Mobile Money: How Do Emerging Markets Compare?

In the last two decades, mobile money services have become a driving force for financial inclusion for billions of people as well as creating tremendous opportunities for small businesses and entrepreneurs; particularly within emerging markets, where there are few institutions and/or legal infrastructures to support unbanked populations' access to financing.

A mobile money account can be opened by anyone with a mobile phone, providing an effective banking gateway for those without a bank account but who own a mobile phone. For the unbanked, mobile money solutions provide affordable, instant, and reliable access to transactions, savings, and credit. Rather than having to sign up at formal bank branches, which can pose difficulties, customers are able to deposit and withdraw funds from their mobile money wallets using a network of agents, such as airtime shops or retail outlets. In exchange for converting cash into electronic value, these retailers receive a small commission. As a result of the agent distribution network, lower-income individuals are also able to access financial services universally and without incurring travel expenses.

Essentially, mobile money provides greater accessibility than formal banking institutions, due to the extensive network of agents and more relaxed requirements for opening an account. It is particularly beneficial to the poor and those who live in rural areas since it enables them to establish a formal credit rating, which can then be used to obtain additional financial services. Additionally, mobile financial services are frequently designed to increase financial inclusion in emerging markets, which has been hampered by barriers to credit. The use of mobile money services is itself a financial inclusion indicator, however by recording each transaction mobile money services also help to increase transparency and traceability, thereby promoting efficiency, building credibility and trust in the formal financial system.

As the concept is based on mobile network operators providing MFS via mobile phones, these services can be as simple as domestic money transfers, or they can be more complex microfinance services that require risk assessment, such as loans and insurance. As a result of the use of mobile handsets for provisioning service, telcos and fintech solution providers are able to adopt a quasi-bank business model to serve underbanked and unbanked populations. 

Source: Mobile Money in Emerging Markets 2024-2029

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