Scale in Mobile Financial Services Yet to Be Achieved

Despite the broad recognition that mobile financial services can serve as a means for “banking the unbanked” on a global basis, wide-scale adoption has yet to be achieved, according to a new report released by the World Economic Forum. To meet the financial needs of underserved populations, most countries – even those that have achieved scale with mobile money transfer – should focus on the flexibility of regulatory provisions for non-bank players, the competitiveness of market structures and the strengthening of financial literacy skills of individuals.

The Mobile Financial Services Development Report 2011 provides a comprehensive analysis of over 100 variables across 20 countries in Africa, Latin America and Asia. Developed in conjunction with The Boston Consulting Group, the report measures the critical factors necessary to achieve meaningful scale of mobile financial services and to meet the needs of billions excluded from the formal economy.

The report highlights that the adoption of mobile financial services is currently confined to a few countries where access to financial services has been historically constrained and the scope of services limited to mobile money transfer. The findings also suggest that the adoption of financial services such as savings, credit and micro-insurance are nascent and that regulatory environments, market competitiveness and the financial literacy of end-users all need to be collaboratively addressed before meaningful scale can be achieved.

Countries such as Kenya and the Philippines are among the few countries covered by the report that have achieved adoption levels of more than 10% of the total adult population. A defining characteristic of these countries is a dense network of agents – retail access points that are capable of registering account holders and handling cash transactions. However, as these countries look to achieve scale in mobile financial services beyond payments, focusing on factors such as government disbursements through the mobile platform, the competitiveness of their financial and telecom sectors, and better data collection and monitoring to facilitate “test and learn” approaches will need to become a priority.

“Ultimately, the market will drive scale in mobile financial services,” said James Bilodeau, Associate Director, Head of Emerging Markets Finance, World Economic Forum USA. “However, public and private sector stakeholders must be focused on eliminating those obstacles to viable business models in order to create a virtuous cycle of adoption and innovation.”

When looking at the broader array of enabling factors covered in the report, several countries such as Brazil and India demonstrate relative strengths when compared to those countries that have currently achieved scale in mobile payments. The ability to leverage existing agent networks and consumer protection in Brazil may facilitate the development of more complex financial services through the mobile platform. The widespread availability of mobile phones within India, the degree of competition within its telecom sector and recent regulatory changes may drive dramatic improvements in adoption levels.

Watch interviews with the authors and contributors of the report.

The Mobile Financial Services Development Report 2011