Saturday, February 20, 2010

The role of banks in transformational banking

Transformational banking is a totally new way of approaching banking. Whereas traditional banking focus on typical banking products (like loans, savings etc.), transformational banking's prime focus is top provide low-cost and flexible payment solutions. This is usually delivered via mobile phones and networks of agents play an important role in distributing and servicing these products.

Transformational banking have been the domain of mobile operators, with the biggest successes achieved by operators in emerging economies. (Examples are Smartmoney in the Philippines and mPesa in Kenya). Bank's contribution were limited to providing regulatory coverage, settlement services etc. But this is rapidly changing as banks start to wake up about what is possible and realising that this is not a threat, but rather an opportunity. I am aware of many such initiatives, some that I can identify by name and others that I can talk about only cryptically:
  • One of Fundamo's clients is a major bank in South Africa (Standard Bank), that is rolling out transformational banking into rural South Africa. This initiative is called Community Banking.
  • The recent announcement between Yellow Pepper and Fundamo (Read here), targets a number of banks in Latin America with the Transformational Banking product, MONY.
  • Banks in Pakistan and India is looking at launching mobile wallet solutions, without using the complex and expensive core banking systems that they use for their existing banking products.
  • A bank in Brazil is considering moving a significant number of their low income subscribers off their core banking system and onto a transformational banking platform, to serve them better at a lower cost point.
  • A major bank in the developed world is considering a "transactional wallet" associated with the primary bank account that could be used to do small transactions on their client's phones. (Rather than putting additional load on the core banking system).
I am sure many more examples can be found.


John said...

The rural banks in the Philippines have also been a great example of promoting mobile money use for transformational banking having processed more than $100 million in mobile phone banking transactions using GCASH since 2006 and more than half of these transactions in the last 12 months alone, the 61 accredited rural banks with over 900 branches and other banking offices are playing a major role in transformational banking.

Andrew Mugred said...

IN Asia ,as of Pakistan, Easy paisa offers remittances, bill pay n mobile wallet services , Tameer bank n Telenor are promoting mobile banking use for transformational banking ... Easy paisa has already handled 270,000 bill payment transactions ...
but thats just a warm-up, the new m-account service features saving and withdrawal ...It seems Transformation banking is in rise in South Asia :)
The source where i got to know about m-account :))