Given the low density of physical access points like bank branches or ATMs, many Africans have few options, if any, for transferring money and accessing banking services. Branchless banking, known as Mobile Banking orM-Banking, refers to the delivery of banking services through mobile phones, which can overcome the limitations of physical infrastructure.
Mobile phones have unique features that make them a close substitute to other banking channels, but unlike those channels, they are available everywhere. Given their inherent functionalities and its ubiquity, the phone is seen by providers as a possible lower-cost alternative to banking via internet or ATM or point-of-sale.
Mobile banking business models range from a bank providing additional mobile services to existing customers, to banks utilizing a network of banking and mobile agents in lieu of branches to reduce delivery costs, to telecommunication companies providing payment services without bank participation.
The potential of mobile banking to provide access to financial services is compounded by the exponential growth that mobile penetration rates have displayed in recent years across Africa. In the continent, four out of ten people have access to a mobile phone – double the number of Africans with access to finance.
While uncertainties remain over some of the implications of using mobile banking services – ranging from regulatory approaches, security concerns, the lack of human interfaces, to the difficulty of complying with Know Your Customer (KYC) rules – the retail network, speed of service, and affordability of mobile banking transactions holds a tremendous potential to expanding access to the formally financially excluded.