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Mobile phone banking moves one notch higher
by: Ted P. Torres
(Source: Philippine Star News Online – 10/20/09)

MANILA, Philippines - The Microenterprise Access to Banking Services (MABS) program is taking mobile banking to the next level in its continued bid to bring credit closer to the un-banked and under-banked.

The Rural Bankers Association of the Philippines (RBAP) and the United States Agency for International Development (USAID) are the key supporters of the MABS program.

MABS chief of party John Owens admitted that they have several mobile banking products already being pilot tested with several rural banks.

"It has to do with smart money and mobile phone technology," Owens said, promising to release more information as the pilot testing period.

Industry sources said that rural banks are working on expanding its mobile banking capabilities and its network.

"Anyone with a phone can start trading through the BA electronic money resources, and we have 170,000 clients registered with the banks that can withdraw money up to a maximum of P100,000 a month," they said.

They said that the RBAP and MABS are presently talking with Bangko Sentral ng Pilipinas (BSP) on using electronic shops (e-shops).

MABS is generally focused on developing microfinance presently working with 90 rural banks operating 140 branches, enrolled in the program.

The BSP, which has been supportive in developing microfinance and mobile banking technology, issued a circular on e-money to protect consumers while promoting innovation in the sector.

The monetary regulator defined e money as "monetary value electronically stored in an instrument or device such as cash cards and e-wallets on mobile phones that may be acceptable as a means of payment by a third party or withdrawable in cash or a cash equivalent, e-money will not be considered as a deposit, and thus its issue will not be regulated by the main banking regulations nor insured by the Philippine Deposit Insurance Corp. (PDIC)."

The MABS chief of party said that what makes these rules especially innovative is that e-money issuance will be open to banks, non-bank financial institutions (such as investment funds) and certain non-financial institutions such as telecommunications operators, if they register as money transfer agents and abide by certain requirements – minimum paid-up capital of P100 million, the creation of a subsidiary that is uniquely engaged in e-money activities, and minimum liquidity requirements equal to the amount of outstanding e-money issued.

He said that the new regime will benefit Globe Telecommunications (Globe) and its subsidiary, G-Xchange Inc., who currently offers the G-Cash service, and Smart Communications Inc. (Smart), with its Smart Money/ Smart Padala products, both who have been until now working in a hazy regulatory environment through bilateral letters of agreement with BSP.

One banking institution that took advantage of the new mobile banking environment is the Bank of the Philippine Islands (BPI), which formed a joint venture bank between Ayala Corp. and Globe Telecommunications (Globe).

The former Pilipinas Savings Bank will be transformed into a thrift bank with emphasis on mobile banking and microfinance.

Owens said that ruralbanks are looking for better collaboration with Globe and the new thrift bank.

"That bank has limited capabilities in terms of retail banking activities, but it has the muscle to extend wholesale loans to microfinance institutions (MFIs) like rural banks through mobile banking technology," he said.

Rural banks can provide the distribution centers or network for mobile bank trading, micro-lending, micro-insurance, micro-housing, and the like. While the new technology-driven thrift bank can deal with the huge distribution networks of corporates the likes of Unilever or San Miguel Corp.

Mobile banking technology brings credit to the countryside, which is home to the country's un-banked and under-banked population.

In the Philippines, roughly 1.6 million of active mobile banking users are un-banked. Twenty-six percent of active users have incomes below P250 per day, and that un-banked mobile money users spent P9.50 more per month than peers.

Savings is the most common financial product in the Philippines, with low-income mobile money users and non-users reporting that they save an average of P170 per day.

It is likewise estimated that nearly one half of the country's population has a mobile phone or has direct access to one.

It is generally perceived globally that the Philippine rural banking system, with the help of the MABS program, initiated mobile banking.

Started in 2004, the first mobile phone banking transaction was made in 2005. That includes micro-loan payments, bills payments, making deposits and withdrawals, sending or receiving domestic or international remittances, and disbursing and receiving salaries.

The key conduits of the ease to access to cash or credit are Nokia Philippines, Globe, Smart, and RBAP.