Financial Services

Mobile Money vs Mobile Banking

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Global MoneyAbstract – This post was originally published on 26-August-2014 on Linkedin. “Mobile Money vs Mobile Banking“. Basic knowledge and introduction on mobile money and its critical success factors, attributes, key stake holders along with meaning were discussed in Mobile Money Basics (updated on 21-Dec-2014).  People interested in the use of mobile phones for their payments, sending money to each other (P2P) or checking balance, often ask what is the difference between e-money, mobile money, mobile banking, mobile payments, mobile commerce etc. Most of the consumers who wants to use and even some who are already using these services are confused.  As there are no universally accepted/defined definitions. This lack of uniformity does become critical at the regulatory level as well as when potential players are trying to have a meaningful conversation with each other.

Introduction – Mobile Money was designed for peer-to-peer money transfer, CashIn and CashOut i.e P2P payment system but since then it has gone much beyond the basic idea. In todays time it helps utility bill payments, Airtime topup credit & buying with upfront cost, Micro savings, Micro loans and Micro Insurance etc forms Mobile Payments ecosystem. These all products are based on credit rating which comes out of algorithm of machine learning techniques and help to narrow down the losses or clearly identify the defaulters. Mobile Money Transfer means person-to-person money transfers and when it refer to person-to-business payments that are made with a mobile phone called as mobile payment.

Calling a process or ability to carry out financial service transactions e.g money transfer, pay bills, make payments, airtime purchases and more via a mobile phone without necessarily having a bank account as Mobile Money is not entirely true. The Government Role, Regulation, National Payment System, Customer Protection Framework plays important role in the whole ecosystem. Data science with its best product called as Big Data is really helpful here.

Main Story –  Mobile Money and Mobile Banking are viewed under the same umbrellaCINCOUT and are currently encapsulated in a financial world which is either too complicated or is viewed as complicated. Mobile money requires phone number as account number while Mobile banking requires bank account number as primary transaction identity. As far as Mobile Money and Mobile Banking are concerned, in terms of technology, there is no rocket science in both services but surely new technologies like artificial intelligence and machine learning are making it complex and deep learning takes it to diffrent level any ways. Major issues are found in business rules, business requirements, distribution channels and regulatory requirements.

Africa is the land/Home of Mobile Money and Mobile is most frequently used and widely acceptable technological device then any other even much better, larger(percentage wise) and quicker the Blockchain adoption. Blockchain on the other hand can help and turn this fintech upside down for betterment. Again calling a process an ability to access your bank account via Mobile phone through a linked bank account number or card(virtual or physical card) although also through a Mobile banking platform as Mobile Banking is also not true in its full capacity.

Idea here to highlight key difference or depict differentiation between Mobile Money & Mobile Banking. Banking, financial transaction or any payment / real money involvement i.e exchange of money either at P2P, B2B, C2B or B2C level first few things is to evaluate are risk, security and privacy as correctly said by some one Risk is for Real if not Artificial Intelligence i.e Fintech’s innovation partner/helper. Mobile Money account or mobile wallet holders may or may not (mostly not) have any access to to bank accounts or mobile banking. Mobile banking users use or access their bank accounts though mobile handsets. its.

Mobile Money was created initially for the purpose of increasing the financial inclusion for the people who were previously financially excluded. Banks and customer both were running/shying away from each other due to the various reasons. Mobile money has good success stories with huge financial numbers in some markets but in many markets; mobile money service providers eagerly struggling to dominate the mobile money market, a country with the highest number of mobile phone users in Africa is the example (Nigeria).

A huge percentage of people do not acknowledge the fact that MobileScreen Shot 2016-01-13 at 12.32.33 PM  Money & Mobile Banking are two different service offerings and completely separate businesses. Mobile Money normally focuses on unbanked, to give financial inclusion for lower segment who cant afford banks or been excluded by banks as per their KYC or other business rules. Mobile money also allows users to do similar transactions like mobile banking with a mobile phone but in this case, the focus is basically on making mobile payments from an account that doesn’t have to be a normal bank account.

In the case of mobile money, a mobile phone is linked to a cash pool that has been pre-funded and then would be able to make payments for goods and services similar to what m-banking offered but without necessarily accessing full banking service. Low end customers where margins are very low, transaction values are low but the high volumes can suffice to bring profitability for operators. Mobile Money wallet that is stored on a phone, heard of concept BaaS over BaaP (Banking as a Service on Banking as a Platform service)

Consumers wants ability to communicate with their banks and buy products via whichever channel is most convenient to them at the time. Consumer and deposit protection, competition and interoperability, consumer protection and innovation, consumer protection regulation, rules of the game, consumer rights and consumer protection law are key critical factors.

