NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, December 9, 2013

The seven billion inhabitants have 6 billion cell phone but only two billion bank accounts. In Bangladesh, for example, 57% of the 150 million inhabitants have cell phones but only 13% have a bank account (sources: CIA World Factbook). Mobile banking can offer savings services to billions of unbanked consumers. Transactions are instantaneous and secure and costs are low. Mobile phones can be used as virtual credit cards: they can store confidential information from the client or institution safely, not to mention that the SIM card itself is already a chip card that shares some features from credit cards. A customer’s bank account number can be stored on the SIM card, the same way as a secret PIN. Sophisticated and Internet connected mobile phones can be used as online bank terminals and provide their owners with instant access to their account and the ability to perform remote payments and transfers.

Mobile banking
In Africa, there were no mobile subscribers in 2000. In September 2010, there were already 506 million users and according to Informa Telecoms & Media, by 2014, this number could very well reach 800 million. This major trend combines with another: due its very dispersed populations, their geographical isolation, transportation infrastructure shortcomings and poor financial literacy, sub-Saharan Africa has the lowest penetration of deposit-taking institutions in the world: 16.6% against 63.5% in developed countries, according to the African Development Bank. Only 20% of families have a bank account and in some countries, the minimum deposit can reach half the per capita national income. Mobile phones can remove most of these barriers.