MasterCard is planning to pilot international remittances with mobile network operators. Indications are that a few pilots will be set up and run with the intention to learn and to ultimately roll-out in a big scale to other operators. One of the pilots will initially pair India's largest mobile operator Bharti Airtel with the State Bank of India corresponding with a mobile operator and bank sponsor in another country. For the pilot programme, the recipients of funds will be notified of cash transfers via a text message sent over the mobile networks. They will be able to access those funds via debit and prepaid accounts issued by local banks.
In another initiative a Vodafone subsidiary (the Kenyan mobile operator Safaricom) and Citigroup is planning to test a similar system under which Kenyan workers in the UK will be able to text payments instructions for money transfers to dependants back home. The recipient will receive a text containing a PIN which is then used to collect the cash at a choice of outlets.
What is the relevance of these initiatives? Should it be taken seriously and what should banks and mobile operators do in the light of these pilots?
I think that these initiatives (and others that are likely to evolve) will definitely succeed - as a matter of fact it has the potential to succeed spectacularly. Parties involved with this will benefit significantly because of the additional revenue that will flow out of business that they were not involved with traditionally. But the most interesting by-product of this will be the number of people that potentially could be drawn into the banking space. Consider how many people will now received money from abroad on a bank account (which they now need if they want to benefit from this system). I believe that the real advantage of this initiative is the market for ancilliary product that banks will now be able to sell to these consumers (ranging from saving to lending products, including risk product - like insurance).
Any bank that operates in developing economies (or have clients with interests in developing economies - like migrant workers and expats), should evaluate these initiatives carefully and develop strategies to get benefits from what is about to happen. It is advisable to contract and work with companies with experience in this space (like Fundamo - my company).