MANILA, Philippines - The Philippines is recognized among the leaders in developing mobile banking for the unbanked. Mobile banking utilizes the mobile phone to extend banking services such as deposits, withdrawals including remittances or money transfer, bills payments, and loan payments.

Telecommunications companies (telcos), such as Smart Communications (Smart) and Globe Telecommunications (Globe), were one of the first worldwide to start mobile money. Smart started in 2001 through Smart Money, and Globe followed soon after in 2004 with GCash.

But one of the leaders in terms of reach and number of subscribers is M-PESA of Kenya. It has 8.6 millions active users or 25 percent of the country’s population, and monthly person-to-person transactions worth over $320 million with average of $37 per user per month.

The telcos have put up systems that cater to the average bank users to the poorer segment of society that do not have banking relationships often referred to as the unbanked, as well as the under-banked that undertake limited banking services.

Reports indicate that half of the country’s population have a mobile phone or have access to one. Mobile-subscriber penetration is almost 80 percent, but banking penetration is only around 35 percent, leaving 21 million mobile subscribers with no bank account.

In emerging markets, formal banking reaches about 37 percent of the population, compared with a 50 percent penetration rate for mobile phones. For every 10,000 people, these countries have one bank branch and one ATM-but 5,100 mobile phones.

That is based on various studies conducted by CGAP, an independent policy and research center dedicated to advancing financial access for the world’s poor; GSMA, the global trade association representing more than 700 GSM mobile operator; and, McKinsey, a global management consulting firm.

Studies further indicate that about one billion people in emerging markets have a mobile phone but no access to banking services; by 2012 this population will reach 1.7 billion.

Only 45 million people without traditional bank accounts use mobile money, but it could rise to 360 million by 2012 if mobile operators were to achieve the adoption rates of some early movers.

By 2012, it could generate $5 billion annually in direct revenue, primarily from fees for financial services such as transactions and cash out, and an additional $3 billion annually in indirect revenue, including reduced churn and higher average revenues per user for traditional voice and short message service (SMS).

McKinsey said that if telcos in the Philippines could bring mobile-money penetration rates among the unbanked into line with those achieved by best-practice operators elsewhere, they could acquire four to five million new customers, and add two to three percentage points of growth to their revenues.

“And these numbers don’t include earnings on loans and deposits, which we conservatively estimate could be a further $60 million to $80 million. Introductory mobile-money services also set the stage for additional cross-selling and up-selling in the future,” the firm said.

The Philippines has one of the best levels attained for mobile banking for microfinance, under-banked, and unbanked. Telcos have established working relationships with institutions that have or continue to contribute to the development of mobile money.

Smart and Globe are working with commercial and rural banks, microfinance institutions (MFIs), non-bank financial institutions like pawnshops, non-government institutions (NGOs), cooperatives, and international institutions.

In fact, Smart has been able to market its wares overseas while Globe joined forces with the United States Agency for International Development (USAID) through the Microenterprises Access for Banking Services (MABS) program.

Globe took mobile banking one level higher when it formed a mobile technology-based thrift bank with the Bank of the Philippine Islands (BPI). BPI Globe Savings Bank will cater to the microentrepreneurs, the underbanked, and ultimately, the unbanked.

Meanwhile, Philippine regulators have also been open to developing mobile banking, showing flexibility and depth in regulations without sacrificing proper governance, sound banking practices, and regulations under the international anti-money laundering environment.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Nestor A. Espenilla Jr. said in a regional mobile money transfer (MMT) conference in Manila that proportionate regulation is necessary to avoid stifling innovation and to allow market to grow.

But Espenilla said that after allowing the market to grow, regulators have started implementing regulations based on the actual experiences and in conformity with domestic and international banking practices and regulations.

By: Ted P. Torres

Source: http://www.philstar.com/Article.aspx?articleId=556160&publicationSubCategoryId=74