Mobile Banking is proving extremely successful, especially in emerging countries where the population has insufficient access to traditional banking services. But the authorities still need to make more effort.

Mobile Banking Still Needs a Better Framework if it is to Flourish

Governments will need to provide a more suitable environment if they want mobile banking services to thrive, says a report from the International Telecommunication Union (ITU), which points out that a few changes could go a long way to help the penetration of mobile banking in emerging countries. Firstly it’s imperative that the telecommunications regulators allow mobile operators to offer services outside their original field of activity, even though they may have to grant additional licences - as is the case in China, Kenya, and Saudi Arabia. Basically it’s a matter of speeding up bureaucracy. It’s also essential to ensure that an existing telephone number can be transferred to another operator offering m-banking services – such as an operator that has recently started up in business in India, for instance – otherwise customers will hesitate to embrace the new services.

Getting Closer to the Benefits of Traditional Banking 

However, some changes do not depend directly on the telecommunications sector. The report explains that mobile banking providers need to offer services and benefits which are as close as possible to those of traditional banking. This means for example that both the operator and the government must ensure that customers’ deposit funds are secure, and this is far from being the case in many emerging countries. It would also be a good idea to enable the customer to earn interest on deposits, as does the M-Kesho service, the product of a partnership between Kenyan telecomms operator Safaricom, and local financial institution Equity Bank.

The dangers of over-taxing mobile services 

According to the study, governments should also refrain from taxing mobile banking services. A report published by the GSM Association at the beginning of September indicates that in some African countries, for example, taxes on mobile terminals and communication are rather steep. The ITU reveals that on average, taxes represent 17.4% of the total cost of owning a mobile phone. Telecommunications regulators also need to be able to anticipate forthcoming technological innovations in this fast-developing sector and avoid putting the brakes on future m-banking models. For example, while many m-banking options currently work via SMS, an eventual move to 3G is inevitable and countries will therefore need to rapidly improve on their existing telecommunications networks.