Reaching Underbanked Consumers Through Mobile Services

by Bart Narter, August 25, 2011
Industry Trends
Global, Asia-Pacific, EMEA, Latin America, North America

Abstract

Underbanked consumers need minute-to-minute information about their finances, and mobile financial services (MFS) are well suited to deliver it. Although these consumers often have insufficient access to financial services, their access to mobile phones is fairly widespread. This disparity suggests a large opportunity exists for financial providers to effectively serve the underbanked population using the mobile channel.

Mobile phone usage is ubiquitous in the United States. In 2010, wireless penetration reached 96 percent of the population. Given the comfort and attachment that people feel with their mobile phones, and considering that many financially underserved consumers are uncomfortable with banks, mobile devices hold considerable promise to provide broad access to financial services.

“The financially underserved tend to manage their balances very closely, making them ideal candidates for mobile financial services,” says Bart Narter, Senior Vice President of Celent’s Banking Group and coauthor of the report. “The ability to check balances anytime and anyplace is a powerful lure for the underserved. The ability to do so in an incredibly cost effective manner is a powerful lure for financial institutions.”

In a collaborative report from the Center for Financial Services Innovation (CFSI) and Celent, Reaching Underbanked Consumers Through Mobile Services, CFSI and Celent outline the potential for mobile devices to bridge the gap between financial services and underbanked or unbanked consumers.

“A future scenario in which mobile devices create new access to accounts and thus increase financial inclusion would be the ultimate achievement for MFS,” says Kate Marshall, Analyst, Innovation and Research at CFSI and coauthor of the report, “However, the benefits that are possible through the information and transaction services of mobile banking, though seemingly modest, are also quite powerful and hold great potential to improve the lives of financially underserved consumers today.”

This report examines the opportunity that makes mobile devices suitable for delivering financial services. The report then outlines the benefits of mobile, the current market landscape, and the challenges for mobile financial services. Lastly, the report offers recommendations for varying institutions.

About Celent
Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally experienced analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is part of Marsh & McLennan Companies [NYSE: MMC].

About CFSI
The Center for Financial Services Innovation (CFSI) is the nation's leading authority on financial services for underbanked consumers. Through insights gained by producing original research; promoting cross sector collaboration; advising organizations and companies by offering specialized consulting services; shaping public policy; and investing in nonprofit organizations and start-ups, CFSI delivers a deeply interconnected suite of services benefiting underserved consumers. Since 2004, CFSI has worked with leaders and innovators in the business, government and nonprofit sectors to transform the financial services landscape. For more on CFSI, go to www.cfsinnovation.com
Media Contacts

Celent
New York - Dana Lautin
dlautin@celent.com
Tel.: +1 646 364 8254

CFSI
Chicago - Maris Bish
mbish@cfsinnovation.com
Tel.: +1 312 881 5847

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

3

The Mobile Opportunity

5

 

Portable

5

 

Ubiquitous

5

 

Personalized

6

 

Multimodal

6

Benefits of Mobile Financial Services for the Underbanked

8

 

Drive Increased Financial Capability

8

 

Offer Greater Convenience

1

 

Lead to Improved Security and Fraud Protection

13

 

Transition Consumers from Cash to Electronic Transactions

14

Improve Access to Basic Financial Accounts

16

 

Mobile Financial Services and Financial Inclusion

16

 

Mobile and Prepaid: Potential for New Access?

17

Challenges

20

Recommendations/Takeaways

21

 

Financial Institutions

21

 

Nonprofit Financial Providers and Counselors

22

Conclusion

24

Appendix A; Defining Mobile Financial Services

26

Appendix B: Key Terms

28

Leveraging Celent’s Expertise

30

 

Support for Financial Institutions

30

 

Support for Vendors

30

Related Celent Research

31

About CFSI

32

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