Mobile Banking

Banking by Cellphone

Mobile banking is growing rapidly worldwide.
Carlina Teteris/Moment/Getty Images

Mobile Banking Trends: In many developing countries transferring prepaid mobile phone (cell phone) credits are being used as a way to move money more swiftly and securely than the antiquated and inconvenient banking, postal and transportations systems in these countries would otherwise allow. These prepaid mobile phone credits thus represent an alternative currency that underlies an alternative banking system.

Thus, the most efficient funds transfer and payment method over long distances in much of the developing world involves transferring funds by moving prepaid calling credits between mobile phone accounts. If the ultimate recipient either does not have a mobile phone or desires a cash payment, third parties often stand ready to accept calling credits to their own mobile phone accounts, then to tender the cash to that recipient, minus a commission, often in the range of 10-20%. See "A special report on telecoms in emerging markets" in the September 26, 2009 issue of The Economist.

According to credit card issuer Visa, there are over 2 billion people worldwide who have mobile phones but no bank accounts ("Visa steps up push into mobile banking," Financial Times, 6/10/2011). The potential size of the market for mobile banking services thus has attracted these major players into the competition for developing the infrastructure to facilitate this new method for transferring funds:

  • Visa
  • MasterCard
  • Google
  • Citibank
  • First Data
  • Sprint

Some of the aforementioned companies have been working in partnership on these projects.

Also Known As: Mobile money

Examples: In Kenya, mobile banking typically entails buying a voucher for mobile phone usage in your village, then asking the merchant to apply that credit to the account of another merchant in your relative's village.

Your relative then can withdraw that amount in cash from that second merchant, minus a commission.

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