Mobile banking and Mobile money may seem a bit confusing to most of the financial services users and it would be helpful if people were more educated on the difference between the two. M-banking or mobile banking is a service which allows a user to operate a bank account using mobile phone via GSM channels i.e SMS or USSD or internet/Data channels i.e NFC or Mobile APP etc.

Basic security  gets covered here as with linking  registered mobile number customers owned bank account, a bank customer would be able to perform basic operations using his/her mobile phone such as topping up airtime, transferring money, check his account balance, pay bills as well as make special requests to his bank. Machine learning algorithms works quite well here for the reason of not much change in behaviour of transaction trends and any small anomaly can be picked quick and easily. Today, customers expect an outstanding digital experience, preferably omnichannel and personalised to them

Mobile Money or mWallet is a data repository that houses consumer data sufficient to facilitate a financial transaction from a mobile device, and the applicable intelligence to translate an instruction from a consumer through a mobile device into a message that a financial institution can use to debit or credit bank accounts or payment instruments. Money sits in MNO network on mWallet.

In summary below is Mobile Money face. A mobile money account can be opened within a few minutes from one’s mobile phone without necessarily visiting a bank or paying an initial deposit but for m-banking, one would have to open a formal account and provide other documents as well as initial funding. Banking as a Service (BaaS) on a Banking as a Platform (BaaP) things making huge disruption here. When we add simulation of artificial intelligence and machine learning it gets better and better.

  • Mobile Money Services essentially was for unbanked & under privileged customers
  • Mobile Money suppose to improves life for the Lower segment of society by
    • Domestic Remittance from cities to villages
    • Availability of Agents to withdraw cash
    • Building Savings Culture
  • Acceptability of Mobile Money under Mobile Financial Services was the biggest break through
  • Role of Mobile Money Agent is crucial and very critical for success of service
  • Who can be an agent , how agent distribution needs to be plotted on city/country map is also very very critical

mcaMobile Banking on the other hand is when a financial institution allows its customers to conduct financial transactions on their bank account via a mobile device. Mobile banking also known as M-banking basically allows a user to operate a bank account using one’s mobile phone. Digital banking teams at banks planning and working on to transform the customer experience later this year with their chat-driven intelligent virtual assistant (Bots).

It would be interesting to see how Banks o will be marrying the latest technology in deep learning, neural networks, artificial intelligence, payment intelligence, predictive analytics and cognitive messaging to serve their millions of  mobile customers, and even may show behind-the-scenes glimpse into the technology that’s designed to grow and develop with customers over time. 

With a registered mobile phone linked to one’s bank account, a banked customer would be able to perform basic banking operations using his mobile phone such as topping up airtime, transferring money (P2P), check account balance, pay bills as well as make special requests to bank. But this is rarely seen in Africa.

Africa is heaven for Mobile Money because banking penetration is less than 5% while in Asia, through countries like Indonesia, Singapore, India and many more, Mobile Money services can never fly or if I can say never be a success; chances are almost zero due to the high level of financial inclusion, availability of ATMs and the rife of Agency Banking. When Africa delivers on its potential in terms of Mobile Money blended with artificial intelligence, payment intelligence and info-security intelligence then, the winners will be those operators who have been ready to live with the risks involved in the business.

Unless we talk about value added services on top of banking, Mobile Banking and Mobile Money basics remains the same as in mainstream banking (Debit or Credit), nothing beyond. Banks are losing out to Mobile Money services due to their failure to compete with MNOs/MVNOs and skepticism to open up their Mobile Banking services to run side by side with Mobile Money. Mobile payments are being adopted all over the world in different ways.

In 2008, the combined market for all types of mobile payments was projected to reach more than $600B globally by 2013. Mobile money came into light or got into existence only because mobile banking or bankers were running away from the fact  that there is serious need to cover the excluded segment which was in couple of billion people. Couple of billion never seen or experience the taste of how financial services works and only after financial inclusion went as a key driver. My understanding and strong believe in the phenomena “Access to basic Financial services – Financial inclusion or Finclusion” is the basic human right. AI is should also be looked at.

(As per Juniper Research), which would be double the figure as of February 2011 ( The mobile payments market for goods and services, excluding contactless transactions or NFC transactions and money transfers, is expected to exceed $300B globally by 2013. Mobile money therefore presents great opportunities for MNOs/MVNOs operating in markets where mobile penetration is rising and financial inclusion is low. Such markets demonstrate high service acceptance levels, as the freedom to conduct financial transactions on a 24/7 basis is highly appealing to the population.

As it develops, each market will need to understand customers’ demands, and develop its own ecosystem and business models. A key facilitator will be converging regulation and legislation which needs to address fraud and money laundering issues. A favorable platform for industry stakeholders to collaborate will be one that maximizes the benefits to all parties.

mms-3More than a billion people in emerging and developing markets have cell phones but no bank accounts. Many low-income people store and transfer money using informal networks, but these have high transaction costs and are prone to theft. Mobile money is beginning to fill this gap by offering financial services over mobile phones, from simple person-to-person transfers to more complex banking services.

