2015 is going to be the year of heightened engagement and activity around mobile financial services.
We will see the accelerated adoption of these services, sparked by consumer needs, innovative commercial models and the increasing contribution of key players to the mobile money ecosystem.
The need for mobile financial services is clear, and I’m not just talking about the convenience of using Apple Pay to shop. Around the world, there are more than 2.5 billion people without a bank account, but more than half (1.7 billion) of them have a mobile phone. For these people, their mobile device represents the best chance to enjoy affordable, secure, convenient and accessible financial services.
And contrary to popular belief, this is not just an emerging markets need. In the United States, more than 60 million people are unbanked or under-banked, though most of them (68%) have mobile phones. Among these consumers are immigrant workers from emerging markets who are sending money back to their families in their native countries and need cost effective and secure financial services.
Looking at developing markets, the growth in mobile financial services will be fueled by the increasing penetration of low-cost smartphones and the growing popularity of ecommerce and online payments solutions. In many of these markets, positive demographics and increasing social mobility are playing an increasingly important role in the end consumer’s need for secure and affordable financial services. The pace of this growth is astounding: China’s middle class alone is estimated to reach 1 billion by 2022 (McKinsey) and both service providers and traditional banks are becoming keenly aware of the growth opportunity to service this new middle-class consumer.
As the ecosystem evolves to cater to these growing, untapped consumer segments, banks will become more and more involved, both in order to attract new customer segments they don’t serve today – the unbanked – and to improve the profitability of serving existing customers. It is far cheaper to serve a customer via their mobile device than by running bank branches. This will lead to greater cooperation between communication service providers and banks, creating win-win engagements for both. One example is the recent partnership of the State Bank of India (SBI) and Bharat Sanchar Nigam Limited (BSNL), in which SBI will use BSNL’s mobile network to offer mobile financial services to India’s unbanked and under-banked population.
Moreover, the type of mobile financial services will evolve, diversifying from money transfer and P2P (person to person) use cases to more sophisticated micro-banking and payment services, such as a single mobile wallet, which allows users to virtually store their financial assets, such as salary, social benefits payments, credit and debit cards, coupons, and then use it for payments and money transfers.
Mobile financial services provides a huge market opportunity for telecom service providers and banks, particularly when you also consider the fact that all over the world, the millennial disruptors are now entering the workforce. This mobile and social-media addicted generation already uses its phones to run most parts of their lives, and the full spectrum of banking services should be no different.
Patrick McGrory is the President of Emerging Offerings at Amdocs.