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Mobile banking for the unbanked

[Article published in February issue of the Review]

Colombia has pioneered secure mobile banking services in Latin America – and soon this will even extend to people without bank accounts

With 90% of Colombia’s 45 million inhabitants carrying mobile phones, compared with just 17% with fixed lines and only 13% using fixed internet services*, the country has proved to be an ideal launch pad for the mass deployment of mobile banking.
 

This was kickstarted when Gemalto and Redeban Multicolor, Colombia’s largest financial network, launched the country’s first SIM-based secure mobile banking services. The project brought together Gemalto’s expertise in EMV card technology for banks and its SIM application services for the telecoms market.

Today, mobile operators in Colombia offer banking as part of a portfolio of wireless value-added services. On average, 1.4 million transactions are processed each month – an average of eight per month, per user, with most using the service to top up prepaid accounts and check balances.

Colombia has a high crime rate, driven in part by the activities of drug cartels, so any technology that makes people feel safer is valuable. By enabling them to carry less physical money, mobile banking does just that.

What’s more, there hasn’t been a single case of fraud related to the service. Hosting the application inside the SIM card guarantees the security of the system, as the SIM is a fraud-proof device that also stores cryptographic keys, algorithms and process data – it’s essentially the same technology as that used in chip banking cards. All the information processed in the card is coded before being sent over the mobile operator’s network and is only decoded at the mBanking gateway, where the transaction is verified.

Work is now under way to take the service to the unbanked. Only 26% of Colombians have bank accounts, which leaves about 28 million with no access to financial services.

Gemalto is developing the necessary platforms to change this. Soon, through any standard GSM network, mobile phones will be able to offer a complete suite of mobile financial services. For instance, by deploying an electronic wallet application that stores money, banks will be able to give all users – banked or unbanked – the ability to perform the transactions that are already incorporated into mobile banking services.

The mobile banking application is the answer to a real need in the market for banking services that are available any time, anywhere. Indeed, it’s likely that, before too long, mobile banking applications will be fully adopted not only by the banks, but also by nonbank financial entities such as PayPal.
 

*Source: Global Insight, Latin Panel e-internet World Stats

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