Will Cell Phones Replace Banks?

To many, a bank account seems like a necessity, while a cell phone is a luxury. The opposite, however, appears to be the case. There are 3.6 billion mobile subscribers in the world today, out of a total population of 6.6 billion, according to Getting the Right Balance – Money Transfers on the Mobile, a report by Juniper Research. Thus, while only 24 percent of the world has regular access to banks, 54 percent has cell phone access. Advantages in mobile technology may make the cell phone a viable alternative to a traditional banking relationship. More than 2 billion people are “unbanked,” according to Juniper Research, meaning that they deal in cash or trade—rather than credit cards, debit cards or wire transfer, among other payment methods. Another 3 billion are “under-banked.” Though there are only 1.5 million ATMs and 500,000 bank branches on the planet, but, there is at least once cell phone for every two people alive today. And, there is room for growth, particularly in emerging economies. The details are staggering. In Ghana, for example, one in 20 people has a bank account. Meanwhile, one in three has a cell phone. In the United States, 40 million households (106 million individuals) are considered to be unbanked or under-banked. This equates to approximately 30 percent of the country’s population. The confluence of cell phone adoption, emerging mobile technology and the large unbanked/under-banked population offers a substantial market to mobile technology providers. The relatively low cost to deliver mobile financial services, Juniper Research says, could satisfy a consumer need and provide a new revenue stream for carriers. Mobile money transfers, in particular, could be the first step toward a mobile banking economy. Immigrant workforces are on the rise around the world, and they are sending money home. In 2007, migrant remittances to India reached $27 billion. China and Mexico followed, at $25.7 billion and $25 billion respectively, according to Juniper Research. For mobile carriers, this could translate to a revenue opportunity of $5 billion globally by 2013. In 2008, this market is not likely to reach $500 million. While technology providers are beginning to rise, many are still in pilot and trial programs. But, as adoption increases and solutions emerge from testing, mobile money transfer is poised to reshape the financial services landscape. The “financial mainstream,” as individuals with consistent to banks are called, may live up to its name with the help of more than 3 billion cell phones.