Economist newspaper confuses mobile money and mobile banking

Posted on September 27, 2013  /  1 Comments

The Economist has a piece on mobiles and banking in Myanmar. This is the world’s leading popular publication on economics, but in this case, it appears the hype has overtaken logic.

What is banking? It is the business activity of accepting and safeguarding money owned by other individuals and entities, and then lending out this money in order to earn a profit. Mobile can play a role in this, but does the Economist really believe that phone companies will actually do well as deposit-taking and credit-extending entities?

If A wants to send money to B, today banks charge exorbitant fees, pushing people, especially poor people, into various alternative modes such as Hawala. It is clear that mobile companies can play a very useful role here, especially if their prepaid value outlets can perform “cash-in” and “cash-out” functions. But surely it is unwise to promote them as banks? This could be end of mobile companies as well as banks in Myanmar.

Another prerequisite for a viable, accessible mobile-phone banking system is the establishment of a good agent network to process client transactions such as depositing or withdrawing money. Telenor promises to have 70,000 sales locations for its phone cards as well as 95,000 refill points. The number of “financial” sales points, where customers can put credit on their phones for cash, would be lower, says Petter Furberg, the head of Telenor in Myanmar, but still enough to provide mobile banking in most of the country.

A final factor is whether the government in Yangon will rein in its deep-rooted instincts to control banking and the wider economy. Rather than specifying individual banks to lead the build-up of mobile banking, Mr Furberg says the ideal approach would be for the government to stick to drawing up robust regulations and then to open the market to “as many players as possible”. Either way, the secret to changing Myanmar’s financial sector may well lie with the phone.

1 Comment

  1. Totally agree with this statement from Mr Rohan Samarajiva , mobile money must be safe ,easy and cheap to use .

    For example in Namibia , banks have implemented mobile money whereby at this stage society is adapting good as it more safe and efficient to use , the transfer cost are there but most poor people that have access to mobile phones can afford this. mobile money in most african countries is something new ,operators and banks should cater for the needs of people that really need the service.

    In Namibia once again banks are working with government to ensure that this process is safe and reliable as people need to be sure that their money is safe and secure .

    So I would say this is a good innovation that needs that operators can invest into making sure that society is catered for . Once again Rohan yes mobile money is the future