by the MicroCapital Team - Technology -

NEWS WIRE: United States: Forbes Reports on “Mobile Microfinance,” Citing Providers Obopay, mChek

Source: Forbes.

Original article available here.

NEW YORK, June 6 – An estimated 750 million households worldwide don’t have a bank account. In Mexico, cash transactions constitute 79% of payments. In India, 91%. In China, 82%. Even in the U.S., 80 million people are in the category of the under-banked.

Most people around the world, however, own a mobile phone. Over the past few years, a number of start-ups have put these facts together to form a cottage industry that helps people access banking services on their cellphones.

Obopay is part of the movement to bring banking services to those around the world who don’t have bank accounts. The Redwood City, Calif.-based company was founded by Carol Realini, a semi-retired software executive, after she returned from a trip to the Congo in 2002.

In the Congolese capital, Kinshasa, Realini noticed that nothing worked. It was a city of 8 million people, and yet there were only a couple of blocks that had electricity. But the city had wireless towers. “The first thing I noticed when I arrived was cellphones everywhere,” she recalls. “In a city where nothing worked, everyone had a cellphone!”

During her trip, Realini was handed a prepaid phone and sent to the store to buy more minutes. At the store, she noticed that most people were carrying bags of money. The store “looked exactly like a bank,” Realini says. “People were standing in line with their bags of money. When they got to the kiosk, they put down the bag of money and received a little card. They would then program their newly purchased minutes into the phone.”

From this, Realini got her idea for Obopay. “Wow, there you have it!” she thought. “If people can call and text each other, then they can use their cellphones to send money to each other.”

The potential for mobile micropayment has attracted other entrepreneurs as well. In India, Sanjay Swamy founded mChek, and has signed up 45 major banks, including ICICI, State Bank of India, Citibank, Visa and mobile telecom carrier AirTel as partners to bring his service to market.

MChek launched in Sri Lanka first, and today powers 5,000 small businesses, mainly retailers, to use cellphones as point-of-sales systems. “A whole generation of small retailers will bypass plastic altogether,” Swamy predicts.

Perhaps these small merchants will bypass the credit cards, but they certainly won’t bypass credit. So mChek’s VISA relationship helps them tie mobile payments to Visa-authorized credit accounts.

Swamy has also started experimenting with one of the largest microfinance institutions in Andhra Pradesh, a state in Southern India. His hypothesis is that every village has a small kiosk that sells everything from cigarettes and chewing gums to onions and other convenience items. If microfinance institutions are able to do all the credit processing through mobile phones, then these stores can act as clearing agents–or glorified ATMs–and disburse cash as well.

Carol Realini has every intention of taking Obopay to India in a big way as well. While she is enthusiastic about the microfinance opportunity, she is more reserved about the short-term adoption prospects. “I am not sure the microfinance industry has the back-office technology they need,” Realini says. “Think of us as the front office–the last mile to the customer.”

I share her concern, since I have heard it from many experts that the technology adoption at microfinance institutions is still quite rudimentary, making loan administration expensive and inefficient.

Nonetheless, I am excited by the prospects of mobile banking, and while it may take a few years before its impact will meaningfully filter down to the poorest of the poor, it is encouraging that entrepreneurs like Realini and Swamy are working on the problem.

Technology often gets fine-tuned by early-adopters before penetrating the masses.

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