Mobile banking is relatively new to the financial scene, and limited to just developed countries with the infrastructure to safely handle transactions, but Bill Gates thinks that in the next 15 years, 2 billion people worldwide who don’t own banking accounts today will be making mobile payments to each other. The main beneficiaries of mobile banking in this instance: the world’s poor.
As one of his 5 “big bets” for 2030, Mr. Gates notes the fact that today’s global poor are overwhelmingly dependent on hard cash and physical commodities for payments on everyday things. This is an inefficient means of commerce because these tend to lose their value over time, making it more difficult to make ends meet. Developed countries are helped out by an abundance of banks that people can store their money with, but brick-and-mortar banking is rare for the world’s poorest due to the fact it isn’t economically viable to serve them.
Mobile banking can step into this void, according to Mr. Gates, because mobile phones are ubiquitous in places like Africa or Southeast Asia, and with the costs for processing digital transactions near zero, there are less costs for developing mobile banking than there would be for brick-and-mortar banks. To address the profit problem, if a “small commission” is placed on the “millions and millions” of mobile banking transactions, it could soon become profitable to serve the poor just as it is for big banks to serve the wealthy. Once basic services like account management are set up, it will begat competitive innovation that will grow to include access to credit, insurance, and savings products to give the poor greater control over their assets.
Mr. Gates acknowledges that there are some challenges that must be sorted through first. Access for women is an important issue in the developing world, as well as crafting a regulatory environment to encourage innovation within the mobile banking sector. Also, despite the fact that this is meant to be a way around relying on brick-and-mortal banking establishments, there will still need to be physical establishments to convert digital currency into cash, but with mobile phone service growing exponentially around the world (especially eastern Africa, which according to Mr. Gates has between 30 and 40 percent of people owning mobile accounts), it is a worthwhile investment that can have immensely profitable returns for providers as well as the 2 billion people it would serve.