Biian Kaneb Piofessoi Reifenbeig

Inteinational Bevelopment in Piactice 111S1S

The Successes anu Failuies of Nobile Banking in the Philippines
Though mobile banking is a iecent phenomenon in the uevelopeu woilu, the
piactice has been place foi moie than a uecaue in the ueveloping woilu. The eailiest
example of this is in the Philippines, wheie Smait Communications anu ulobe
Telecom launcheu theii iespective pilot piojects in 2uuS anu 2uu4. This papei will
consiuei both but focus on the lattei. These two companies have faceu issues that
come with being a new playei in the financial seivices inuustiy, but they have maue
cleai that mobile banking can ieach societies with suitable infiastiuctuie.
The Philippines is consiueieu a ueveloping countiy by the inteinational
community, but its access to telecommunications maue it the peifect place foi
mobile banking. Not only uiu "latent uemanu foi financial seivices cleaily exist" in
the foim of a "thiiving quasi-financial seivices sectoi anu sizeable iemittance flows"
(!"#$%& !"(&) $( *+& ,+$%$--$(&., S), but most of the population was SNS liteiate as
well. In fact, the amount of cell phones in the countiy now outnumbeis the amount
of people in the countiy (Evans). ulobe Telecom was awaie of this untappeu
potential, anu establisheu uCASB "foi iemote payments anu.the unbankeu
maikets" (Teves) accoiuing to the piesiuent of the piogiam. Wheieas customeis
once only hau banks to access financial seivices, they coulu now make use of cell
phones to uo so. 0f couise Baiti is uiffeient fiom the Philippinesonly one thiiu of
the population hau access to cell phones (Rhoaus)but theie is enough mobile
penetiation to suggest that limiteu mobile banking can be successful.
When it came to the stiuctuie of theii systems, Smait Communications
ueciueu on a bank-baseu piogiam anu ulobe Telecom went with a non-bank baseu
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Biian Kaneb Piofessoi Reifenbeig
Inteinational Bevelopment in Piactice 111S1S
piogiam. Wheieas the foimei iequiies the customei to "have a uiiect contiactual
ielationship with a foimal financial institution," the lattei expects the peison to
"exchange cash at a ietail agent in ietuin foi an electionic iecoiu of value" (Stiubei,
2). This is not to say that uCASB ignoies the banking system, but meiely that it
makes use of agents as inteimeuiaiies between banks anu customeis. The lack of a
uiiect ielationship between the two begins with iegistiation. The customei uoes not
neeu to open an account at the bank, but simply senus a text message with peisonal
infoimation to ulobe Telecom. The company will then confiim, via SNS, if the client
meets the ciiteiia foi a mobile banking account. This allows the customei to "loau
cash onto electionic wallets" (/"*&. "( 0&12%3*$"( "4 563(7+%&.. 53(8$(1 $( *+&
,+$%$--$(&., S) by visiting the afoiementioneu agents. This is wheie the piocess can
become tiicky. The client must piesent "two foims of valiu IB anu complete a
iegistiation foim eveiy time" ($#$9, 6) he wants to make a tiansaction. This can be a
pioblem in places wheie access to these foims is limiteu, as seen in the fact that
almost two-thiius of Filipinos finu it "not easy to open a Smait Noney oi uCASB
account" (Bokans, Ahein, Bezuiuenhouut, 61). It shoulu be expecteu that Baiti
woulu face these issues as well. Not only uo you alieauy "neeu the national IB caiu
to uo youi banking anu to uo business" (Leblanc), accoiuing to stieet venuoi Naiie-
Clauue Belson, but this is bounu to become moie of a concein because mobile
banking is iuentification-intensive compaieu to tiauitional banking. E2E shoulu look
to iuentify clients without making it haiuei foi them to paiticipate in the piogiam.
0ne way of uoing so woulu be to cieate smallei gioup savings piogiams that uepenu
moie on the community than on the goveinment foi iuentification. While mobile
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Biian Kaneb Piofessoi Reifenbeig
Inteinational Bevelopment in Piactice 111S1S
banking is moie auvanceu in the Philippines than it is in Baiti, the two countiies can
leain fiom each othei when it comes to the stiuctuie of theii piogiams.
