However, in developing economies, the widespread adoption of mobile money systems that we believe will be a reality by 2032, will have a transformative impact, not only nationally, but on the way users connect globally. Access to formal financial services has a profound impact in developing economies as consumers benefit from the ability to reliably save funds in interest-bearing accounts (e.g. M-KESHO’s pioneering example) and to tap into insurance and credits products hitherto unavailable to the vast majority of households in developing markets. Mobile money systems have started and will continue to facilitate that access, often beginning with mobile money transfer services, which enable consumers to send money efficiently across long distances. Mobile money is faster, cheaper and safer than the alternatives. JD Bergeron, Senior Director of Social Performance at Kiva, believes that mobile money will play a significant role in reducing the high transaction costs currently associated with distributing cash to and collecting cash from microloan recipients in areas of the world where poor transportation infrastructure makes these frequent, small transactions time-consuming and costly.
A number of studies have sought to quantify the benefits of mobile money, and their findings are impressive. Usage of mobile money in Kenya has been credited with increasing income by 5-30%, according to a study of households that use M-PESA (The Economist, “The Power of Mobile Money” September 24, 2009.). The increase is due, in part, to the lower transaction costs associated with mobile remittances; senders send smaller amounts more often, resulting in an increase in the total amounts sent, on average (Suri and Jack, ““Mobile Money: The Economics of m-Pesa,” October 2009). Mobile money payments also help reduce fraud and corruption, resulting in increased earnings for workers. When the Afghan National Police trialed use of the M-Paisa mobile money system to disperse salary payments, policemen received payments one-third higher than they were accustomed to as their commander was no longer able to take his cut of their salaries (http://technology.cgap.org/2010/01/19/in-afghanistan-going-where-no-bank-has-gone-before/ . While several studies have concluded that an increase in mobile subscribers leads to an increase in GDP, Menekse Gencer, Founder of mPay Connect, believes that mobile money will have a profound impact on the GDP of countries most in need of economic growth and development (http://www.slideshare.net/mpayconnect/the-mobile-money-movement-by-mpay-connect-dec-2010-innovations-publication-winter-2011).Next page