The rapid development of technology made the cellular phone cheap and accessible for the poor. The mass-market appeal of carrying a cellular phone spread across landscapes where fixed line operators baulked at providing service. India is a good example for this rapid growth of cellular communication. Indian Department of Telecommunication’s most optimistic survey identifies this rapid growth at almost 500 million mobile connections by 2010. With the increased mobile access came the increased use of mobile applications, and provided a responsible portal to the financial institutions to access the rural community.
Most importantly, the increased access through the growth of cellular phone users opened up the micro finance sector to the rural community. Paradigm wise, to the poor, the banks and finance institution served the rich and the middle class. To the banks and finance institutions, the rural villages were inaccessible and its population was ‘unbankable’. The Central Banks’ tough regulations and bank credit evaluations, credit scores and anti money laundering – know your customer (KYC) requirements aimed at a group of people that lacks proper documentation, proof of identification, permanent residences etc., identified the majority of rural population as ‘unbankable’. Also, the loan amounts required were too small to invite the banks to open up branches as the cost of opening up a bank branch, its maintenance and employment of staff was viewed as not feasible in terms of corporate revenue generation. The poor were not encouraged to bank their money, which was in very small amounts. Lack of awareness, cost and time taken to travel, easy availability of your friendly neighborhood moneylender and informal practices of pawning of valuables with the wealthy of the village kept the poor out of banking services.
In such environment, the growth of mobile communications and rise of popularity for mobile apps in transferring funds, news alerts, text messaging and reloads through remote kiosks created a new awareness among the community. This new awareness fueled microfinance institutions (MFI) ready to utilize the cellular phone as their business platform of approaching rural customer. Transfer of money internationally was made easy and less costly due to the extensive reach of the mobile network. The benefits allowed the MFI to search for more niche markets and to tweak the system to gain more borrowers. Some MFIs financed the cellular phone and even the cellular connection. The borrower sold the services of the phone and repaid the micro-loan through the small fee charged per each use from his customer, who may want to call his far away relative, receive a text, receive money transfer details etc.
Anand Shrivastav identify Philippines as having one of the most successful micro payment applications at present, covering over 3.5 million subscribers and using two networks. The key success factor for the market was its ability to “top-up” or reload value to their cellular accounts, thus transferring cash over cellular service. Typical top up value was around 47-57 cents (US$ terms). Development of local language apps increased the attraction to use the cellular phone. In India, Fino acts as an application service provider for microfinance institutions.
The rapid growth of cellular phone industry has increased mobile commerce among the global community but could it also provide an avenue to the rural subscriber to earn money and most of all to empower him/herself. Could this be the beginning of the end for cash, being replaced by an encrypted text message?