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The advent of the Internet has enabled new ways to conduct banking business,
resulting in the creation of new institutions, such as online banks, online brokers
and wealth managers. Such institutions still account for a tiny percentage of the
industry.[O



Over the last few years, the mobile and wireless market has been one of the fastest
growing markets in the world and it is still growing at a rapid pace. According to
the GSM Association and Ovum, the number of mobile subscribers exceeded 2
billion in September 2005, and now[ 
exceeds 2.5 billion (of which more than 2
billion are GSM).[O



With mobile technology, banks can offer services to their customers such as doing
funds transfer while travelling, receiving online updates of stock price or even
performing stock trading while being stuck in traffic. Smartphones and 3G
connectivity provide some capabilities that older text message-only phones do not.

According to a study by financial consultancy Celent, 35% of online banking

households will be using mobile banking by 2010, up from less than 1% today.
Upwards of 70% of bank center call volume is projected to come from mobile
phones. Mobile banking will eventually allow users to make payments at the
physical point of sale. "Mobile contactless payments will make up 10% of the
contactless market by 2010.[2 Another study from 2010 by Berg Insight forecasts
that the number of mobile banking users in the US will grow from 12 million in
2009 to 86 million in 2015. The same study also predicts that the European market
will grow from 7 million mobile banking users in 2009 to 115 million users in
2015.[3

Many believe that mobile users have just started to fully utilize the data capabilities
in their mobile phones. In Asian countries like India, China, Bangladesh, Indonesia
and Philippines, where mobile infrastructure is comparatively better than the fixed-
line infrastructure, and in European countries, where mobile phone penetration is
very high (at least 80% of consumers use a mobile phone), mobile banking is likely
to appeal even more.

c 

   




A wide spectrum of Mobile/branchless banking models is evolving. However, no

matter what business model, if mobile banking is being used to attract low-income
populations in often rural locations, the business model will depend on banking
agents, i.e., retail or postal outlets that process financial transactions on behalf
telcos or banks. The banking agent is an important part of the mobile banking
business model since customer care, service quality, and cash management will
depend on them. Many telcos will work through their local airtime resellers.
However, banks in Colombia, Brazil, Peru, and other markets use pharmacies,
bakeries, etc.

These models differ primarily on the question that who will establish the
relationship (account opening, deposit taking, lending etc.) to the end customer, the
Bank or the Non-Bank/Telecommunication Company (Telco). Another difference
lies in the nature of agency agreement between bank and the Non-Bank. Models of
branchless banking can be classified into three broad categories - Bank Focused,
Bank-Led and Nonbank-Led.

x

 



The bank-focused model emerges when a traditional bank uses non-traditional

low-cost delivery channels to provide banking services to its existing customers.
Examples range from use of automatic teller machines (ATMs) to internet banking
or mobile phone banking to provide certain limited banking services to banks
customers. This model is additive in nature and may be seen as a modest extension
of conventional branch-based banking.

c 

 



Mobile banking can offer services such as the following:

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Especially for clients in remote locations, it will be important to help them deposit
and withdraw funds at banking agents, i.e., retail and postal outlets that turn cash
into electronic funds and vice versa. The feasibility of such banking agents
depends on local regulation which enables retail outlets to take deposits or not.

A specific sequence of SMS messages will enable the system to verify if the client
has sufficient funds in his or her wallet and authorize a deposit or withdrawal
transaction at the agent. When depositing money, the merchant receives cash and
the system credits the client's bank account or mobile wallet. In the same way the
client can also withdraw money at the merchant: through exchanging sms to
provide authorization, the merchant hands the client cash and debits the merchant's
account.
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Based on a survey conducted by Forrester, mobile banking will be attractive

mainly to the younger, more "tech-savvy" customer segment. A third of mobile
phone users say that they may consider performing some kind of financial
transaction through their mobile phone. But most of the users are interested in
performing basic transactions such as querying for account balance and making bill
payment.


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Key challenges in developing a sophisticated mobile banking application are :

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There are a large number of different mobile phone devices and it is a big
challenge for banks to offer mobile banking solution on any type of device. Some
of these devices support Java ME and others support SIM Application Toolkit, a
WAP browser, or only SMS.

Initial interoperability issues however have been localized, with countries like
India using portals like R-World to enable the limitations of low end java based
phones, while focus on areas such as South Africa have defaulted to the USSD as a
basis of communication achievable with any phone.

