Monday, August 18, 2008

Will mobile banking change remittances?

NEEDHAM, Mass. (8/15/08)--Mobile remittances are moving in on the global remittances market and the accelerating investments in mobile payment platforms will be a disruptive industry force, says a new TowerGroup study. However, the World Council of Credit Unions (WOCCU) doesn't see that happening anytime soon.

Mobile remittances are a person-to-person payment system that is cross-border in nature and involves mobile data applications at either end of the transaction, according to TowerGroup, a Needham, Mass.-based research group.

TowerGroup maintains that an emerging revolution occurring for sending and receiving remittances may undercut existing fee structures and traffic volume of incumbent brick-and-mortar money transfer operators, which the firm says already appear to be under pressure in the economic climate.

However, WOCCU is hesitant to agree with the assertion that mobility will change the nature of remittances, said Tiffany Kultgen, WOCCU's program manager, technical services responsible for credit unions' international remittance program, IRnet.

"There are two major components to a remittance--the transfer of data and the transfer of funds," she told News Now. "While mobile solutions may enhance the ease of data transfer for many, they don't circumvent the need for physical locations in order to realize the transfer of funds for the market as a whole.

"I think more pieces must be added to the puzzle before we'll see a complete transformation of the remittance market," Kultgen added.

Kulgen noted there has been talk about mobile remittances "for quite some time, and to my awareness there hasn't been any major shifting of the market from cash-based transfers to mobile transfers--at least not in the U.S. or Latin America.

"There has been a lot of hype about mobile remittances in Kenya and the Philippines, but the demographics of those markets are quite distinct from individuals who have migrated to the U.S. from Latin America," she said, adding that she has read that M-Pesa isn't having much luck opening up remittance corridors outside of Kenya due to security and compliance concerns.

Kulgen noted that "WOCCU is continuously exploring new developments within the remittance market to assure that the credit unions are able to meet their members' need. Thus far, we haven't experienced a significant demand for mobile remittances; however, that is not to say we won't see changes in the future."

TowerGroup says its analysis indicates that the benefactors of mobile remittances may be banks, especially those that emphasize growth among unbanked customer segments. That's because remittances are "an avenue for banks to initiate relationships with unbanked consumers who are heavy users of both remittance products and mobile phones."

The relationships then can fuel deposits through later cross-sale of more traditional banking products such as share draft/checking accounts, the firm's report said.

On the receiving side, mobile remittances will spur evolution of the financial sector in developing countries and economies so recipients can direct their remittances to checking accounts, bill payments and microfinance applications, said TowerGroup.

"The inevitable convergence of remittances and mobility offers new opportunities for banks to grow this market by making payments faster, more convenient, more secure, and more accessible to a greater number of senders and recipients," said the report.

Virginia Garcia, senior research director in TowerGroup's Cross-Industry practice, and Charul Vyas, an analyst in the Emerging Technologies practice at TowerGroup, co-authored the report, titled, "Disruptive Technology Spawns Market Revolution: The Ascent of Mobile Remittances into the Mainstream."

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