The three ways mobile money is changing transaction banking

There is no question that society is slowly moving away from physical cash transactions and striving for more digitally convenient ways of transacting money. One area that is attracting attention is mobile money, otherwise known as an electronic wallet service, which allows users to store, send and receive money using their mobile devices.

A record US$33 billion was transacted in Kenya, home of the famous M-Pesa service, in 2016, as revealed by data from the Central Bank of Kenya. According to Reportlinker, the global mobile money market is predicted to grow at a CAGR (compound annual growth rate) of around 38.9% by 2025 and reach around US$405 billion in size. Data released this week from GSMA states that there is around 500 million registered mobile money accounts globally in 2016.

Here in Asia, several market participants have acknowledged the potential of mobile money and have started to make preparations to grasp this opportunity. Ant Financial, an affiliate of Alibaba, last year invested in Thailand-based Ascend Money in an effort to expand and internationalize its business operations. In the Philippines, rival mobile money services GGash and PayMaya Philippines earlier last month said that they would implement an interoperability scheme between the organizations to make their services more user friendly.

1 - Digitize collections
While mobile money is widely known for its ability to greatly impact retail banking, the technology can also be a game changer for capturing transaction banking business. In the realm of corporate collections for instance, the integration of mobile money into a treasury function can fully digitize the collections process and eliminate the need of physical cash. This in turn can lead to a faster collection rate and enhanced reconciliation efficiency for the company.

India-based mobile wallet provider Paytm wallet announced late last year that it would be partnering up with insurance firms in handling some of their digital collections. The company is currently live with HDFC Ergo, Religare Health Insurance and ICICI Prudential.

2 - Corporate payments
Another way mobile money can have an impact is for corporate payments. Imagine that you didn’t have a bank account or never used financial services and instead received physical cash as payment from a company. The act of handling large amounts of physical cash could result in a cash loss for the individual and cash processing costs for the company. However, with mobile money, workers can receive corporate payments directly to their smart phones. With smart phones becoming cheaper and mobile penetration on the rise expect to see more companies opting for this payment route.

In Indonesia, delivery and transport firm Gojek last year opted to work with CIMB Niaga to help with a system that pays its drivers. As a rising e-commerce company, Gojek had to deal with paying low-income workers who don’t own bank accounts. With physical cash payments being a manual and time consuming process, Gojek encouraged it’s over 95,000 drivers to use CIMB’s Rekening Ponsel system that linked Gojek’s cash management system to a mobile-based e-wallet with the driver’s mobile number acting as a bank account number.

3 - Support financing services
Finally, mobile money services can be used to support financing services, in particular micro financing. Union Bank of the Philippines, for example, partnered with Gcash Mobile Money in creating a cash management solution for TSPI (Tulay Sa Pag Unlad) a microfinance NGO. Prior to the mobile money solution borrowers of TSPI who often lived in rural locations had to travel long distances to reach TSPI or bank branches. Under that partnership both companies will provide collection and disbursement services for TSPI via mobile technology allowing borrowers to receive funding remotely.

Date

3 Mar 2017

Channel

Treasury

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