Much has been said about the role of mobile money in an economy such as Ghana's. Since its advent onto the scene some seven years ago, the overriding debate has been whether it poses an existential threat or is rather a symbiotic platform for the banking industry.
Some prominent figures in the banking industry have expressed several views on the debate. Amongst the points, previously espoused, include the following;
§ Telcos are trying to operate as pseudo-banks without the regulatory rights and privileges.
§ Telcos are attempting to receive interest from mobile money transactions; which directly distorts the status quo currently.
§ Telcos in mobile money operations are targeting and shrinking banks’ customers.
While these premises seem to have been hammered on for a long time, the truth is that they are unfounded.
How do Banks mobilise their funds?
The ethos of any financial institution, or banks for that matter, gives them the license to receive deposits, issue loans and conduct other financial services such as Wealth Management and Investment Banking. For mobile money to be considered competitive, it has to possess the capacity to significantly disrupt the bank’s ability to perform these primary functions.
There are several ways banks mobilise funds in their day-to-day operations. However, the two major sources are:
§ Corporates & businesses and;
§ High/Middle income earners
Banks access these customer deposits through the placement of branches in selected areas where their targeted customers are located. It is therefore no surprise that there are now less than 2,000 bank branches since the advent of banking in Ghana in 1896. In fact, some Banks are even reducing their branch networks, further restricting their reach to only big businesses and the “elite” in the society.
As it stands currently, none of the major sources of bank deposits is even remotely available to mobile money providers. Mobile money is not targeting deposits of large corporates or businesses nor does it target the deposits of high to middle income earners. In fact, mobile money focuses attention on the common man; the man who has been financially disenfranchised because of the strategic decisions of the banking industry for 120 - years.
Mobile money’s presence is to provide a reliable, secure, convenient and cost efficient means for banks to reach millions of Ghanaians who will otherwise be left out of mainstream banking.
Today, Banks in Ghana have in their possession over GHS600m of mobile money deposits (representing 30% of total deposits), 80% of which will not have made it onto their books but for the activities of mobile money operators. In just seven years, mobile money operators have racked up 100,000 agent locations through which customers transact and are directly raising deposits for the banks. Mobile money has no chance of taking deposits away from banks, rather, what it seeks to do, is to mop up other sources of funds sitting with the largely unbanked 70% population and make them available to the Banks.
A relevant question, therefore, arises: Is Mobile money trying to access or win deposits that the banks are fighting for or does mobile money add to the banking industry’s deposit mobilisation efforts?
The answer is obvious.
Over 90% of the banks revenue streams are not accessible to mobile money operators. Mobile money operators cannot lend to the government, neither can they lend to corporates and high net worth individuals. Even if mobile money operators ever get to lend money, it will be to those millions of Ghanaians the banking industry has disenfranchised for over 120 - years.
Mobile money provides a platform for banks to better monetise their own investments. For example, banks are earning revenues from mobile money customers who use their ATMs and Point of Service (POS) platforms; these are revenue generating outcomes that were not previously available.
Driving the point home:
The presence of Mobile Money is an answer to man’s crucial need to simplify the financial services process for his fellow man. Ghana’s banking sector has been able to bank close to just 30% of the entire population since 1896. It leaves the country with a staggering 70% of Ghanaians who are still without a bank account. Mobile money came to bring these services closer to these people; some of whom are our parents, siblings, relatives and even business colleagues.
Mobile money is the guarantee that people from all walks of life will be able to transact businesses wherever they are just by the touch of a mobile phone screen. It tackles the problem from the bottom of the pyramid; giving access to many a farmer, student, informal trader at a basic level.
In Kenya, for example, the number of prudential account holders doubled in 2006 and 2013; the same period M-PESA experienced exponential growth. Mobile money exposes banks to a broader deposit base which will reduce their cost of funds and improve their resilience in times of financial stress.
Disruptive innovations have enhanced banking in the past. The ATM is an example. Mobile money is simply the current disruption and like innovations in the past, it will enhance banking rather than replace it. It is another gateway to banking but one that is more democratic than any path we have ever seen. It does not matter where you live. It doesn't matter how much or how little you have. If you have a basic mobile phone, you have access to a pseudo deposit system and that is awesome.
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