition out of poverty and build their financial security.” Digital](https://www.financedigest.com/linear-digitized-transition-to-form-the-crux-of-digital-dentistry-market.html "Linear Digitized Transition to form the crux of Digital Dentistry Market") payment systems can address the needs of individual low-income households by offering a one-stop solution to enable the collection of customer payments, buy goods and pay for housing, healthcare, utility bills as well as a way to send money to family, friends and business associates. The mobile revolution can be the catalyst to help people in the world’s most impoverished regions to improve their lives and shape [sustainable futures](https://www.financedigest.com/sustainable-finance-the-wave-of-the-future.html "Sustainable Finance: The Wave of the Future") by linking them with digitally-based financial tools and services. **About the Author:**  Harold Montgomery is [Chairman and CEO](https://www.financedigest.com/novartis-names-firmenich-ceo-as-chairman-designate-of-sandoz.html "Novartis names Firmenich CEO as chairman designate of Sandoz") of MoneyOnMobile, India’s largest mobile payment platform. ``` “Original publication in Finance Digest Issue 1 https://www.financedigest.com/finance-digest-print-magazine/” ``` --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---