The desire for interoperability is largely dependent on the banks themselves, where
installed applications(Java based or native) provide better security, are easier to use
and allow development of more complex capabilities similar to those of internet
banking while SMS can provide the basics but becomes difficult to operate with
more complex transactions.

There is a myth that there is a challenge of interoperability between mobile

banking applications due to perceived lack of common technology standards for
mobile banking. In practice it is too early in the service lifecycle for
interoperability to be addressed within an individual country, as very few countries
have more than one mobile banking service provider. In practice, banking
interfaces are well defined and money movements between banks follow the IS0-
8583 standard. As mobile banking matures, money movements between service
providers will naturally adopt the same standards as in the banking world.

x
 

Security of financial transactions, being executed from some remote location and
transmission of financial information over the air, are the most complicated
challenges that need to be addressed jointly by mobile application developers,
wireless network service providers and the banks' IT departments.

The following aspects need to be addressed to offer a secure infrastructure for

financial transaction over wireless network :

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Another challenge for the CIOs and CTOs of the banks is to scale-up the mobile banking
infrastructure to handle exponential growth of the customer base. With mobile banking, the
customer may be sitting in any part of the world (true anytime, anywhere banking) and hence
banks need to ensure that the systems are up and running in a true 24 x 7 fashion. As customers
will find mobile banking more and more useful, their expectations from the solution will
increase. Banks unable to meet the performance and reliability expectations may lose customer
confidence. There are systems such as Mobile Transaction Platform which allow quick and
secure mobile enabling of various banking services. Recently in India there has been a
phenomenal growth in the use of Mobile Banking applications, with leading banks adopting
Mobile Transaction Platform and the Central Bank publishing guidelines for mobile banking
operations.

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Due to the nature of the connectivity between bank and its customers, it would be impractical to
expect customers to regularly visit banks or connect to a web site for regular upgrade of their
mobile banking application. It will be expected that the mobile application itself check the
upgrades and updates and download necessary patches (so called "Over The Air" updates).
However, there could be many issues to implement this approach such as upgrade /
synchronization of other dependent components.

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It would be expected from the mobile application to support personalization such as :

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The bank-led model offers a distinct alternative to conventional branch-based

banking in that customer conducts financial transactions at a whole range of retail
agents (or through mobile phone) instead of at bank branches or through bank
employees. This model promises the potential to substantially increase the
financial services outreach by using a different delivery channel (retailers/ mobile
phones), a different trade partner (telco / chain store) having experience and target
market distinct from traditional banks, and may be significantly cheaper than the
bank-based alternatives. The bank-led model may be implemented by either using
correspondent arrangements or by creating a JV between Bank and Telco/non-
bank. In this model customer account relationship rests with the bank

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The non-bank-led model is where a bank does not come into the picture (except
possibly as a safe-keeper of surplus funds) and the non-bank (e.g. telco) performs
all the functions.

Mobile banking: A boon

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The biggest advantage that mobile banking offers to banks is that it drastically cuts
down the costs of providing service to the customers. For example an average
teller or phone transaction costs about $2.36 each, whereas an electronic
transaction costs only about $0.10 each. Additionally, this new channel gives the
bank ability to cross-sell up-sell their other complex banking products and services
such as vehicle loans, credit cards etc.

For service providers, Mobile banking offers the next surest way to achieve
growth. Countries like Korea where mobile penetration is nearing saturation,
mobile banking is helping service providers increase revenues from the now static
subscriber base. Also service providers are increasingly using the complexity of
their supported mobile banking services to attract new customers and retain old
ones.

The relevance importance and future of P2P payment.

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With the advances in mobile payments, the deployment of suitable infrastructure

and (most important) education, it is highly likely that cash will start to be replaced
as the P2P payment tool of choice. This may not take too long to happen.

c" " ' ''"   " 

It is now accepted as being a reality for banking: mobile will be a part of the future
of how banking will be delivered to consumers. As was the case with ATM's, it is
highly likely that consumer's behaviour related to their interaction with banks will
change, as mobile banking usage picks up. Something else that we can have fun
with speculating...

Based on prelimanry research and other evidence, it does seem as if the growth of
mobile banking leads to a reduction in visits by customers to branches and a
reduction of calls to contact centres. This is of course good news as this will
directly lead to a reduction in cost. Some observations also seem to suggest that
consumers do more transactions now. It is as if the ease with which mobile
banking allows consumers to do transactions, stimulate them to do more. But what
are some of the other changes that we could also expect?