The success of these piogiams is eviuent in the incieaseu uemanu foi theii
seivices fiom the piivate sectoi. 0ne example of this is the incentive foi banks to
paiticipate. Foi example, uieen Bank founu it is "much cheapei to encouiage
customeis to make loan iepayments via Text-A-Payment using uCash insteau of
senuing collectois to collect the payments" (Kumai, NcKay, Rotman, 1S). Yet it also
iealizeu it was "too small to be attiactive" to mobile banking on its own, so it woikeu
to cieate a netwoik of moie than "77 iuial banks anu 1,171 bianches anu banking
offices" ($#$9, 4). This enableu it to expanu beyonu a few banks to a point wheie
"moie than S million mobile banking phone tiansactions" have been maue at a value
of "moie than 17 billion PBP ($4uu million)" (Applying Technology: Nobile Phone
Banking). These banks aie not the only paiticipants in the piogiam that benefit,
howevei, as the agents that meuiate between the banks anu the customeis uo as
well. Euen Ellin, a small business ownei, is one example of this. She agieeu to be an
agent not only because she coulu "eain fiom the seivice chaiges" but also because
the piogiam woulu "inciease foot tiaffic in (hei) gioceiy stoie anu loauing station"
($#$9). It is cleai that those managing the piogiam uo not uo so out of selfless
concein foi the pooi but because it makes business sense. E2E shoulu be awaie of
this. It shoulu show those inteiesteu that they coulu expanu theii maiket shaie if
they invest in mobile banking.
The iemaining paiticipantthe clientcan take auvantage of these
piogiams if he gets beyonu the public ielations pioblems associateu with them.
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Biian Kaneb Piofessoi Reifenbeig
Inteinational Bevelopment in Piactice 111S1S
uCASB woulu point out that it maue use of "billboaius, point of sale, anu iauio"
(!"#$%& !"(&) $( *+& ,+$%$--$(&., 11) when it was launcheu, but the peicentage of the
population that is awaie of the seivice still stanus at twenty-eight peicent (Bokans,
Ahein, Bezuiuenhouut, S). This numbei is not acceptable. Still, it coulu be a piouuct
of the piogiam being new to the financial seivices inuustiy. It is haiu to believe that
the numbei of people awaie of uCASB has not incieaseu fiom its inception nine
yeais ago. Regaiuless, those who enu up paiticipating in the piogiam benefit fiom it.
This can be seen in the savings the banks passeu to theii clients. Because uieen
Bank was able to "ieuuce the costs of fielu-baseu collection," (Kumai, NcKay,
Rotman, 1S), foi example, it coulu ieuuce both the inteiest iate anu seivice chaige
foi customeis. These savings amounteu to $S.Su baseu on an aveiage loan of
$4uu.Su ($#$9). This numbei is not laige, but it is also not insignificant. The fact that
the "cost of tiavelling to the bank" often "exceeus the cost of conveiting cash into
uCASB" ($#$9: also gives a ieason foi those in iuial aieas to paiticipate in the
piogiam. E2E shoulu be able to convince clients that it is helpful in the long-teim,
but this uoes not mean it shoulu be shoitsighteu. The fact that a well-establisheu
piogiam is stiuggling with public ielationsone suivey founu paiticipants hau "no
iuea which financial objective will be best seiveu by the built-in featuies" (uusto,
}ustiniana, 8) of uCASBshoulu be a lesson foi E2E.
Theie aie impoitant lessons E2E shoulu take away fiom uCASB. The fiist is
that the piogiam is bounu to face implementation issues. Whethei this is the
piouuct of pioject manageis oi the clients themselves, the two will neeu time to
woik togethei. The seconu is that E2E shoulu make suie each paiticipant knows it
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Biian Kaneb Piofessoi Reifenbeig
Inteinational Bevelopment in Piactice 111S1S
can piofit fiom the piogiam. It will be haiu to uo so if some uo not see immeuiate
benefits, so it will be impoitant to point to piogiams like uCASB to ieminu them of
the potential of mobile banking. E2E shoulu succeeu if it pays attention to
paiticipants in the piogiam.
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Biian Kaneb Piofessoi Reifenbeig
Inteinational Bevelopment in Piactice 111S1S
Woiks Citeu
"Applying Technology: Nobile Phone Banking." ;< =>?@ ,+$%$--$(&.. Chemonics
Inteinational, }une 2u12. Web. 1u Nov. 2u1S.
<http:mabs4finaliepoit.woiupiess.comchapteischaptei-S-applying-
technology-mobile-phone-banking>.
