<p><em><strong>As mobile phones become more functional, mobile money will clearly emerge as the banking solution for the unbanked, writes Srinivas Nidugondi</strong></em><br><br>Mobile money, a digital money paid for a wide range of products or services through a mobile device is revolutionising financial access, especially for the unbanked.</p><p>As per World Bank estimates, 2.5 billion people across the world, lack access to formal financial services. The primary reasons for this include:</p><p><strong>Insufficient banking services</strong><br>In the absence of banking services, people have to rely on cash transactions, which are both inconvenient and unsafe. These are the exact reasons why mobile money finds favour. With its growing penetration, the mobile phone provides a low cost and highly accessible platform that formal banking systems are unable to provide.</p><p><strong>Change of Power</strong><br>From offering person-to-person transfers, bill payments and point –of-sale purchase options, mobile money clearly shifts the balance of power in favor of customers. Some of the areas where mobile money can particularly benefit unbanked people include:</p><ul><li>Quicker recovery from economic shocks<br> </li><li>Efficient receipts of money transfers post any disasters<br> </li><li>Access to savings, credit and insurance opportunities</li></ul><p>Little surprise then that the number of registered mobile money accounts worldwide, reached 299 million in 2014. However, in terms of percentage, they still represent a low 8 per cent of the mobile connections in markets where mobile money services are available.</p><p>To achieve scale, mobile money providers will need to circumvent the following challenges, especially in rural areas:</p><p><strong>Logistics and delivery:</strong> Lack of infrastructure in rural areas can create logistical challenges. Local partnerships along with flexible agent financing are some of the aspects that providers are leveraging to address these challenges.</p><p><strong>Clearly communicating benefits:</strong> A compelling value proposition that will be different for rural and urban consumers, aided by a thorough understanding of their saving and buying patterns, can go a long way in optimising usage.</p><p><strong>User-friendly service:</strong> A user-friendly interface is one of the primary factors that will help in customer on-boarding. This is especially significant for customers with low literacy levels.</p><p><strong>Substitution of formal identification documents:</strong> The lack of formal identification documents is a major stumbling block as far as traditional banking is concerned. Substitution of these documents with acceptable KYC documentation within the regulatory framework can go a long way in customer adaptation.</p><p>Other than mobile money, providers are now expanding the mobile financial services, to include:</p><p><strong>Mobile insurance</strong></p><p><strong>Mobile savings</strong></p><p><strong>Mobile credit to customers</strong></p><p>Clearly, mobile financial services are set to impact a customer’s social and economic lives, especially the base of pyramid community where literacy levels are low and income is often sporadic. As mobile phones become more functional and less expensive, mobile money will clearly continue to emerge as the banking solution for the unbanked.<br><br>(<em>The author, Srinivas Nidugondi, is Senior Vice President & Head of Mobile Financial Solutions, Mahindra Comviva</em>)</p>
