Mobile financial services adopt new technologies

 

Banking services are available on smartphones. Photo/AFP 

By Erik van der Dussen and Sadiq Merali

In Summary

Telcos and financial institutions have been overlapping services over the past decade, and although Internet banking was already commonplace, mobile banking entered as the successful new kid on the block.

The banking and telecoms sectors have a strong interest in growing their share of the market for mobile financial services.

 

The players that will come out as winners in the next two years are those that will have gone to the market with technology-driven innovations that are the most meaningful to the consumer.

Bill Gates’s observation “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10,” seems to be accurate if we look back, but wrong if we look ahead.

In the past 10 years, Facebook was founded in 2004; YouTube appeared in 2005; Twitter in 2006, and a year later, in 2007, the first iPhone was sold. Since then, smartphones and apps have evolved into tablets and iPads. Then came the “cloud.”

Telcos and financial institutions have been overlapping services over the past decade, and although Internet banking was already commonplace, mobile banking entered as the successful new kid on the block.

Wrong, if we look ahead two years. The next two years’ change can hardly be overestimated, given both the recent developments and what’s still to come, especially when we focus on mobile banking in Kenya.

Telcos are strengthening their “banking” position — apart from mobile banking — by providing small loans and other financial services. The financial world has engaged well from their side too, by enabling payments from bank accounts to mobile payment systems.

In this way, at least, they are co-custodians of the new infrastructure after having lost part of their role as guardians of money.

In mobile payment services, the money is kept by the banks and the service is provided by telecommunication firms. This causes a yet unsolved problem of how the two institutions share revenues.

The mobile handset is never the less emerging as the key device of doing business.

Who will be the winners in the market for mobile financial services in the next two years?

Will it be telecoms providers that maintain and strengthen their position based on their golden asset, mobile payment platforms that are still walled gardens?

Or will it be banks that are launching new user-friendly ways of contactless (small) payments? Or neither of those parties, because a new technology driven entrant will shake up everything — like Google, which already holds a banking licence issued by the Central Bank of the Netherlands?

Google may follow the example of China’s search giant Baidu. Baidu Wallet offers interbank transfers for free and lets you pay for online purchases and utility bills.

Winning over consumers
Investments in innovation will be the key driver for winning the heads and hearts of the consumers.