Nepali Times
My Two Paisa
Banking on cell phones


ON HAND: Bal Ram Shrestha (centre), a Laxmi Bank m-banking agent in Dolalghat, Sindhupalchowk interacts with clients using Hello Paisa.
Even after relentless expansion of branches, only 28 per cent of households in Nepal have access to bank accounts. Compare this number to the mobile penetration rate which stands at 55.40 per cent, with spread across 75 districts. It's time financial institutions understood the opportunities this difference represents, and move forward with mobile banking (m-banking).

With innovative features and applications, especially in smartphones, there is little that a cellphone can't be used for. A mobile is not just a telephone service, but a portable digital companion that informs and entertains. Due to its universal reach and cost-effective technology, the device is being looked upon as an efficient tool for financial inclusion.

M-banking technologies let customers access their accounts to conduct a host of financial transactions and inquiries. In addition to basic services such as providing account information, m-banking allows real-time transactions through mobile phones. Around the world, m-banking has not only made "anywhere, anytime, anyhow" services possible, but it has become a necessity in today's competitive market.

But banks here are still obsessed with physically expanding their branches, and have limited themselves to sending text alerts. Only a few like Kumari Bank and Laxmi Bank have started providing full m-banking services.

Nepal now has one of the highest growth rates for mobile penetration with large geographical coverage. Furthermore, the central bank recently introduced regulations that cover e-commerce and m-banking. Financial institutions should cash in on this new channel to expand their customer base and enhance loyalty. Some may consider m-banking an added expense, but it has the potential to boost revenues by decreasing transaction costs.

Such technology can be used most successfully in rural and geographically remote areas where it is hard for banks to have a physical presence. With m-banking agents, families can receive cash directly from abroad and won't have to walk for days in search of bank outlets. Pensioners will be able to get their money in the comfort of their homes. Women won't have to travel for hours to settle their microfinance loan payments. And paying utility bills will not cost a paisa in travel expenses.

Of course, receiving money through mobiles will only be valuable if customers can use it to make payments as well. This requires an integrated network of financial institutions, telecom operators, merchants and utility service providers that enable transactions through mobile phones. Shared m-banking platforms, such as the recently introduced Hello Paisa are being developed locally to enable inter-operability of all stakeholders.

Tapping into the mobiles of the unbanked population is certainly more economical and effective than a brick and mortar expansion for banks. Global financial institutions are tilting towards offering service that is fast, convenient and available on the move. Now that they have the technology to be on the fingertips of their clients, why not take the step?

See also:
Leapfrogging with phone cash
Two overseas Nepalis return to pioneer a mobile banking venture

1. Anna
interesting article! m-banking technologies enable more independence for those unanble to open a bank account. and this applies globally. according to a world bank report, three quarters of people living with less than $2 per day do not have a bank account.

2. Mr Lama
Lets say i am two days away from the nearest bank but i have the mobile coverage. And i need money... how can i get money? Who will bring me money from my account? 

(11 JAN 2013 - 17 JAN 2013)