Mobile banking expands in rural areas

MANILA, Philippines - In 2011, Philippine rural banks processed over P4.9 billion (roughly $116 million) worth of banking transactions which were enabled by mobile banking.

In fact, the former head of the Microentrepreneurs Access to Banking Services (MABS) program John V. Owens said a 58-percent increase in the volume of transactions through mobile banking has been noted in the first four months of 2012.

Since mobile banking or access to banking services through the mobile phone technology was introduced in 2006, a total of P16 billion (approximately $363 million) had been processed.

Involved in the entire process were 73 rural banks through their 1,168 branches and other banking offices.

In his presentation at the 59th convention of the Rural Bankers Association of the Philippines (RBAP), Owens noted that the rural bankers made good their partnership with the two leading telecommunications companies – Globe Telecom and Smart Communications – to facilitate easier use of mobile money for greater access to banking services.

“Rural banks are fortunate to live in a country with two very active and supportive mobile money platforms and a very proactive and supportive regulatory environment. I highly recommend that all rural banks take advantage of these two platforms to better connect with new and existing clients and customers,” Owens said.

Globe and Smart have over 85 million subscribers and this number is growing whereas rural banks serve only six million clients. There are now 10 million Filipinos that have registered to the two mobile money platforms.

The former MABS representative said that as more government agencies look at paying out benefits as well as accepting payments via mobile money, rural banks are well positioned to be the mobile money enabler in the countryside. Mobile banking is somewhat similar to what larger commercial banks have achieved in capturing the payments market in urban areas, in partnership with debit and credit card companies such as Visa and MasterCard.

Owen said that rural banks can play a similar role in the mobile payment ecosystem in the countryside with GCash (Globe) and Smart Money (Smart) and other players who are now entering the market place.

He further noted that at the recent GSMA Mobile World Congress, which had over 67,000 participants from all over the world, the world’s banking system and the banking public embraced mobile technology and the implications for banks.

“We already see cheaper smartphones which are under P4,000 ($95) and there are expectations that these phones will drop further to under P2,000 ($47.50) within the next few years in the Philippines. Most of these new phones will be android enabled phones and we also see the rise of android enabled tablets that will revolutionize payments, commerce, as well as banking. Mobile tablets will be used increasingly to replace traditional point-of-sale (POS) systems and even cash registers,” he pointed out.

Mobile applications will continue to expand and be easier to develop and launch by banks, even rural banks. New mobile applications for iPhone, Blackberry, and Android phones using GCash and Smart Money’s android application will facilitate the easier use of mobile money for clients and merchants.

Owen revealed that SMS (short messaging system or text message) banking services are also helping banks to reach out to clients in new and innovative ways and to personalize customer relationships in ways that were never before possible.

All banks require is a simple computer, modem and basic software to get started to make use of SMS customer relationship tools.

Automated teller machine (ATM) and debit cards like the co-branded GCash Rural Bank PowerPay+ or Smart Money Card are now providing greater access and significantly lower fees than ever before.

Smart Money MasterCard as well GCash ATM/Debit cards offer the convenience of not only accessing ATMs but also making purchases in tens of thousands of POS merchants nationwide.

While banks have been investing in their own ATMs, for most rural banks, partnering with a third party ATM provider such as ENCASH and offering a GCash and/or Smart Money enabled ATM card provices better 24/7 access for clients and customers than ever before.

New technologies are now offering opportunities never dreamed possible even five years ago. Mobile Money enabled services, SMS banking, POS systems, cash cards, ATM cards, and prepaid debit cards are technologies that are now within easy reach of rural banks.

Improved banking services are likewise complimented by new regulations that provide greater opportunities for rural banks to grow and expand both their services and the areas they serve.

The new regulations and circulars issued by the Bangko Sentral ng Pilipinas (BSP) over the past few years have focused on the BSP’s continuing effort to support a proactive regulatory enabling environment that will promote greater financial inclusion.

The former MABS chief representative said that among the important policies have included the easing of bank branching requirements and the expanded role of micro-banking offices (MBOs).

Circular 694 expanded the range of microfinance services that banks can offer including disbursing and collecting microfinance loans, accept micro-deposits, payout remittances, providing cash-in and cash-out mobile money services, sell and support microinsurance services, bill payments, and government services, etc.

The BSP broadened the classification of microfinance clients who could be offered microinsurance services to include customers from low-income households. This important change paved the way for rural banks to more actively bundle microinsurance services to a much larger number of depositors and borrowers and even to attract new customers to the bank.

Other important regulatory developments included changes to Anti-Money Laundering rules, which allowed for changes to the “Know Your Customer” or KYC rules that make it easier to open up savings accounts remotely and allow third-party agents to conduct KYC on behalf of the bank.

“Rural banks can now take advantage of these regulations to open up a presence in new areas without the major investment of opening a full branch. Micro-deposit and insurance services have been expanded as the BSP expanded the definition of microfinance clients,” Owen added.