REV: JANUARY 31, 2012
V. KASTURI RANGAN
Mobile Banking for the Unbanked
In 2009, an estimated 1 billion people in developing countries owned a mobile phone but did not
have access to formal financial services. It was estimated that this number would increase to 1.7
billion by 2012 and that during this period more than 290 million of the unbanked wou ld begin touse
An article in The Economist extolled the virtues of mobile banking:
Once the toys of rich yuppies, mobile phones have evolved in a few short years to become
tools of economic empowerment for the world’s poorest people. . . . Mobile money presents a
shining opportunity to start a second wave of mobile-led development across the poor world.2
This case describes two modelsof mobile banking, one led by third parties (but supported by
banks) and the other led by mobile network operators (MNOs). We provide an in-depth look at
WIZZIT, a third-party initiative in South Africa, and M -PESA, an MNO-centered initiative in Kenya.
Additionally, we provide brief examples of two other initiatives —Smart Money and GCash in the
Philippines, in Appendix 1 at the end of thecase.
Collectively, these four players represented the early innovators in mobile banking. Smart Money ,
the first, began in 2003, followed by GCash in 2004. In Africa, WIZZ IT began in 2005, followed by
M-PESA in 2007. As banks, MNOs, and other competitors considered entering this market space, the
following questions remained unresolved:
Which was the better model: the third-party-ledor the MNO-led model? Or was there a
What was the path to profitability?
There were more than 4.0 billion mobile phone subscribers worldwide by the end of 2008, and it
was projected that there would be more than 4.6 billion subscribers by the end of 2009. 3 Global
penetration stood at 61% in 2008, up from 12% in 2000. 4 The most significant growth was indeveloping countries, where the penetration rate increased from close to zero in 1998 to an estimated
49.5% in 2008 (see Exhibit 1).5 The International Telecommunication Union noted that the growth in
mobile phone use in developing countries was not only “faster than any other technology in the past,
but that the mobile phone is also the single most widespread ICT [information andcommunications
technology] in use today.” 6
Professor V. Kasturi Rangan and Research Associate Katharine Lee prepared this case. HBS cases are developed solely as the ba sis for class
discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations ofeffective or ineffe ctive management.
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Mobile Banking for the Unbanked
Among the developing regions, Africa had the highest mobile phone growth rate (32% in 2006–
2007). Its mobile penetration of 28% was quickly catching up with the 38% in Asia, 72% in the
Americas, 79% in Oceania, and 111% in Europe (see Exhibit 2).7 In a March 2009 report, the Global
System for MobileCommunications Association (GSMA) projected that mobile penetration in Africa
would reach 70% by 2012.8
The growth in mobile phone subscriptions contrasted sharply to fixed -line telephony. Between
2000 and 2008, global fixed-line penetration hovered around 20% (see Exhibit 3).9
While fixed-line telephony enabled two or more people to talk to one another, mobile cellular
phones offered much...