Evans, Petei. "Philippines-Telecoms, Nobile, Bioaubanu anu
Foiecasts." 5299&A7"BA32. BuuueComm, }uly 2u1S. Web. 8 Nov. 2u1S.
<http:www.buuue.com.auReseaichPhilippines-Telecoms-Nobile-
Bioaubanu-anu-Foiecasts.html>.
Bokans, }ames, Bienuan Ahein, anu }ohann Bezuiuenhouut. ?&B3(9 <*29) "4
?"B&.*$7 ,3)B&(*. $( *+& ,+$%$--$(&.. Rep. Bankable Fiontiei Associates, S
Bec. 2u1u. Web. 12 Nov. 2u1S. <http:bankablefiontiei.comwp-
contentuploausuocumentsBNuF.PBP-FinalRepoit-uec2u1u.puf>.
uusto, Anatoly, anu Feliciuau }ustiniana. ?"&. !$76"%"3( 0&-3)B&(* C$3 D&%% ,+"(&
>(76&3.& D%$&(* D"(4$9&(7& $( !"#$%& E3%2& <*"631&F G+& D3.& "4 H6&&( 53(8 $(
!$(93(3"I ,+$%$--$(&.. Rep. Nstitute foi Noney, Technology anu Financial
Inclusion, }uly 2u12. Web. 12 Nov. 2u1S.
<http:www.imtfi.uci.euufilesimtfiuocs2u12gusto_imtfi-
micia_synopsis.puf>.
Kumai, Kabii, Clauuia NcKay, anu Saiah Rotman. !$76"4$(3(7& 3(9 !"#$%& 53(8$(1@
G+& <*"6) <" J36. Rep. no. 62. CuAP, }uly 2u1u. Web. 12 Nov. 2u1S.
<http:www.ifc.oigwpswcmconnectS6146Suu4a1ua46b9u1ufuuu29SS
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Biian Kaneb Piofessoi Reifenbeig
Inteinational Bevelopment in Piactice 111S1S
2bS1Tool%2B8.2e.%2BCuAP%2BNN%2B%26%2BNiciofinance.puf.
N0B=A}PERES>.
Leblanc, }ean-Fiancois. "In Baiti, Baving an Iuentification Caiu Neans 'having a
Say'"K**-@LLMMMA379$N7$93A17A73L. uoveinment of Canaua, 2u12. Web. 12 Nov.
2u1S. <http:www.acui-ciua.gc.caacui-ciuaacui-ciua.nsfengNAB-
11S16214-SNX>.
!"#$%& !"(&) $( *+& ,+$%$--$(&.. Rep. uSN Association, 2uu9. Web. 9 Nov. 2u1S.
<http:www.gsma.commobilefoiuevelopmentwp-
contentuploaus2u12u6Philippines-Case-Stuuy-v-X21-21.puf>.
/"*&. "( 0&12%3*$"( "4 563(7+%&.. 53(8$(1 $( *+& ,+$%$--$(&.. Rep. CuAP, }an. 2u1u.
Web. 6 Nov. 2u1S. <http:www.cgap.oigsitesuefaultfilesCuAP-
Regulation-of-Bianchless-Banking-in-Philippines-}an-2u1u.puf>.
Rhoaus, Chiistophei. "Quake Sets Back Baiti's Effoits to Impiove
Telecommunications."O<PA7"B. Wall Stieet }ouinal, 1S }an. 2u1u. Web. 7 Nov.
2u1S.
<http:online.wsj.comnewsaiticlesSB1uuu1424uS27487uS6S76u4S7Su
uS4SS22S2S7u96>.
Stiubei, Naiion. !"#$%& 53(8$(1 $( !$76"4$(3(7&. Rep. Cieuit Suisse, 7 Nai. 2u12.
Web. 1u Nov. 2u1S. <http:opsmiciofinance.cieuit-
suisse.comuocsNobileBanking-in-Niciofinance.puf>.
Teves, 0livei. "Cell Phones Bouble as Electonic Wallets." ;<= G"93). Associateu Piess,
29 Sept. 2uu7. Web. 11 Nov. 2u1S.
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Biian Kaneb Piofessoi Reifenbeig
Inteinational Bevelopment in Piactice 111S1S
<http:usatouaySu.usatouay.comtechwiielessphones2uu7-u9-29-
philippines-cell-phones_n.htm>.
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