New Delhi - It can scale mountains in a single bound and wend its way down the most wretched roads. It is the mighty cellphone signal - and the latest hope for bringing financial services to the world's masses who don't have access to banks.
Grameen Solutions, an affiliate of Nobel Prize winner Muhammad Yunus' Grameen Bank, this week teamed with Obopay, a for-profit mobile payment company based in California, to bring banking to a billion poor people using cellphones.
"Today, it's difficult to reach these people," Obopay India Executive Director Aditya Menon said at a news conference in India's financial capital, Mumbai. "If you solve that problem, you are enabling them to enter the economy."
The joint venture plans to launch pilot programs in India and Bangladesh in October and aims to reach 1 billion people globally by 2018, in large part by keeping costs ultra low - possibly through the help of charitable foundations.
Obopay, whose partners include Verizon Wireless, Citigroup, BlackBerry maker Research In Motion and AT&T, is already active in the US, where customers who want to send money pay 10c per transaction. After opening an Obopay account, you can transfer money between bank accounts, credit cards and phones via text messages.
More people have access to banks
Obopay founder and CEO Carol Realini did not say what transaction fees would be for India and Bangladesh.
The announcement comes at a time of increasing convergence between telecom and financial services, especially in the developing world, where far more people have access to cellphones than banks. Mobile banking services have proven popular in the Philippines, Kenya and South Africa, for example.
The payoff could be big for companies providing these services. People who are now "unbanked" in China, India and Brazil alone could generate $85bn in banking revenue by 2015, according to an estimate by the Boston Consulting Group.
In January, India's ICICI Bank, the nation's second-largest bank, launched a mobile banking system. The State Bank of India, which has more than 100 million customers, many without internet access, has tapped Indian telecom Spanco Telesystems & Solutions to set up its mobile banking systems.
The Bank of India, another public sector bank, also plans to launch mobile services soon, allowing customers to transfer funds, pay bills and even buy movie tickets over the phone.
All, however, have to wait for the finalisation of India's mobile banking guidelines, which the Reserve Bank of India says will happen soon. Reserve Bank spokesperson Alpana Killawala says she can't specify when "soon" might be.
For now, then, Indian banks are restricted to offering informational services, like account balance and ATM locations.
Mobile banking - 'a hard sell'
Killawala emphasized that the Reserve Bank supports the nascent technology. She cited a pilot project with a women's group in a remote district of Andhara Pradesh, a largely rural state in southern India, where the participants, most of whom could not read and write, found the technology "convenient to use."
Dean Tong, a managing director at the Boston Consulting Group, said the idea began to accelerate about four years ago, partially by accident. When Globe Telecom let cellphone users in the Philippines transfer wireless minutes to each other, the mostly poor consumers turned the minutes into a currency.
Globe followed by introducing G-Cash, which lets customers transfer funds by text message.
Mobile banking could be another area in which the developing world leapfrogs the developed world, which is often constrained by expensive, pre-existing infrastructure. For example, countries like India and Cambodia have often skipped land lines in favor of installing mobile phone technology only.
Similarly, it's far easier to bolster rural cell coverage than it is to build countless bank branches to serve a billion people tucked away in remote areas. Already more than 3 billion people have mobile access, with emerging markets responsible for 85% of new connections, according to the GSM Association, a mobile phone trade group.
Still, hurdles remain for wider use of mobile banking. Mobile carriers must have broad enough coverage to connect urban and rural users, as many remittances come from urban migrants sending money back to their family villages. It can also be hard to convince villagers, many of whom are new to the concept of banking, that a virtual bank is a safe place to stash their hard-earned cash.
"The trust must be there," Tong said. "`Put your money here, and oh, by the way, there's nothing actually there.' That's a bit of a hard sell."
- AP