20 Dollar Smartphone - what does it mean for mobile banking?

Hi Alex, it was great talking to you in Barcelona last month!

I don't see this having a huge impact on banking in developing countries.

First of all, users of $20 mobiles phones will have very low income and will represent virtually no value to banks - there is just no revenue to fight for.

Secondly, mobile banking these days is purely informational and transactional - even most developed banks do not offer products or transactions that actually generate revenue via mobile banking apps. Mobile banking does not offer opportunities to make money - it's for customer service only.

So I agree that it's great to have as many people on board as possible, but this comes at a cost and I'm not sure that the business plan is solid - at least not in the short- and medium-term - must be a very long play.

Hi Andrei - great to hear from you - and thanks for the comment!

I agree that many users of $20 smartphones will be on low incomes. However, I believe that there are certainly benefits to banks. First of all is the revenue from money transmission. Banks have been disintermediated by telcos and have lost this revenue, which they can now win back. It also leaves them less exposed to USSD service providers.

Further to this, you make a point that mobile banking apps do not offer revenue generation opportunities. Without mentioning brand names (!), some leading products do offer product sales via mobile. There are a number of 'one-touch' sales processes which can be rendered very effectively on mobile devices - e.g. credit cards, overdrafts, insurance etc.

Based on the feedback I have had from banks in a number of markets, there is huge interest in growing mobile banking volumes. I believe that the $20 smartphone will move customers off featurephones and will lead to the demise of USSD, SMS and browser based mobile banking - as well as opening up mobile banking to entirely new users. However, I would love to hear more opinions...

With the cheapest feature phone selling at ~$14 in India, a $20 smartphone will indeed revolutionize the market - the mobile handset market, that is. Under the current law, for the level of KYC required to get a mobile phone plan - yes, even prepaid connections require KYC in India - one can get a bank account. Banks are not going after this market because, under the current regulations related to capital adequacy, it's not profitable for them to serve this market. Likewise, customers are not going to banks because they can get faster loan disbursement and higher interest rates from informal financial service providers like pawn brokers and "blade" companies. As things stand, it's as though banks and certain segments of the market are happy *not* doing business with each other. As long as the current regulatory framework continues, smartphone or feature phone is unlikely to make any difference to the banking market.