Microfinance Focus, April 3, 2012: The recent most report by the Citi Global Perspectives and Solution (Citi GPS) talks about how the rise of mobile phone subscriptions has impacted communication, and subsequently, economic transactions. Titled as "Upwardly Mobile: An Analysis of the Global Mobile Payments Opportunity," this report looks at what the Mobile Payments opportunity could be and examines the factors that contribute to a successful Mobile Payments ecosystem.  The report also discusses about how mobile payment products that offer rural coverage.

The report speaks about the ubiquity of mobile phones vs. the generally lower bank penetration. It states that in spite of this, mobile phone penetration continues to grow at a healthy pace —meanwhile; bank penetration has been relatively stagnant. The researchers have explained that the bank penetration is much low compared to mobile penetration in most emerging markets, and regionally in Southeast Asia and Africa. Mobile platforms can replace branch-based banking infrastructure in emerging and developed markets.

Financial inclusion expands the opportunities for underserved individuals and communities. This population’s financial services choices are often limited to money lenders and other informal services. For some, financial inclusion includes access to credit. For others, it could improve the credit terms relative to what a money lender might charge. For the self-employed, it could mean more stable and supportive income because its customers have access to safer and more portable stored monetary value. Most inclusion, however, is also about payments, insurance, and savings. This enables a household with the ability to manage monthly finances and weather unexpected crises. Broadening access to payment alternatives also reduces costs, increases safety and convenience and can be a first contact with formal providers.

Helping a hitherto underserved part of the community can help lower a government’s social burden. If a population’s income rises as a result of the higher transaction volumes typically associated with stored value vs. cash, it might even help the tax base of the government. The key here is that once a government understands the benefits of financial inclusion, they can help the process along with regulatory change that helps push financial inclusion through Mobile Payments.

Many countries in the Middle East, Africa and Southeast Asia have upto 50x more mobile phone subscribers than fixed-line subscribers as a result of these leap-frogging investments. Lastly, because many of these consumers have grown up only knowing mobile phones and rely on them, the adoption rates for financial services via this channel can actually be higher than advanced economies given the better level of trust in the system.

Click here to download the full report