Providing financial services to some of the world's poorest people through mobile phones is proving to be a lucrative business in developing nations. The GSM Association, which represents the global telecom industry, says the number of people using mobile phones to send or receive money will grow exponentially in the next few years.
Mobile operators see a bright future for mobile phone banking. And nowhere is that more evident than in Kenya. The nation's biggest mobile phone provider, Safaricom, says the user base for its M-Pesa mobile money service has doubled in just one year.
Cellphone banking services represent only four percent of the company's annual revenues. But Gavin Krugel at GSMA says the opportunities for growth are enormous. "What we found is that by 2012 we are looking at a $5 billion industry specifically focused on the developing markets," he stated.
It's estimated that about 3.50 billion people, more than half of the world's population, have no access to banking services - but about one billion have mobile phones.
Aletha Ling is chief executive of Fundamo, the leading provider of mobile money software. She says it's a case of technology catching up with demand.
"This is one of the characteristics of emerging markets," she said. "Because there is such a lack of technology, it is possible to leapfrog earlier generations of technology and really launch on new technology platforms."
Krugel predicts mobile money services have the potential to be as big as text messaging, but he says the budding industry faces a number of challenges. "This isn't a cut and paste product. This product, the ecosystem, is different per market, which is an immense challenge," he said. "Specifically if you're a group like Vodafone or a group like MTN, which is present in tens of markets and you want to mass-deploy this. The second challenge is still financial regulations."
Operators and banks are still developing security protocols. For now, necessity is driving the market. That and the potential profits generated by providing access to financial services for people who previously had none.