Despite the broad awareness that mobile financial services can serve as a means for “banking the unbanked” on a global basis, widespread adoption has yet to be achieved, according to a new report released today by the World Economic Forum and The Boston Consulting Group. To meet the financial needs of underserved populations, most countries, even those that have achieved scale with mobile money transfer, should focus on the flexibility of regulatory provisions for non-
bank players, the competitiveness of market structures, and the strengthening of financial literacy skills of individuals.
Mobile Financial Services Development Report 2011points out that the adoption of mobile financial services is currently confined to a few countries where, historically, access to financial services has been constrained and the scope of services limited to mobile money transfer. The findings suggest that financial services such as savings, credit, and micro-insurance are only now becoming available and those regulatory environments, market competitiveness, and financial literacy of end-users all need to be collaboratively addressed before meaningful scale can be achieved.
Countries such as Kenya and the Philippines are among the few covered by the report that has achieved adoption levels of more than 10 percent of the total adult population. A defining characteristic of these countries is a dense network of agents—retail access points where it is possible to register account holders and handle cash transactions. However, as these countries look to achieve scale in mobile financial services other than payments, it will be critical for them to focus on factors such as government disbursements through the mobile platform, the competitiveness of their financial and telecom sectors, and better data collection and monitoring to facilitate “test and learn” approaches.
“In the Middle East, mobile financial services represent a good opportunity for mobile operators to expand their portfolio. A combination of high share of blue collar expats and the underlying cash driven society support the attractiveness of mobile financial services in the Middle East. For example, in KSA 40% are still unbanked and foreign remittances are expected to double in the next 5 years” said Joerg Hildebrandt, a partner in The Boston Consulting Group’s Technology, Media and Telecommunications practice. “However, public and private stakeholders must first get the basics right: solid and efficient distribution networks close to the consumer, and regulations that combine openness to innovation with protection of consumers and broader financial stability,” he added.
In terms of the array of enabling factors covered in the report, several countries, such as Brazil and India, demonstrate areas of relative strength when compared with countries that have already achieved scale in mobile payments. The ability to leverage existing agent networks and consumer protection in Brazil may facilitate the development of more complex financial services through the mobile platform. The widespread availability of mobile phones within India, the degree of competition within its telecom sector, and recent regulatory changes may drive dramatic improvements in adoption levels.
Estimates of the levels of adoption of mobile financial services in the 20 countries surveyed were compiled through an analysis of deployments done in collaboration with the GSMA Development Fund. A survey of regulators, conducted jointly with the Alliance for Financial Inclusion, provided data on regulations specific to mobile financial services. Data from a number of secondary sources such as the Consultative Group to Assist the Poor were also integrated into the analysis. The report contains a profile for each country featured in the study, including a summary of the relative advantages and disadvantages within its mobile financial-services ecosystem, as well as an extensive listing of data tables showing results for each variable used in the country profiles. The data set is available for download and can also be analyzed online with other World Economic Forum data sets for deeper and customized analysis.