Types of Mobile Financial Services


December 9th, 2014 - Posted by Peter Cook

Welcome to the Novatti blog. We will use this space to update our followers on matters that may affect them in the payments industry, present our thoughts on payment industry topics, and discuss new payments developments and technologies.

In this first post, we will look at how mobile financial services encompass mobile payments, mobile money and mobile banking.

  1. Mobile banking, by definition, performs actions on a traditional bank account. These actions involve obtaining account information, and transacting on accounts.
  2. Mobile payments are payment for goods and services using a personal mobile device as the transaction terminal. Mobile payments can use a traditional bank account or a mobile money account.
  3. Other services include insurance and microfinance services.

Mobile banking is offered by nearly all of the major banks in developed nations and typically uses a smartphone app to securely perform bank transactions. Some banks also offer only informational services using SMS or phone menus.

Mobile money is a stored value account that is accessed from the user’s mobile phone. It is typically operated by the mobile network operator and managed separately to the user’s phone account. Mobile money is popular in developing nations where most people do not have regular bank accounts (the unbanked population). It offers a form of “lite” banking as a replacement for formal bank accounts, so mobile money and mobile banking become synonymous, and the two terms are often used interchangeably.

The popularity of mobile money services in these regions is due in no small part to the ubiquity of mobile phone services. Many areas or regions that do not have access to branch banking do have reliable mobile coverage. It is also indicative of the pent-up demand for financial services that were previously unobtainable to the general population.

Mobile money can help boost the population’s financial inclusion by providing the mobile payments and banking tools to assist in branchless access, financial literacy, product availability, and risk management. Financial services provided by mobile devices are affordable, sustainable, secure, and convenient. They contribute directly to increasing the income of the poor via financial inclusion while reducing their vulnerability to exploitation. Bringing more people into the formal financial system is a recipe for growth, development, and increased economic stability.

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Peter Cook

CEO at Novatti

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