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Business - Written by on Friday, September 26, 2008 11:08 - 3 Comments

Mobile banking, innovation and culture.

A few months ago I wrote about the mobile banking solutions I found while travelling in Africa – essentially a series of PayPal-like systems for mobile users. Given the limited nature of financial services in the region, and the overall paucity of infrastructure, these innovations make sense.

But do they make sense in more developed markets? That’s still very unclear.

RBC (Royal Bank of Canada for non-Canadians) recently rolled out a trial for their own mobile banking solution. RBC Mobex is billed as an “innovative payment solution designed for use with your existing mobile phone to make life more convenient for you. Just imagine, you already use your mobile phone to access friends, family, work and play: now you can use it to access your money too. Use it when you don’t have cash in your wallet, there isn’t an ATM nearby or cheques and/or debit / credit cards are not accepted forms of payment.”

The value of such systems comes with scale. I may want to pay someone using this system but if the receiver isn’t signed up then I can’t. And getting this scale isn’t necessarily easy. Projections for the growth of the mobile banking section range from the objective to the fantastic:

  • Gartner has forecast that there will be 33 million mobile payment users worldwide in 2008, with the Asia Pacific taking the lead. Gartner expects this number to triple to 103.9 million users in 2011.
  • IMS Research sees the combination of contactless mobile payments, mobile banking and over-the-air payments pushing the number of mobile banking users to 884 million in 2012.
  • And finally, Juniper Research predicts said in April that 816 million consumers will use mobile devices for banking services by 2011.

So somewhere between 100 million and 1 billion people will be using these platforms by 2011… helpful.

Perhaps more interesting is the geography of usage, this from Gartner’s research on the topic: “Asia Pacific has the most mobile payment users with a projected 28 million users in 2008, accounting for 85 per cent of the worldwide total. Western Europe is expected to have 499,000 users in 2008, and North America is projected to have one million users.”

While there are certainly markets in Asia / Pacific whose usage and demand for such solutions stem from infrastructural deficiencies (for example, India and China), other markets such as Japan and South Korea are big users despite having dominant bricks-and-mortars financial services players. So what makes them want such services? This links back to Naumi’s recent post on why North American consumers seem to demand less than their East Asian bretheren. Perhaps we’re just technology luddites, satisfied with what serves our needs, and less willing to try new services that, while cool, may or may not add value to current activities.

And within that lies a much deeper cultural and sociological analysis of what makes different people tick – and the subseqent incentives for companies to innovate for them. Has the East Asian model of state-driven development embedded a greater sense of confidence or trust amongst people,  or perhaps even a  greater willingness to fail given the backing of the welfare state? And conversely has a more free-market oriented system which pushes competition and failure actually produced a populace that desires stability rather than constant change?

I’m full of questions rather than answers but nonetheless it would make for an interesting thesis on the link between the path of economic development and the subsequent impacts on culture and innovation.


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Sep 30, 2008 22:55

A lot of startups have been looking at this space in India. One such startup I came across is Eko (http://www.eko.co.in/).

They are trying to reduce the barrier for common people to get into the mainstream banking system using mobile phones b building a bank-agnostic service.

Oct 1, 2008 17:21

You are so right about it not being easy to get the scale necessary. I want to get your opinion about the ability to send funds to someone that is not signed up for RBC Mobex. Anyone that is signed up to RBC Mobex is able to send funds to any cell phone. If the cell is not registered with RBC Mobex, the recipient receives an invitation via text message to register for RBC Mobex within 30 days. RBC holds the funds for recipient until that day. If not registered in 30 days the funds are returned to the sender. As you know it will not be easy to build scale, but you are correct both parties eventualy have to be registered for RBC Mobex.

Oct 1, 2008 20:01

Very cool, Sid, thanks. I’ll check it out.


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