For the majority of people in the West banking is as easy as walking to a local branch or ATM, or logging into their account from a computer. But for millions in developing countries, even having a bank account is out of reach. In India, at least, that could be about to change.
Vodafone India and ICICI Bank, India's largest private bank, have launched M-Pesa, a mobile-based money transfer and payment service that was first established in Kenya in 2007. The partnership, announced in a news release April 17, claims it will give mobile-banking access to some 700 million Indian people who are currently "unbanked" -- people with no access to conventional banking services like bank branches and ATMs.
Vodafone says service will first rollout in India's eastern regions, including Kolkata and West Bengal, with 8,300 agents. That part of India is home to about 220 million people. Service will eventually be extended across the rest of the country.
The M-Pesa system -- where "M" stands for mobile and "pesa" is the Swahili word for money -- begins with real cash and an M-Pesa agent. A customer signs up, registers a personal mobile phone number and deposits money into the linked account at an agent store, which could be a mobile phone shop, a gas station or a supermarket.
To send money, the user inputs a recipient's mobile phone number, the amount of money to send and a security code for protection. To withdraw funds, the receiver visits an M-Pesa agent and requests a withdrawal through his or her mobile phone. Both the receiver and the M-Pesa agent then receive a confirmation for withdrawal, which instructs the agent to give the customer cash. Bills can be paid and mobile talk time can also be bought through the platform.
"For millions of people in India, a mobile phone is a bank account, a front door to a micro-business or a lifeline to people in the remotest areas," said Marten Pieters, Managing Director and CEO of Vodafone India.
"Research shows that M-Pesa brings real benefits to users in their daily lives, saving three hours a week of their time and around $3 in money transfer costs -- a significant amount to people in some areas."
Greater cell phone penetration also brings greater economic benefit to local economies, often far removed from urban centers in large developing countries. A 2006 University of Michigan study found that every 10% increase in cell phone penetration grows the local economy by 0.6%.
In 2011, India alone added 142 million new mobile phone subscriptions -- twice as many as in the whole of Africa, and more than in Europe, the Middle East and the former Soviet republics combined, according to the International Telecommunication Union (ITU) in a June 2012 report.
Between 2000 and 2011, India recorded an enormous boom in cell phone subscriptions -- growing from just 3.5 million to more than 893 million. In that same time, China saw mobile phone subscriptions increase more than ten-fold to more than 986 million subscriptions. The United States saw growth of just 87% over the same dozen years to 290 million, says the ITU.