Mobile Banking Technology
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Mobile Banking Technology
Poor people’s access to finance is a strategy for poverty alleviation and social stability. For instance, India has made efforts to foster inclusive development. Financial inclusion refers to the provision of monetary services to low-income and underprivileged people at a reasonable cost. Moreover, credit, remittance services, insurance payments, and savings are among the different monetary services available. Financial inclusion aims to broaden the scope of the structured banking system’s monetary services so that individuals with modest incomes can benefit from them. For instance, in India, the impoverished are being lifted from one stage to another via graded credit and technological advancements to elevate them out of poverty. Mobile banking is but one technology widely employed around the globe, developing nations, to alleviate poverty through financial inclusion projects that devise approaches for cheap transaction costs. Therefore, mobile banking, which combines monetary services and technology, is the hottest field of growth for reducing poverty across the world by extending out to the unbanked, especially in developing nations.
Mobile banking services such as the Philippines’ GCash, and Pakistan’s Easy Paise offer more insight into the use of mobile banking as an approach to poverty alleviation. These mobile banking technologies are used as means for financial inclusion. In developing countries, about 20% of the underprivileged borrow, although lending institutions are the dominant source in that market. About 12% of the population is made up of friends and family (Khan, 2020). Since most channels are concentrated in metropolitan regions, and individuals who are not banked in developing countries primarily dwell in rural areas, fewer banks can address these requirements.
Even though approximately more than half of the unbanked individuals in developing countries have contemplated utilizing banks, only around half the total number have taken action. This inaccessibility to even the most primary banking services has significant economic ramifications, as a large percentage of small enterprises must borrow on the black market. In rural locations, the costs of providing financial services by a bank are high. However, since lending standards or norms prohibit charging high-interest rates to customers, these costs are frequently not adequately compensated by interest costs. As a result, banks tend to diminish the quantity and quality of their services, raising customer transaction fees.
Individuals in developing nations have limited opportunities for moving money and using banking services due to a lack of conventional financial infrastructures, such as low internet connectivity and fewer branches. As a result, a cashless payment channel using mobile phones might be significantly superior to the alternatives for impoverished people: traveling to and waiting at faraway institutions or saving in cash or tangible assets. Only around a 1/3 of individuals in underdeveloped nations have any formalized financial savings. Moreover, in numerous nations, these statistics remain considerably behind other socioeconomic indices such as access to education, immunization programs, sewage, and safe water systems (Khan, 2020). One of the techniques of Branchless Banking is technology-enabled mobile banking, which allows the branch to go where the consumer is instead of the customer going to where the branch is.
Regardless of the method, branchless banking entails the following two components:
1. Using technology, such as mobile phones or credit cards to identify consumers and process payments electronically and allowing customers to start transactions remotely in some situations.
2. Third-party establishments, such as small retailers and post offices, serve as intermediaries for banking and allow consumers to complete duties that need their physical location, such as handling cash and account opening due diligence. Mobile banking is among the methods for providing monetary services using information and communication technology, facilitated by the increasing use of mobile phones in developing countries such as the Philippines and India.
There has been some criticism regarding mobile banking technologies. Regulators and policymakers have criticized the trust aspect in mobile banking technology as well as technology-Helped processes that are coming to the rescue for financial institutions to make sure there is confidence in non-bank agent transactions. However, trust in mobile banking can be guaranteed by measures such as customer authentication.
Regulators and policymakers have criticized the failure of banking institutions to ensure that all consumer transactions are offset immediately against the transactional bank account of the store and are also susceptible to the availability of finances by the store in order to make sure no credit risk is encountered during a transaction. Many target devices, each with its own set of abilities, functions, and limitations, is a significant problem for mobile application development (Khan, 2020). Because there are various types of mobile phones, it is difficult for app developers to create mobile banking solutions for all of them. Some of these devices support J2ME, while others support WAP or SMS.
Conclusion
The experiences of a developing country such as the Philippines show, mobile banking is an essential tool for a financial inclusion policy in a country. This is because it extends to a nation’s rural and poor population much faster than all other money transfer methods by distributing monetary services to unbanked individuals who use mobile services from rural areas. The integration of actors such as banks, mobile application providers, Mobile Network Operators, sophisticated technology, and the need for several regulations from perspectives in the mobile banking system are among the challenges involved in the development of mobile banking services. Furthermore, m mobile banking is currently the most essential and discussed advancement in the banking business, with industry analysts predicting that it would eventually overtake the debit/credit card system. As a result, the critical criterion for mobile banking is a universal set of guidelines, educating the poor, and using a shared platform for promoting compatible services.
References
Khan, K. (2020). Mobile Banking as A Tool of Financial Inclusion. International Journal of Economics, Business and Human Behaviour, 1(1), 6-15. https://ijebhb.com/index.php/ijebhb/article/view/4/4
Financial inclusion provides the unbanked with access to finance and financial services. Many countries have embraced financial inclusion as the key to economic empowerment and a solution to rising poverty levels.
Financial innovation has been a fundamental companion of economic development over the centuries. Economists believe that financial innovation and technology can increase financial inclusion because it can by-pass existing structural and infrastructural barriers to reach the poor
Your Task: Find an example of a financial innovation that encourages financial inclusion from an online search, articles discussed in class and/or examples discussed in class.
Excellent sources for articles include The Wall Street Journal, the New York Times, and The Economist.
Ideally you would focus your financial innovation on a developing country. You can also look at innovations that help the poor and unbanked in the US.
Then, write a 3 page report (double-spaced, single-sided, one-inch margins all around), to explain the innovation. How does it help with financial inclusion? Are there any criticisms of the innovation?
In your report make sure that:
• The report should follow standard writing format. Include a title, an introductory paragraph with a thesis statement, a body supporting the thesis statement, and a concluding paragraph.
• You should not simply summarize the article/example. This means that you should not copy facts from the article without a critical analysis based on topics covered in class.
In other words, you must connect your report to what we have been discussing
in class lectures.
• You must cite the article(s) in a footnote. Use this link for Chicago Style
Citations:https://www.chicagomanualofstyle.org/tools_citationguide/citation-guide-1.html
