The mobile banking revolution
In emerging economies, some 2.2 billion low-income workers(1) do not use financial services because they live in areas without banking facilities.
However, they do have other retail outlets such as grocery stores, pharmacies and post offices. ‘Cash merchants’, also called ‘banking agents’, enable financial services providers to reach these communities through existing retail outlets. By early 2012, one in every four Kenyans will be subscribed to a mobile banking provider. The more than 22,000 cash merchants far outnumber Kenya’s 840 bank branches. In a country where only about ten percent of the people have a bank account, this service has revolutionised the economy and thus the society as a whole.
How does it work?
Once the customer is registered with the provider’s mobile banking system, making a deposit involves exchanging physical money for virtual funds, called ‘e-float’, which is then credited to his of her mobile money account. E-float can then be transferred by mobile phone to other registered users, who can exchange it for cash in an agent’s store in their vicinity.
Some merchants, mainly located in cities, accumulate cash and risk running out of e-float. Meanwhile, agents in rural areas, where most transactions are cash withdrawals, face the opposite problem. In order to keep the system running, agents must manage their liquidity by regularly swapping cash for e-float, or vice versa. Mobile banking providers rely on a system of intermediaries, such as PEP Intermedius, between agents and banks. PEP Intermedius takes on the job of transferring cash and e-float to make sure its agents can service their clients. But PEP does more than just transfer money and e-float. By training and coaching its branded agents, PEP is helping steadily advance their professionalization. This teaches them to handle a growing number of financial services at attractive rates in a pleasant, safe environment.
This animated film, made for PEP, explains how mobile money works, its advantages for the user and the role PEP plays in the process. (Spoken in English).