New research reveals that mobile financial services offer some of the best commissions in the world — threatening to knock toothpaste from its lofty perch as the most lucrative product for profit hungry merchants.

CGAP, a global microfinance centre, has found that in the Philippines, commissions earned from sales of everyday commodities are starting to take a back seat as M-banking proves more favourable business case for merchants.

According to CGAP’s data, while toothpaste earns merchants a cool 10 to 12 per cent margin, many are increasingly being attracted to the better performing mobile banking model that promises much smaller commissions at greater volumes.

Thus, the group is now urging the world to embrace m-finance  to save itself from the vagaries of the ongoing financial credit crunch.

“This financial crisis cannot mean the end of innovation.  Let us  remember that some of the greatest innovations of the past century — the pocket calculator, television, the World Wide Web — were created during times of economic hardship,” said Elizabeth Littlefield, CGAP CEO.

So CGAP has launched  a campaign that it hopes will encourage telecom operators, financial institutions and governments to see the business potential in expanding access to financial services for poor people in developing markets.

To do that, CGAP is looking at Kenya.

The institution now lists M-Pesa as the biggest mobile banking success to date globally, as it dropped transaction rates for money transfers by 45 per cent compared to other transfer services while managing to win the hearts of nearly four million users.

An independent survey found that  83 per cent of users think not having M-Pesa would have a “large negative impact” on their lives.
 
Though these are encouraging numbers, CGAP has found globally that so far m-banking has yet to reach its full potential.

Fewer than one in 10 mobile phone banking customers are poor, new to banking, and doing anything more than payments and transfers.

“Mobile banking can move beyond simple transaction accounts to offer a flexible platform that will meet poor people’s needs,” said Ms Littlefield, who adds that all the pieces are now falling into place for mobile banking to transform the way people get banking services in markets like Kenya.

Potential opportunities

There are other potential opportunities for service providers to help address the needs of the poor while growing new business.
 
CGAP estimates that 150 million poor people around the world receive regular social welfare payments from their governments.

Yet fewer than 25 per cent of beneficiaries receive their benefit into a bank account through which they could save, make payments and build assets.

“Imagine if such payments could be delivered using magnetic stripe cards linked to a bank account —or through a mobile phone. This could mean beneficiaries would suddenly have access to a full range of valuable services, such as savings,” said Ms Littlefield.