Cell phones have the potential to make money transfers faster, cheaper, and more convenient, secure, and accessible. Mobile remittance technology can be used for sending remittances both within a country, from urban laborers to rural families, as well as for international remittances.
Mobile remittances are especially beneficial for rural recipients who have to travel to collect ordinary transfers. Such travel can cause a loss of productivity because recipients have to take time out of school or work, and it also adds another risk factor associated with carrying cash for long distances.
There were more than five billion mobile phone connections worldwide in 2010 according to the BBC. In India, China and Mexico, the top three remittance receiving countries in 2010, about 73, 71, and 79 percent of the population had a mobile phone. This high penetration of mobile phone technology in developing countries has made mobile banking services, specifically ones aimed at sending remittances, a hot topic of discussion over the last few years.
Juniper Research estimates that diaspora members will use mobile phones to send $55 billion in remittances during 2016, quadrupling the approximately $12 billion they transferred through this technology in 2011. There is huge potential for mobile banking and mobile remittances to transform the financial lives of the individuals who use these services.
While in Bondo, Kenya in 2010, I was introduced to M-PESA, a forerunner of the mobile remittance revolution. One of the leading telecommunications companies in Kenya, Safaricom, developed this system to allow customers to make small payments, send money, and store money, all using their mobile phone. The system has been adopted by 14 million customers, about 68 percent of Kenya’s adult population. While working with small entrepreneurs in Kenya, I saw the difference that this service has made in the way they run their businesses. Mobile banking has allowed them to cut the cost of transactions, reduced the amount of time necessary for them to be away from their business because many of the things they had to travel to do they can now do over the phone. Even more importantly, M-PESA lets them receive remittances instantaneously so they can purchase the materials they need right away. In addition to allowing for money transfer within Kenya, M-PESA and Western Union provide the International Money Transfer (IMT) Service that allows for remittances to be sent from the United Kingdom to more than 24,000 agents in Kenya within seconds.
Nevertheless, mobile remittance technology poses regulatory, security and legislative challenges. Countries need to maintain financial integrity by controlling the amount of money coming in and out, as well as address money laundering and terrorist financing risks. These risks have made it difficult to expand mobile remittances worldwide, but it is important to face them in order to allow for financial access and a reduction in transaction costs. Although the regulatory hurdles for international transfers will be hard to surmount, the benefits of this technology would be tremendous.
Have you ever sent remittances using a mobile phone? Was the process easy and simple to do? Do you prefer it over other methods of sending remittances? We are eager to hear about your experiences.