In developing countries, 2.5 billion people do not have access to bank accounts and rely on cash or other informal services for their needs. Banking infrastructures face challenges in adapting their business models to serve remote areas or lower-income populations.

But much of the population in these areas has access to a mobile phone, which can change the landscape of financial services for these “unbanked” individuals in a secure manner — mobile money banking.

In Kenya, 72% of the population has mobile money accounts. The nearest bank may be several days’ walk for many people, but through a password-protected transaction enabled by a cellphone, people are able to make withdrawals and deposits easily. The system also enables transfers, insurance, savings and more.

How It Works

Mobile money systems rely on human agents who can be compared to ATMs. Located in key areas throughout a city and country, including in rural and more remote locations, these agents help transfer cash in and out of money accounts.

In Kenya, mobile money service M-PESA has 40,000 registered agents. For the population working in cities and sending money home to families in more rural areas, M-PESA agents provide an accessible and fast way to transfer money almost immediately.

Registered intermediaries are able to pool cash and mobile money received from various agents and arrange logistics between affiliated banks and other agents, creating a distribution network that offers the necessary liquidity.

Why It Matters

Where mobile money banking systems are in place, various uses have helped expand business operations and safety:

• Businesses are able to use mobile money deposits as a safe to protect their earnings
• People traveling longer distances can deposit money with an agent in one location and withdraw it at their destination
• During the pandemic, fee waivers on M-PESA have enabled more contactless currency exchanges to prevent the spread of the virus

Access to such financial services can boost a population’s economic well-being. Fewer and lesser fees, as well as safer processes, enable and encourage users — particularly those sending money home to families in other areas — to save more.

The savings provide users with more stability, making them more likely to be able to seek medical attention if needed and less likely to go hungry.

The growth of mobile money banking has the potential to change the economic landscape for many currently underserved and unbanked countries and may be a feasible solution to aid in pulling many communities out of extreme poverty.