CEO Perspective: Mobile Payments Technology Is Key to Alleviating Global Poverty
Jason Oxman
July 30, 2013 – The lack of traditional retail banking services in the developing world plays a significant role in global poverty. Worldwide, 2.5 billion adults lack access to formal financial services. This limits their ability to protect against unexpected expenses like illness, and it keeps them from economic opportunities such as starting businesses or pursuing an education. According to the World Bank’s Global Financial Inclusion Database, three-quarters of the world’s poor lack a bank account because of poverty, costs, travel distances and the often-burdensome requirements involved in opening a bank account.
But this is not merely a third world phenomenon. In the United States, the FDIC estimates some 10 million households are unbanked, and another 24 million are underbanked. This is a challenge to growth here at home because access to banking services is key to economic empowerment. Banking services can boost job creation, raise income, reduce vulnerability to theft, and increase investments in human capital. Conversely, reliance on physical currency or other assets leaves unbanked or underbanked individuals, households and enterprises more vulnerable to high-interest loans, delayed bill payments and increased costs.
Fortunately, we are holding one solution to poverty in the palm of our hands – literally. Mobile payments can revolutionize the way the underbanked access financial services. Of course, there’s no question technology is transforming the way everyone accesses financial services, even for people who already have full access to banking services. More and more people prefer the convenience of performing banking transactions on mobile devices. This same technology can have a profound impact in fulfilling the banking needs of underbanked populations worldwide.
More than 2 billion people worldwide own mobile phones, making the mobile phone a direct conduit to a significant portion of the world’s underbanked. New low-cost mobile innovations for financial services are taking off in emerging markets that lack a traditional brick-and-mortar banking infrastructure. Empowering the poor to save and invest in themselves and others – through technology as simple as text- or Tweet-to-pay – will create opportunities to move people out of poverty.
A growing number of entrepreneurs are seizing on the opportunity both to improve the financial services experience for the world’s poor and expand the mobile pay business model. One example is Trak, a mobile payment service provider located in Brazil and winner of the 2013 E-Pay Innovation Award. Trak is rolling out a mobile wallet that can be funded with a cash payment. Shoppers without bank accounts, credit cards or debit cards can select a cash payment option at the checkout screen on the Trak app. The user can then pay for the purchase at Trak’s bank in Brazil. Once payment is received, the merchant is given the OK to deliver products or hold for pick-up. This technology enables thousands of merchants and millions of unbanked consumers in Brazil to transact over smartphones and tablets securely and safely.
MasterCard has also taken up the challenge of providing banking services to the underbanked around the world through its Mobile Money Partnership Program. Their goal is to give 2.5 billion underbanked consumers access to banking services through their mobile phones.
Similarly, the Bill and Melinda Gates Foundation has invested significantly in education and awareness about banking services to underbanked populations. Their strategy includes increasing digital financial services availability to underbanked people, which reduces costs, increased connectedness in the global marketplace and reduces the threat of theft and corruption that comes with heavy reliance on physical assets.
As the industry continues to mature, and entrepreneurs team up with philanthropists to provide secure financial services across the globe, we will see more people empowered to take the first critical step out of poverty. Growth in digital technology and the use of technological advancements to expand banking options will continue to remove barriers and provide banking services to the underbanked around the world. It’s a good investment for the economy and people, everywhere.
[spacer height=3] [divide] [spacer height=3] Jason Oxman is the CEO of the Electronic Transactions Association.