In Japan it is not uncommon for people to make everyday purchases using only a cell phones. A variety of secure mobile technologies alowing for easy transfer of money from one’s bank account or credit card to retailer have existed for some time. The trend is catching on in the developing world as well, where those who do not have bank accounts or credit cards can move or store money and credits via cell phones. A good review of some current M-banking and M-remittance services in the developing world can be found here.
In reading recenly about a bank sponsored program to help the “unbanked” poor in San Francisco open up banking accounts, I was struck by how far behind the curve we seem to be in America in leveraging the same mobile opportunities that are coming online around the globe. Rather than spending alot of energy trying to do outreach to the unbanked in an effort to get them to open a physical bank account, wouldn’t it be smarter to make mobile banking more prevelant and accessible? The fact remains that mobile phones are used by everyone these days, from the urban poor to rural illegal immigrants. Getting these same people to come in to a bank branch to open a bank account, while worthwhile, seems unrealistic – particularly for folks on the margins who may have only a handful of dollars at any given time.
A more intelligent approach, it would seem, is to enable M-banking without any restrictions or penalties on the amount of money being stored or transferred. Just as people use prepay cards for long distance calling, why couldn’t they prepay for mobile storage and transfers of money at a local 7-11 or convenience store or at a kind of open ATM? And why shouldn’t they be able to remit their money globally for the price of a text message instead of the 15% or so service charge that the money transfer companies (Western Union, Moneygram, etc.) routinely charge users?
No doubt there are some banking and financial regulations that are standing in the way of rapid adoption of such innovations here in the U.S. But rather than ignore this market opportunity in favor of token programs for the unbanked, I think the established banks and financial institutions (not to mention nonprofits and governments) should take up the challenge. By omission they and we are leaving a large percentage of the population open to predatory and over priced financial services fees, manipulation, and worse. Sadly, those who can least afford to pay the price are charged the most…