To date, there have been more than 100 mobile-money deployments in emerging markets; at least 84 of them originated in the past three years. In a rapidly changing environment, telecommunications operators are facing the challenges of growth, operational efficiency, convergence, technology and increasing regulatory pressures. Banks are any way exploring chatbots, personal assistants, robo-advisors, machine learning and cognitive computing to tackle their biggest rival FinTech.

When addressing the opportunities of mobile money in today’s rapidly changing environment, telecommunications operators, financial institutions and technology providers face the challenges of strategy design and modeling, operational efficiency, management of partnerships, risk, compliance and regulatory complexity. Electronic money is the electronic alternative to hard cash which is in form of bits and bytes of electronic data. Or in short concept/virtual form our tangible item i.e physical paper/coin cash.

Electronic monetary values  are/can be used  for making payment transactions or sending to another person in form of settlement or payments or more specific electronic value products and services. Most of the fintechs today use AI to model scenarios for capital planning, or use natural language processing and graph processing techniques to flag transactions for compliance reviews.

To help our clients address those challenges, Ernst & Young brings together a worldwide team of professionals with deep experience in providing assurance, tax, transaction and advisory services. World is now moving from plastic to mobile phone for payments that also means all the work done in last 20-30 years is now getting scrapped and we are back to basics and shifting our mind set from one side of coin to another side. To achieve faster and quick win here we should adopt the philosophy of  Harvey Mackay where he said “To me, job titles don’t matter.

Everyone is in sales. It’s the only way we stay in business”. I personally like this statement as this is the only way where we can zero in the difference between being data-informed and data-driven. These uses are lower profile, but they’ll have a big impact due to Big Data techniques as they move toward mainstream.

For people who are economically challenged / underprivileged people face these agonising choices is not just that they don’t have enough assets. They also don’t have access to a bank to help them use their assets effectively. If their savings are in the form of jewelry or livestock, for example, they can’t very well chip off tiny pieces to cover routine daily expenses and mobile money can help them to improve their life and living life style to come up from the level they are. FinTechs will evolve more from digitization and automation i.e in short from cognification.  Mobile Money is such a great tool whose potential is still not known to the most the world though there is lot going by many MNO’s , MFS Companies and foundation entities; they are doing commendable and excellent job.

I guess I am correct in saying transaction values are low in mobile money but volume can suffice the value of total volume of transactions. Banks anyways coming up with more robust and stronger use of AI more often with processes that rely on machines to make very specific decisions. We’ll also see banks (Mobile Banking providers) and fintechs (Mobile Money Providers) modeling how customers might react to various scenarios, testing assumptions on users’ digital twins. There are some vital questions which needs to answered by every one in the said business which getting much hype to conclude is it really necessary or just free hype.

1) Which route to go as crux of this discussion?

2) What are your views on same?

3) What are the implications of this war?

4) Is it going to change the world (unlikely), be a significant “win”, be a nice hack, or simply serve as a road sign indicating that this path is “UNKNOWN”.

Objective of digital payment is to assess the user friendliness, trust and the user’s view on the current and the future authentication methods of cashless payments and to understand ideal payment solutions. The economic barriers are also disappearing, though a substantial additional investment in equipment and cards would be needed to permit even purchases such soft drinks to be made. But transactional privacy will be at the heart of the government’s attack on digital cash. Central banks are equally worried by the prospect that e-money may be issued that is not denominated in the national unit of account, like dollar or euro. That could be the rebirth of private currencies and free banking. Merely jumping on the fintech bandwagon by banks — or even building a successful fintech company — will not create a successful financial institution.

Sign-tConclusions: Which system is useful and needed for the business considering the market you operate and synchronised with your strategies and goals. While mobile payment announcements from various smartphone makers are growing in frequency, still too much unknown & doubtful thoughts that such services will drive much interest in buying the smartphones that support it. Mobile money which is a service in which the mobile phone is used to access financial services. Mobile money transfer is a movement of value that is made from a mobile wallet in P2P manner, accrues to a mobile wallet, and/or is initiated using a mobile phone.

In mobile payments movement of funds from customer wallet value  to merchant/biller mobile wallet. Sometimes, the term mobile payment is used to describe only transfers to pay for goods or services, either at the point of sale (retail) or remotely (bill payments). Mobile wallet is nothing but just an account that is primarily accessed using a mobile phone. I found from internet “Artificial intelligence can help individuals and business to make faster, better, and cheaper decisions. But willingness to collaborate with the machine, and not just treat it as either a slave or an overlord.”

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