As with all emerging technologies, the mobile payments industry is sometimes accused of exaggerating the importance of its products, or the magnitude and speed of the changes its products might lead to. But the larger the view that one takes, the more clear it becomes that the size of the market for mobile payments is enormous, and its potential impact – and potential for doing good – nothing short of breathtaking.
The larger view in this case involves the global unbanked population, meaning everyone who doesn’t have an account at a traditional deposit-taking financial institution.
How big is the unbanked population? According to the World Bank, approximately 2.5 billion people around the world fit the definition, including roughly 60% of adults in developing countries and 10% of those in developed countries.
Unsurprisingly, sub-Saharan Africa is the part of the world with the highest percentage of people living without a bank account, at more than 80%. In Nigeria, the continent’s most populous nation, the more than two-thirds of the adult population who have never used a bank totals an amazing 60 million people.
Also unsurprising are the reasons why so many people around the world don’t have a bank account – or have never stepped foot in a bank. The most obvious is a lack of money: In some countries the minimum deposit required to set up or maintain a bank account can reach 50% of per capita income, while in absolute terms transaction fees are often higher in poorer countries than in rich ones. Another major hurdle is a relative lack of bank branches. Finally, there are issues of “financial literacy,” such as the ability of would-be customers to navigate their way through the paperwork demanded by traditional financial institutions.
But as dismal as the numbers surrounding the global unbanked may seem, they mask a very different reality – and a tremendous revolution – made possible by growth in mobile phone use in both the developing and developed world.
According to a study by the African Development Bank, from 1998 to 2009 mobile phone penetration on the continent rose almost 100-fold, from .53 per 100 people to almost 43 per 100. And these hundreds of millions of newly-connected Africans are not just using their phones for voice calls or text messaging; in some countries use of mobile phones for financial transactions has become as or more commonplace than in the richest markets on the planet. For example, in Kenya fewer than 20% of the adult population has a bank account, but almost 70% of adult Kenyans have used a mobile phone to transfer money in one way or another.
Meanwhile, in woefully underbanked Nigeria UNESCO is using mobile payments to spur charitable giving.
Africa and other disproportionately unbanked parts of the world continue to pose challenges, especially in the areas of financial literacy, trust, and merchant acceptance. But global mobile payments specialits like Cellum see these territories as unparalleled growth areas in a world with a majority that is comfortable to bank, shop and pay their bills on mobile devices.
For some experts and economists, the time has come to stop talking about “banking the unbanked” but to allow the unbanked to sidestep traditional banking – and cash – in favor of next-generation mobile bill payment and other emerging m-commerce applications. Either way, the revolution is well underway.
Photo by ICT4D.at