8 Reasons mobile money will surpass traditional banking

If Mobile Money went to war with the traditional banking sector for Uganda’s unbanked population who would win. I say Mobile Money wins. Especially if it is mobile money as I predict it will be, without transaction fees.
Here are 8 reasons why mobile money is the future of banking in Uganda, especially for the vast majority who have no experience with banking so far.

1. It is much easier to open an account

Opening an account with a bank in Uganda can be quite the headache they want utility bills and letters of introduction from your Local Council and after that it takes anything from days to weeks to process, one bank I opened up an account with for recently took 3 months to deliver the ATM cards. Opening an account with mobile money is a much simpler affair. It is so easy you can do it from your phone wherever you can get a cell signal. Even if you include the SIM card registration, mobile money is registration is a matter of minutes. And that ease might just be what makes it the first financial service many Ugandan's experience.

2. Banks have savings, mobile money has everything else.

Banks typically have the money that the clients are not using; in that sense they are much like a safe, without transaction fees, mobile money will have everything, it’ll be a safe place to keep you money and it’ll also be a means of payments. The equivalent in a bank is one where most of the clients make transactions by debit card or cheques. Which lets face it is unlikely to happen in Uganda.

3. Telecom Companies can judge investments better than banks

I wrote before about Telecom Analytics. What it amounts to is that with the vast amount of data a the disposal of telecom companies, they are going to be better judges of what investments are likely to succeed in which areas that is in addition to whatever expertise they would get from hiring finance specialists. In other words in addition to the advantages banks have in making investment decisions, telecom companies have Analytics.

4. Mobile Money happens wherever you are

This is an easy one, mobile money’s advantage is that it is mobile. Without transaction fees, everybody becomes an agent, deposits and withdrawals would happen so long as you could find someone willing to do the other. Sure this might not always be easy, but it will almost always be easier than finding a bank branch, ATM or cash deposit machine.

5. Mobile Money can be to Ugandans what Visa and Mastercard are to the developed world

Lets face it, payments by debit and credit cards are not likely to become a major thing in countries like Uganda anytime soon. There’s just too much investment and infrastructure needed to make it work. Mobile Money payments however run on already existing infrastructure. In fact it is possible to offer visa and master card services on top of the Mobile Money platform.

6. Mobile Money has more room to maneuver

Since today’s mobile money platforms are owned by telecom companies and are thus nit the main source of income for these companies, they have more flexibility. To spur growth, a telecom company could operate its mobile money division at low or even negative margins (within reason) without the telecom company itself making a loss. Eventually economies of scale could kick in and make mobile money more than self sustaining.

7. Convenience

So many transactions in mobile money could happen in the comfort of your home or wherever you are without you having to wait in queues. And the convenience doesn’t stop there, there are the many applications that could be built on top of mobile money that are just not possible in traditional banking. This is mostly due to the fact the key interface for mobile money is a portable computer. Even feature phone offer more flexibility than credit and debit cards.

8. The marketing advantage

One key advantage that Mobile money has even today is in acquiring new users. Sooner or later everyone receives money through mobile money even without having to open a mobile money account, all they need is a phone number. This makes it much easier for a mobile money operator to introduce new clients to their service. In fact they hardly have to do anything to achieve this.

Though I personally am excited about the potential of mobile money. I do understand that the traditional banking system also have at least one key advantage on their side, inertia. And inertia is a big deal. There are lot of people who will resist any change for a variety of reasons, paranoia and special interests for example. And perhaps more than anywhere else in the world, here in Africa we know that incumbents are often slow to leave.