Banking on Mobiles: Why, How, for Whom?

This paper examines how banks can translate the potential of mobile phones into greater financial access for poor people. Although mobile phone operators have been able to use the mobile phone for mobile remittance and bill payment services in several countries, banks have had little success in using mobile phones as part of a growth or outreach strategy. This paper focuses on smaller banks or microfinance institutions (MFIs) that face a much higher cost of service delivery because of the smaller transaction values they handle and the likely more remote and dispersed location of at least some of their customers. The opportunity seems particularly great for them, but implementation challenges also loom larger because of their small scale. This discussion assumes these banks and MFIs have adequate back office and transaction switching capability and sufficient internal controls, whether managed in-house or outsourced. Without that, mobile banking is not possible because it is fundamentally a front end to a financial institution's information technology system.