The use of the mobile phone for the transfer of workers’ remittances and for small payments holds much promise, especially in Africa. However two problematic issues threaten the mobile revolution. These are the attitude of the banks to their prospective clients and the attitude of bank regulators to non-bank participants.
The 2nd decade of the 21st century is going to be the “Mobile Decade”. There is absolutely no question about that. All across the globe banks and others are churning out mobile payment applications (among others of course) at a speed that has become so rapid that it is increasingly hard to keep up. In a word the pace of change has become “dizzying”.
In Africa the mobile phone is being seen as the tool that can bring so much good, cheaply and rapidly to this long suffering continent. A popular application for this wonder tool is in the field of Migrant Worker Remittances and small value Payments.
Amid all this excitement, there is however two shadows on the horizon. And if these potential problems are not addressed they could both become showstoppers. These problems are what I collectively term the “Driver Issues”. As I said there are two of them; “Technology Drivers” and “Regulatory Drivers”. Let me explain.
Technology Drivers
Leading edge developments especially in the banking industry tend to be driven by the technologists. Banks were early adapters of Information Technology. Way back in the 1960s and 1970s banks saw the obvious benefits of the computer, initially for account and data processing and rapidly became the industry’s largest users of this new way of doing business and processing transactions. Anything that would automate the processing, storage and retrieval of massive amounts of transactional data was sure to be a big hit – and it was!
So it was logical, that as the years passed, any new technology or application was quietly previewed to the banking industry. As someone heavily involved in R&D in electronic banking way back in the 1980s we were constantly being approached by the “big guys” and many smaller developers too, who had solutions to problems that they asked to find. It became pretty much an industry joke about “solutions looking for problems”.
In this way we were exposed to new technologies and processes such as contactless cards, remote banking (before the Internet and the PC), smart cards, biometrics (fingerprint and iris), touchtone banking, long before the final products were ever announced never mind rolled out.
What the Technology vendors had done was to enter into an informal partnership with the financial industry, using them as a sounding board and as an idea generator for new products and processes. In other words the banking industry in the fields of technology and data processing were being actively driven by the technology who legitimately were creating their future sales through this informal partnership. Nothing wrong with this especially as the banks were still very customer driven. I say this because in those days the bank-customer interface still had a human side to it. We saw our customers as real flesh and blood people and then customer saw the teller or the loan clerk as the personification of the bank.
The problem of course is that this technology driven approach has continued from the vendor side. Today however the banks generally appear to have largely forgotten that customers a human. To banks today, customers have merely become electronic impulses on the other side of a remote interface, be it an ATM, a PC or a mobile phone.
So as the technology changes the banks have become rapid adopters. Often though the real needs and the problems of the customers are totally forgotten.
In the case of Migrant Worker Remittances these problems and needs are two-fold. They are commonly referred to as a “First and Last Mile” issues. The “First Mile” refers to the problems that the sender faces in whatever country he is working in. These sort of problems range from issues like a lack of fluency in the local language, or not understanding local customs, or a lack of formal such as being an illegal immigrant or things like not knowing how or where to send money from. “Last Mile” issues relate to problems that the receiver in the home country faces and these are often equally daunting. These sort of issues range from the fact that the receiver may not have a bank account, or there may be excessive charges on the relatively low remittance or that the recipient may have to travel for literally days to collect a small amount from the closest bank branch.
Regulatory Drivers
Bank regulation fulfils a very important role in all financial systems. Banks have the ability to create money. To maintain a stable economy it is vital that the banks money creation ability is regulated. This is the prime reason for bank regulation, whatever form it may take. True there are a lot of other reasons for regulation, such as consumer protection. However rest assured, when someone may have the ability to “create money” such as through the deposit multiplier affect the local bank regulator quickly steps in. Often the line of least resistance is for the regulator to simply restrict all money transfer business to a licensed bank.
Doing this as has happened in many parts of Africa has a very negative effect on the on the development of new money transfer and payments mechanisms. Regulation restricts competition. We all know that free completion is vital to the offering of efficient, reliable and affordable banking services.
In many African countries, local banks not willing to compete against non-bank money transfer operators have run to the regulator and sought his protection. Oftentimes the regulator has slapped a blanket ban on the non-bank money transfer operator’s activities. This ensures that the complainant banks retain their remittance and payments monopoly. It ensures that noting much will happen and that the receivers “Last Mile” difficulties will remain. Irresponsible regulation such as this will have an extremely damaging effect on mobile payments opportunities.
Conclusion
Unfortunately the evidence so far from across Africa is pretty damning. Banks and regulators in most African countries tend to ignore what the migrant remittance issue is all about. Specifically this relates to “Last Mile” problems. If the banks fail to address the “Last Mile” issue adequately and if the regulators are not prepared to soften their approach to the entry of non-bank participants to the financial system – both these issues, either on their own or in concert threaten to torpedo this budding African mobile payments revolution.
Mobile Manners
The mobile phone has become ubiquitous. It is the one hi-tech device that has become the universal calling card for humankind. Yet despite the privilege and the benefits that this instrument bestows it has turned many folk into rude bores bereft of any manners in their slavish obedience to this twenty-first century icon.
Is the Financial Crisis Really Over?
To really fix the financial and banking system governments and regulators need to get to the core of the problems that led to the 2007-9 financial crisis. The evidence so far indicates that the current approach has failed and that throwing money at banks is not a part of the solution. Unless the authorities can get the “fix” right we are facing ongoing crisis as banks revert to their old ways with little regard for anyone but themselves.
Do Bankers Have a Conscience?
Banks are once again up to their old tricks. It seems as the events of 2007, 2008 and 2009 have been forgotten. Greed seems to have taken precedence once again prompting the question of bankers and their conscience.
