Research for Global Development

Reducing Barriers to Mobile Money


What would you do without access to ATMs, banks, and other traditional means of protecting your money?  Many people in the world are faced with this question on a regular basis, but due to the ever-growing use of mobile phones, the emerging technology of mobile money services may offer a viable alternative.   The Grameen Foundation, in recognition of the United Nation’s International Day for the Eradication of Poverty, recently hosted an event to examine the virtues of mobile money services and what barriers exist to more widespread use.

Noting the significance of mobile money services, Claudia McKay of CGAP pointed out that more than one billion people worldwide do not have bank accounts but do own mobile phones.  With so many people owning  mobile phones, building traditional brick-and-mortar banking institutions to provide them with greater financial security would be far more costly than providing mobile money services and training several agents to act as intermediaries between mobile phone owners and pre-existing banks.

Despite mobile money services’ potential to bring financial stability to the world’s poor, significant barriers still exist that have prevented widespread use.  InterMedia’s Peter Goldstein explored the subject of barriers, listing several that InterMedia uncovered through research:

  • A large percentage of the population in target countries do not yet own mobile phones;
  • Misconceptions about mobile money services are fairly common ; and
  • Agents aren’t necessarily incentivized to expand use.

In Tanzania, a mere 23 percent of households that do not have banking accounts own mobile devices, and in Uganda that number drops to 14 percent.  Goldstein also pointed out that a person being aware of mobile money services doesn’t necessarily mean people understand how it is used.

A participant from one of InterMedia’s projects said, “When I see some place is written M-Pesa [one of the largest mobile money providers], I know there is a service there where people send money to each other.  We don’t quite understand what those services are.” However, even when a potential user understands what the services are, they may not trust the agents; may be wary of sending and receiving money electronically; or may be illiterate and unable to use the services without help.

Many mobile money agents do not have incentives to properly educate nonusers or even advocate for its use.  One agent that spoke with InterMedia’s researchers noted that if he does not have time to teach everyone how to use the services, saying “my main responsibility is to assist the customers to transact.”  Other agents note that they often lack the liquidity to cover all of the transactions where they are located or they [the agents] are robbed en route to very remote locations.

How can mobile money providers and their stakeholders address some of these barriers?

Perhaps the most accessible solution available to providers is to increase the reliability of services.  Mobile networks must be reliable so that transactions are not dropped due to poor reception; agents must have enough cash to conduct all transactions prior to going to a location;  and agents must maintain their schedule so that users can anticipate when the services will be available to them.

What does the future of mobile money hold?

The panel predicted that mobile money use will significantly increase over the next decade.  Companies employing poor persons may start using mobile money services to pay their employees; the increasing use of smart phones will help enable illiterate persons to effectively use mobile money services; and the poor will be able to access cradle to grave financial services through mobile money.  Credit cards in the 1950s and 1960s are what mobile money is today, noted one participant:  relatively limited in use and function, but have a huge potential for growth.

The event, Banking on a Phone: Making Mobile Money Real for the Poorest People, featured Debbie Dean of the Grameen Foundation, Peter Goldstein of InterMedia, Claudia McKay of CGAP, and Evelyn Stark of the Bill & Melinda Gates Foundation.

More on InterMedia’s work on mobile money.

 

InterMedia

Reducing Barriers to Mobile Money


What would you do without access to ATMs, banks, and other traditional means of protecting your money?  Many people in the world are faced with this question on a regular basis, but due to the ever-growing use of mobile phones, the emerging technology of mobile money services may offer a viable alternative.   The Grameen Foundation, in recognition of the United Nation’s International Day for the Eradication of Poverty, recently hosted an event to examine the virtues of mobile money services and what barriers exist to more widespread use.

Noting the significance of mobile money services, Claudia McKay of CGAP pointed out that more than one billion people worldwide do not have bank accounts but do own mobile phones.  With so many people owning  mobile phones, building traditional brick-and-mortar banking institutions to provide them with greater financial security would be far more costly than providing mobile money services and training several agents to act as intermediaries between mobile phone owners and pre-existing banks.

Despite mobile money services’ potential to bring financial stability to the world’s poor, significant barriers still exist that have prevented widespread use.  InterMedia’s Peter Goldstein explored the subject of barriers, listing several that InterMedia uncovered through research:

  • A large percentage of the population in target countries do not yet own mobile phones;
  • Misconceptions about mobile money services are fairly common ; and
  • Agents aren’t necessarily incentivized to expand use.

In Tanzania, a mere 23 percent of households that do not have banking accounts own mobile devices, and in Uganda that number drops to 14 percent.  Goldstein also pointed out that a person being aware of mobile money services doesn’t necessarily mean people understand how it is used.

A participant from one of InterMedia’s projects said, “When I see some place is written M-Pesa [one of the largest mobile money providers], I know there is a service there where people send money to each other.  We don’t quite understand what those services are.” However, even when a potential user understands what the services are, they may not trust the agents; may be wary of sending and receiving money electronically; or may be illiterate and unable to use the services without help.

Many mobile money agents do not have incentives to properly educate nonusers or even advocate for its use.  One agent that spoke with InterMedia’s researchers noted that if he does not have time to teach everyone how to use the services, saying “my main responsibility is to assist the customers to transact.”  Other agents note that they often lack the liquidity to cover all of the transactions where they are located or they [the agents] are robbed en route to very remote locations.

How can mobile money providers and their stakeholders address some of these barriers?

Perhaps the most accessible solution available to providers is to increase the reliability of services.  Mobile networks must be reliable so that transactions are not dropped due to poor reception; agents must have enough cash to conduct all transactions prior to going to a location;  and agents must maintain their schedule so that users can anticipate when the services will be available to them.

What does the future of mobile money hold?

The panel predicted that mobile money use will significantly increase over the next decade.  Companies employing poor persons may start using mobile money services to pay their employees; the increasing use of smart phones will help enable illiterate persons to effectively use mobile money services; and the poor will be able to access cradle to grave financial services through mobile money.  Credit cards in the 1950s and 1960s are what mobile money is today, noted one participant:  relatively limited in use and function, but have a huge potential for growth.

The event, Banking on a Phone: Making Mobile Money Real for the Poorest People, featured Debbie Dean of the Grameen Foundation, Peter Goldstein of InterMedia, Claudia McKay of CGAP, and Evelyn Stark of the Bill & Melinda Gates Foundation.

More on InterMedia’s work on mobile money.

 

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