Saturday, February 20, 2010

The Mobile banking fairness principle

One of the benefits of the MWC is the opportunity to have in depth discussions with experts from all over the world on the topic of mobile banking. I managed to find some time to chat with Qasif (Head of Channels for MCB Bank in Pakistan), and he explained his fairness principle for me, that I found particularly interesting. I will describe my understanding of this in my own words:

The ultimate aim of mobile banking should be to collect as much of the wealth of your customers to be reflected on the bank's balance sheet. This is not too far-fetched if one considers that a person to person payment from a customer of the bank to another customer of the same bank, does not change the aggregated amount at all. If the bank can enable their customers to do all payments electronically, the money will never leave the balance sheet of the bank. This objective would leave banks much better funded and through leveraging of these "in-transit" deposits can lead to good profits.

The fairness principle says that one should never charge the payer for an electronic payment. The notion of a transaction fee is not fair, nor will it entice the behaviour that will leave money on deposit. One should make electronic transactions free, charge a lot for cash-out transactions and provide the means to pay for everything possible electronically. In this way, money will never leave the bank. Think about it...

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