Prashant, a small trader in Dolalghat, can now pay for electricity bills, top-up his mobile phone and send money to large wholesalers across the country, without visiting a bank. On the other hand, Shristi, a domestic worker in Kathmandu sends money back home to her family in Mahendranagar. Payments through mobile are now a reality in Nepal. Dreams are coming true for those who do not have a bank account, but use a mobile phone.
According to a World Bank report, only 28 percent of households in Nepal have access to a bank account, while the rest do not have access to banking services due to travel distance, cost and amount of paperwork involved in opening a bank account. Further, only 11.8 percent of adults with bank accounts use the ATM as the main mode of cash withdrawal.
The inadequacy of a formal financial infrastructure, the rural demography and the poor credit profile of a large segment of the potential customer base in Nepal hinder the growth of institutional banking. Though financial services are available, they reach only select groups.
If there is one thing that Nepal can learn from their neighboring countries like Bangladesh, with a similar landscape, it is the manner in which the country has adopted mobile banking to benefit the millions belonging to the lowest strata of society.
Banglalink, one of the leading telecom operators in Bangladesh, introduced its mWallet services in partnership with select banks in the country a few years ago, to offer integrated financial payment services which allow customers to conduct a variety of transactions including international money transfer, railway ticketing, utility and insurance premium payments over the mobile. The service has achieved incredible uptake in the region due to a large number of un-banked or under-banked population and also due to the fact that majority of the population lives in rural locations with low access to banking infrastructure. This is just a basic example of the profound impact that such mobile banking services can have on the lives of millions in a country such as Nepal.
It is my belief that the mobile phone will do to the banking system, what prepaid mobile service did to the telecom industry—through Mobile financial services, wherein the unbanked customer would be able to store virtual money on a mobile phone (M-wallet) and pay at designated merchant outlets or remit money to family members. This will help banks reach rural areas and facilitate that crucial first access to formal financial services for a large group of people.
There are several aspects that can be addressed for the overall growth of mobile financial services in Nepal.
THE INFRASTRUCTURE
Nepal needs cohesive and complete infrastructure to drive full-fledged adoption. The use of mobile technology for financial access is in an infant stage. Only 0.3 percent of adults use mobile phones to pay bills and only 0.4 percent use mobile phones to send and receive money.
Introduction of mobile money distributors and touch points are critical to the system along with the necessary infrastructure required to facilitate transactions between registered and unregistered users. It is only then the mobile financial access would truly be on a growth trajectory.
CUSTOMER KNOWLEDGE
Designing products to suit the needs of customer segments is of utmost importance to ensure rapid adoption of mCommerce.
The rural population in Bangladesh, like in Nepal, for example, needed an easy remittance service via mobile technology—one that worked by merely taping a few buttons.
Moreover, promoting technological innovation, particularly mobile based services as a means, could expand the financial system access and use. Recent data show that the number of mobile phone subscribers and tele-density have been increasing substantially over time, creating an opportunity for banks and micro financial institutions to use mobile technology in financial services. This approach can serve un-banked people at a cost that is affordable especially in rural areas and hence boost the rate of overall financial inclusion.
Furthermore, the higher dependence of small and marginal farmers on non-institutional sources can be reduced significantly to achieve wider coverage of financial inclusion in Nepal. A recent mobile money study also suggests that remittance payment via formal accounts is one of the highest in Nepal, auguring well for the future of such technology to be introduced in Nepal to make foreign remittance.
Developing an understanding of the market and its need and then developing a product around that is the key to success in a market like Nepal.
The inclusive potential of the mobile as a medium for banking and payments would be unleashed only when stakeholders tie up with each other and facilitate widespread adoption of Interbank Mobile Payment Service (IMPS). This is termed as ‘open loop mobile money service’. For example Comviva has tied up with MasterCard to launch a first-of-its-kind open loop Mobile Money Partnership Program. Working together, Comviva and MasterCard will help more than 2.5 billion financially underserved consumers globally to gain access to mainstream financial services—via their mobile phone.
Currently several banks in Nepal have introduced mobile banking services with the aim of making money transfer and payment of bills easier. The kind of mobile payment services that are currently being used in Nepal are a bit nascent as compared to other emerging markets. The service will gain momentum with requisite framework introduced in the system. Other emerging economies such as India, Tanzania, Kenya, Bangladesh and Cambodia have also set themselves firmly on the path to successful financial inclusion via the mobile. However, to do this, stakeholders must remain firmly focused on the needs of customers. In a country where people are fairly comfortable dealing in cash, the telecom industry is definitely favored to give the right impetus to financial inclusion.
With a surging 10.04 million mobile subscribers and mobile penetration rate of 55.40 percent in Nepal, mobile banking reach is minuscule at present. It has a very long way to go and it is just a matter of time before it takes off.
The author is Vice President for Asia, Comviva Technologies Ltd
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