In Tanzania, a hospital sends money by text message to women in remote areas so they can pay for bus fare to travel for critically needed surgery. In Afghanistan, the government pays its police officers by text message to skirt corrupt middlemen. In Pakistan, the biggest financial network is not a bank, but a unit of Telenor, the Norwegian mobile phone operator.
While storefront bank branches and online banking are ubiquitous in the United States and most developed countries, in less-developed countries only a small fraction of the population is served by banking services.
Mobile banking first appeared in the Philippines in 2001, when two operators, Globe and Smart, introduced their own domestic payment plan. In most mobile banking models, the person sending a payment sends the amount by text to the recipient’s phone number.
The person receiving the payment goes to an authorized local agent, typically a mom-and-pop retailer that also sells prepaid mobile phone cards, and withdraws the cash.
In parts of Latin America, Africa, the Middle East and Asia, more than 90 percent of people typically carry at least one mobile phone, a technological tether that mobile operators are exploiting to become retail bankers to the emerging world.
“Five years ago, there was hype around mobile banking but no real numbers in terms of customers,” said Mung Ki Woo, vice president of electronic payments and transactions at Orange, the wireless unit of France Télécom. “Now we are starting to see significant numbers. I think the potential of mobile banking is huge, going forward.”
Since December 2008, Orange has signed up one million people for its Orange Money mobile banking service in six African countries: Mali, Senegal, Ivory Coast, Madagascar, Kenya and Niger. In Kenya and Tanzania, subsidiaries of the British mobile operator Vodafone now process more international wire transfers than Western Union.
In Kenya, Vodafone has 13 million customers and in Tanzania, six million customers for its mobile banking service, which generated 670 million transactions last year, primarily for domestic or international money transfers, said Peter Cornforth, a Vodafone business development manager for the service, called M-Pesa. Pesa is the Swahili word for money.
In Kenya, coffee growers routinely pay their field workers by text message, and in Tanzania, Vodafone customers pay the national electric utility, Luku, by text. In Dar es Salaam, Tanzania, a rehabilitation hospital called C.C.B.R.T. sends bus fare via texts to women who travel to it for surgery to correct fistula incontinence, a common side effect of childbirth.
“Apart from being a serious new business for operators, these services for the first time are connecting people to critical banking services, and making positive changes” in their lives, said Mr. Cornforth, who is based in London.
Telefónica, the Spanish operator that is a market leader in Latin America, plans to start mobile banking services in four South American countries next year. Globally, the number of mobile banking users is expected to surge more than sixteenfold, to 894 million by 2015 from 55 million in 2009, according to Berg Insight, an industry research firm based in Stockholm.
Almost all of those mobile banking customers — 78 percent, or 697 million people — are in Asia, Africa, the Middle East and Latin America, according to Berg Insight. In Europe and North America, mobile banking remains secondary to personal computer-based Internet banking. Even so, the on-the-go convenience of mobile banking is attracting users in the West.
About 10 percent of U.S. bank consumers use mobile banking, usually to transfer money, make payments or monitor bank accounts, said Teresa A. Epperson, a partner at Mercatus, a Boston company that advises banks and financial institutions. As more U.S. consumers buy smartphones, mobile banking’s market penetration is expected to exceed online banking’s, which currently is about 50 percent, by 2015, Ms. Epperson said.
“This is only going to get bigger, in our opinion,” she said.
The potential is great in Latin America, where only 35 percent of the people have bank accounts, only 19 percent have bank cards but 90 percent have mobile phones, said Pablo Montesano, the head of mobile financial services at Telefónica.
Investors are also beginning to recognize the potential of the technology. In September, a leading maker of mobile banking technology for SIM cards, a French company called Gemalto, bought Trivnet, an Israeli company that makes financial transaction management software for mobile operators, for $40 million.
Only six months earlier, Trivnet had won the contract to supply mobile banking technology in Latin America to Telefónica.
Amit Mattatia, the Trivnet chief executive, said that 10 to 15 operators next year are planning to start large mobile banking operations in big markets in Latin America, the Middle East and India. Citing confidentiality, he declined to identify the operators.
“Because so much of the world is under-banked, consumers want these services very much,” Mr. Mattatia said.
As the cost of a simple mobile phone has fallen below $20 in most of the world, mobile banking is becoming affordable in emerging markets.
“This is now poised to explode in the developing world,” said Philippe Vrignaud, a senior vice president in Singapore for Gemalto.
In Pakistan, where only 14 percent of the people have bank accounts, Telenor introduced mobile banking in November 2008.
The service, called Easypaisa (100 paisa equal a Pakistani rupee), now has 500,000 active users who sent transactions worth a combined 5.5 billion rupees, or $64.1 million, in the first quarter of this year.
Most were domestic money transfers, which are limited to $120 a transfer. Telenor exacts a fee of as much as 5 percent of the transaction.
Easypaisa is available at 11,000 independent retail agents that make up Telnor’s distribution network, which outnumber the 8,300 combined branches of all Pakistani banks.
Within three years, Telenor plans to expand the number of retailers in its network to 36,000.
“This service is about addressing the unmet needs of the consumer,” said Aamir Ibrahim, a vice president and chief strategy officer at Telenor Pakistan. “I think this is suitable for all of our markets everywhere.”