Mobile Money and the World’s Unbanked

Dina Papamichael, Penser Consulting, @PenserConsult

2.5 billion people in the world are ‘unbanked’

While a large percentage of the world’s population have no access to traditional financial services, the use of mobile phones across the globe has skyrocketed. Taking the idea that the use of mobile phones can play a role in solving the day-to-day problems of having no access to banks, a number of services around the world have emerged in the last decade. Just over half of the world’s adult population are ‘unbanked’ – at the same time 91% of all people on earth have a mobile phone[i]. 2.2 billion of these unserved adults (those who do not use or have access to banks or microfinance institutions to borrow or save) live in Africa, Asia, Latin America, and the Middle East[ii]. What solutions have companies developed to allow the convenient transfer of money using mobile phones? What will the future be for ‘mobile money’ around the world?

M-Pesa – Mobile Money

M-Pesa, Swahili for mobile money, was launched in Kenya seven years ago. In many ways, the company, a joint venture between Vodafone and Safaricom, has set an example in how the use of mobile phones can transform lives in unbanked populations around the world. For example, over 40 percent of Kenyan adults who used mobile money report that they do not have a formal bank account[iii]. The service works through customers loading money onto their mobile phones at M-Pesa vendors – they can then send money to other users via text message. Once the text is received, the user can then collect the cash by visiting their nearest M-Pesa vendor. The service has been praised as it allows users to pay utility bills, buy groceries or even get taxis without having to carry cash. Susie Lonie, one of the creators of M-Pesa has claimed “Ideally what we are looking for is to take cash out of the economy and replace it with electronic money”[iv]. M-Pesa has 18 million mobile phone users subscribed and close to half of the population participates in the mobile money service.[v] This results in the service processing more transactions domestically in Kenya than Western Union does globally, it has become this successful by providing an affordable service to the public.[vi] The Global Findex shows 3/4 of the world’s poor do not have a bank account, not only because of poverty, but also due to costs, travel distance and paper work involved[vii]. Mobile money has been particularly welcomed by the public in Kenya because it has made transfers safe and convenient without the need for traditional financial services and banks.

From Africa to Europe

Although a significant percentage of the world’s unbanked live outside Europe, M-Pesa launched its mobile money service in Romania in March 2014. The move to introduce the service in Europe has occurred after M-Pesa launches in Egypt, India, Lesotho and Mozambique signaling the potential for mobile money to be successful in a variety of markets around the world. Vodafone Director of Mobile Money Michael Joseph said: “The majority of people in Romania have at least one mobile device, but more than one third of the population does not have access to conventional banking”[viii]. Despite identifying Romania as a country where there is a need for simple mobile money transfers, Michael Joseph admits that it will not succeed everywhere in Europe. Moving forward with the expansion of M-Pesa, he claims that a key indicator of potential success is whether there is a big gap between mobile ownership and bank account ownership in a market[ix]. In Romania, only 50% of the population have a bank account meaning that alternative methods of payments such as mobile money are particularly useful[x].


Mobile Money in the UK

Services such as M-Pesa specifically cater to those who may not have access to the internet or live far away from the closest banks or financial institutions. In the UK fewer than a million people do not have access to a bank account[xi] but this has not stopped services such as Paym emerging in an attempt to simplify the process of person-to-person (P2P) transfers. Paym works with banks to allow users to transfer money from one bank account to another using only mobile phone numbers. The Payments Council expects 1 billion Paym payments to be made by 2018 and research by Consumer Intelligence showed that 25% of bank customers said they expected to use Paym, rising to 39% among those aged 18 to 34[xii]. Therefore, convenient mobile transfer services are likely to become more widely used around the world both in countries where mobile money exists outside of the traditional banking models (M-Pesa) and within (Paym). The Payments Council wanted to launch Paym as a way of linking every current account with a mobile number. Adrian Kamellard, Chief Executive of The Payments Council has said about the technology: “Paym is a great example of industry-wide collaboration that delivers tangible benefits for customers. The service has the potential to link up every bank account in the country with a mobile number – millions of people will be able to use it this year and we look forward to expanding Paym even further, so everyone can benefit from this easy, secure new way to pay.”[xiii]


The Future of Mobile Money

In the near future, it is expected that services like M-Pesa, that work outside the traditional banking system and offer convenience to rural and urban users, are likely to expand in countries where a large percentage of the population are ‘unbanked’. The use of M-Pesa is becoming more mainstream in India since its rollout in April 2014 in a market where 41% of the total population is unbanked – a figure which rises to 61% when looking at rural areas[xiv]. The success of mobile money in Kenya has shown companies that offering individuals a service to easily make payments is likely to be welcomed across the world. In addition to everyday payments, companies such as World Remit have focussed on remittances, launching a mobile wallet service in Uganda in May 2014. 3.7% of Uganda’s GDP are remittance payments; World Remit seeks to expand in this market offering a more ‘efficient, affordable and transparent remittance alternative to traditional money transfer operators’[xv].  M-Pesa, WorldRemit and Paym are just a few examples of companies who are making the link between widespread mobile phone usage and the opportunity to offer financial inclusion and convenience to millions. From central banks to microfinance institutions and now telecomms companies, there have never been more organisations attempting to give poor people access to financial services and products. What’s more, smartphone penetration is growing globally, with just under one-quarter of the world’s total population using smartphones in 2014. By 2017 it is estimated that more than one-third of all people around the globe will be smartphone users.[xvi] With this in mind, opportunities for innovation in mobile money and payments are increasing rapidly creating a huge impact on the lives of both those with access to formal financial services as well as the world’s unbanked.

[i] Super Monitoring 2013,

[ii] McKinsey 2010,

[iii] CGAP 2012,

[iv] BBC 2010,

[v] Triple Pundit 2014,

[vi] GSMA 2012,

[vii]World Bank 2012,

[viii] Vodafone 2014,

[ix] RFI 2014,

[x] DW 2014,

[xi] Independent 2012,

[xii] The Guardian 2014,

[xiii] Payments Council 2014,

[xiv] Bank of India,

[xv] World Remit 2014,

[xvi] eMarketer 2014,