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Tim Tyler - Mobile Static

Tim Tyler - Misys

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Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.

Man The Pumps?

30 April 2012  |  2283 views  |  3

I have just read an article on the Economist linked to by Finextra: "The bank of SMS" -  talking about mobile banking across Africa.

Even more interesting than the article were the comments, of which one leapt out at me more than others. It was criticising the investment being made in mobile banking, when there should be so many other priorities: "You also need substantial investment programs (sic) to give access to water in ... drought-stricken areas"

Of course, being in the middle of a drought here in the UK, despite it being the wettest April on record, resonated somewhat.

But what has this got to do with (mobile) banking?

One of the problems that we have in the UK at the moment is that some parts of the country have more than enough water, whilst other parts do not. Unlike electricity, there is no "National Grid" system for the movement of water from where it is in surplus to where it is in deficit. The water network is very localised, with no efficient means of transferring from one network to the other. I could fill a barrow up with water and physically move it to where I wanted it myself, but that is not very efficient - either in time or effort.

This is reminiscent to me of a problem that we have in moving funds around. Note that I didn't add "in banking" to the end of that sentence. This is because consumers don't think of moving money as "banking", they just want it to be as easy (and low cost) as possible. If we take particular note of workers remittance, the actual act of getting money from point X to point Y can be far more difficult than it should be.

I particularly enjoy travelling to Tanzania, yet if I wanted to send money to a friend there could I do that through my bank? Of course I can, but only if my friend also has a bank account. If they don't have a bank account, or perhaps they don't want to make the journey to their nearest branch or ATM, how do I get money to them? Fortunately, there are numerous methods I can use, that utilise widespread agent networks across the globe; I could also send direct to my friend's mobile phone within Tanzania, as they happen to subscribe to M-Pesa.

But I can't do this from my bank.

The act of transferring from one network to the other is far more difficult than it should be - the equivalent of my water barrow. Why am I not able to make a payment to a beneficiary on any one of multiple payment networks via my trusted financial partner? Surely it's as important to have our pipes well-engineered as it is to have a nicely polished chrome tap?

TagsPaymentsRetail banking

Comments: (5)

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 03 May, 2012, 08:29

Money has a few traits that are not shared by water / electricity viz. local currency, legally obtained versus ill-begotten, and so forth. These differences are responsible for at least a part of the feasibility, friction and fees involved in cross-border worker remittance. On second thoughts, even electricity exhibits some of these differences e.g. 120V/60Hz in the USA versus 230V/50Hz in the UK. Not sure whether it's even feasible to transmit electricity seamlessly between such places with dissimilar specs.

Tim Tyler - Misys - London | 03 May, 2012, 16:25

I think electricity as you noted is actually a good example. We don't have to have to carry voltage converters with us when we travel, we just expect our devices to work. We do have to carry plug adaptors, but in truth we would rather that we didn't.

And so I think it is with money as well. If I want to send you some money now, should I have to worry about the precise mechanisms as to how it gets to you, and really should I have to go out and find specific money transfer agents / enrol with new (potentially risky) companies just because you decide that you want / can only receive money via mechanism Y? No - my bank should handle all of that for me.

The AML / Risk / Exposure elements that the bank needs to carry out are the equivalent of the voltage converter - it should just happen transparently to me (unless something fails in which case I experience the equivalent of a blown fuse?).

We should be looking at this from the consumers' perspective, enabling and empowering them, rather than - as the majority of banks seem to - deciding its too hard / complicated.

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 04 May, 2012, 09:24

No, I didn't mean the electrical appliance. I meant electricity, which is the correct analogy for money. As far as I know, electricity produced in USA cannot be transmitted to UK due to difference in specs. Period. At least, banks are transferring money produced in USA (USD) to money that is usable in UK (GBP). 

Even where electricity can be transmitted from Place A to Place B, it obviously can't be handed over to the consumer's hands (God forbid!). The electricity company is justified in delivering it to a plug point and in expecting the consumer to have access to a plug point. Same way, why can't a bank expect the beneficiary to have a bank account?

Consumers might be justified in wanting everything their way but regulations do impose certain limits on what banks can and can't do. I've given a few concrete examples of the role of regulation on customer experience in this and a couple of other Finextra posts / comments. And, then, there's the uncomfortable question of whether the consumer is willing to pay for all this or expects the regulator to clamp down on banking fees.

Tim Tyler - Misys - London | 04 May, 2012, 10:28

Analogies are dangerous things! If we lived in a world with no power grid and no personal generators, would batteries become the new gold standard, or a universally accepted currency?

The point I'm making though is that banks are missing out on large revenue streams by not adapting to new and emerging payment networks. What %age of global workers remittance payments do the banks have a share of, as an example? They could increase this by adapting to their customers' demands: building windmills and not wind-breaks.

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 04 May, 2012, 16:44

Ah, that's a different question and one that I'd asked, and answered, a couple of years ago in my person blog post Banks Can’t Look Down On Remitters (Finextra policy forbids me from giving a hyperlink to this post but it comes up first on the search results when you Google search by its title).

Let alone remittances from bank accounts to nonbank accounts belonging to the emerging networks of the nature mentioned by you, banks don't seem to be interested even in the conventional bank account to bank account money transfer business. Reason?

According to the Western Union executive I'd quoted in my post, 'many banks still view remitters in developed countries as impoverished, nearly illiterate, and hence not worthy of selling checking accounts, credit cards, mortgages and other banking products. According to one former banker and remittance specialist quoted in this article, “not all banks will want the footflow into their branches on the sending side. They don’t want these guys coming into their branches and cluttering up their nice clean offices”.  Apparently, banks fear that putting remittance service stickers on their windows would dilute their brands.'

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Tim Tyler

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