OY Consumers will be more aware of their money (or the lack of it). I believe
that consumers will become more educated about spending and saving
money. People will budget better and become more savvy to manage and use
their money.
 OY More sophisticated mechanisms to stimulate impulse buying will become
prevalent. This will change spending patterns and the effectiveness of
alternative sales and marketing approaches.
OY As mobile banking systems become more mainstream, more advanced
applications will be developed (making use of cellular characteristics like
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The study is intended to help to raise awareness among key decisionmakers in the
public, private and civil society sectors about the potential importance of the use of
low cost mobile devices -- especially mobile phones -- to help benefit a variety of
educational objectives. By documenting the existing landscape of initiatives in this
area and emerging 'good practice', it is also hoped that this work will serve as a
common base for further analytical work in this area, and inform the impending
explosion of development of new hardware, software and business services
occurring on mobile devices, to the benefit of these educational objectives.

This activity is one component of a larger 'mobile flagship' program at the World
Bank consisting of studies and activities related to mobile services and applications
in selected sectors, including Mobile Banking Users and Non Users Behavior
Study; Extending Mobile Applications in Africa through Social Networking";
and Mobile Applications for Sectoral Development.


 

Drawing on examples of the use of mobile phones and related handheld

technologies for educational purposes in advanced economies like Korea, Japan,
the U.K., the United States and Finland, and an emerging evidence base of pilot
projects from countries as diverse as Tanzania, Kenya, the Philippines, Mongolia,
China and South Africa, this study proposes to:

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While education is the focus here, the area of inquiry is not be limited to the
formal education sector itself. Lifelong learning and educational outreach activities
utilizing the mobile phone to benefit the health and agricultural sectors will also
fall within the scope of this study. This work will draw heavily on organizations
and expertise active in these areas on-the-ground.

The results of this study will be disseminated and discussed at a landmark global
event on mobile applications sponsored by the World Bank as part of the 'mobile
flagship' initiative, involving sets of key stakeholders from the public, private and
civil society sectors.

 u


Going forward, isn't it more likely that the ICT tool of choice for students in
developing countries will be the mobile phone, and not the computer?

This is a question of hot debate in many circles. Whatever the eventual resolution
of this debate (and no doubt it will not yield a simple either/or answer), there are
still precious few widespread examples of the use of phones for education purposes
inside or outside of classrooms in developing countries that have been well
documented, and fewer still that have been evaluated with any sort of rigor.

28% of Africans now have a mobile phone subscription, according to data released
by the ITU earlier this year, part of a larger trend that sees two out of every three
mobile subscribers around the world living in a developing country. The flagship
ITU publication Measuring the Information Society notes that two-thirds of the
world's cell phone subscriptions are in developing nations, with Africa, which has
a 2% subscriber rate as recently as 2000, growing the fastest. And it is not only
adults who are making use of this new technology. Recent survey work at a low-
income high school in South Africa's Samora Machel township (for example)
suggests that mobile penetration among youth in some places might be higher than
one might suspect.
While the explosive use of mobile phones in developing countries is well-
documented -- and undeniable -- and evidence is emerging that phones are slowly
making their way into the hands of teens, just what this might mean for the
delivery of education in developing countries is a little less clear.

Five years ago infoDev commissioned work to map out what was known about the
nascent topic of mobile banking, and the resulting study, the first of its kind,
helped frame the issues for donor agencies, governments, NGOs and private sector
firms alike. M-banking has exploded since then, and this study proposes to do for
the use of mobile phones in education what the earlier infoDev study did for the
use of mobile phones in the financial services sector. We are at a similar point now
with where we were with m-banking five years ago, and this study will provide
guidance for World Bank technical assistance and investment activities related to
the much-hyped potential for the use of mobile phones in education. There is an
opportunity here to contribute to the global knowledgebase in the very early stages
of what is poised to become a potentially massive area of investment by ministries
of education, civil society and (especially) the private sector in the decade to come.

Nascent efforts are underway to explore various aspects of the emerging

phenomenon of the use of mobile phones in education, but no institution has
stepped forward to help catalyze global collaboration and cooperation around
research directions and agenda setting in this area. This work will tap the expertise
and convening power of a number of key partner organizations and experts active
in this area.

This work, expected to run through December 2010, is being funded by the Korean
ICT Trust Fund at the World Bank. Updates on this project will be posted
periodically on the World Bank's ICT and Education blog, EduTech.


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