Mobile phone banking is already fully commercial in the Philippines, South Africa, and Kenya. It's about to happen in perhaps a dozen additional countries. With more than 1.5 billion mobile phones deployed in the developing world, the potential market is large and growing. The need is equally apparent-most of the BOP have no access to modern financial services, despite the success of microfinance.
So what is keeping this from becoming a revolution in financial services for the poor? In a word, regulatory hesitation. Central banks-and behind them, the U.S. Treasury-want to be sure that the democratization of financial services does not also lead to widespread money laundering and consumer fraud. And a key part of current security systems-the SIM card that gives each phone a unique ID-is device-based and potentially hackable.Today we report new research
that assesses the potential of biometric security systems-user-based, not device-based-for mobile phones. It turns out there is an obvious candidate, and that phones with this technology are already in commercial production.
I won't give away the story-read the report, Biometric Security for Mobile Banking
-but the cost of including this technology in low-cost GSM or CDMA phones appears to be low, well within the buying power of most of the BOP. The report also places this new capability in the context of broader technology trends that could extend the reach of mobile phones-and mobile banking-into rural areas.
This research strengthens my belief that it is possible to add a billion people to the banking system in the next 5 years. That would be a boon to the BOP, enabling prompt payment by employers and customers, money transfers and remittances, bill and loan payments, savings, protection against theft of cash, establishment of a credit record, and other mainstream financial services.
It would benefit mobile phone companies-a value-added service that increases traffic and gives low income people a compelling reason to have their own phone. And it would give banks a huge new customer base, together with the very low transaction costs necessary for these customers to be profitable.