TowerGroup recently released a report titled “Disruptive Technology Spawns Market Revolution: The Ascent of Mobile Remittances into the Mainstream which said that "accelerating investments being made in ubiquitous mobile payment platforms will be a disruptive industry force”. As a result according to TowerGroup, “the emerging revolution occurring for sending and receiving remittances may well undercut existing fee structures and traffic volume of incumbent brick-and-mortar money transfer operators, which already appear to be under pressure in this current economic climate."
TowerGroup goes on to suggest the intersection of channel investments in mobile banking and payments by banks is essentially self-serving, and will create the scenario where the combination of mobility and remittances will most directly benefit the banks as they emphasize more growth efforts among unbanked customer segments. “The inevitable convergence of remittances and mobility offers new opportunities for banks to grow this market by making payments faster, more convenient, more secure, and more accessible to a greater number of senders and recipients,” said Virginia Garcia, co-author of the research and senior research director in the Cross-Industry practice.
On the sending side in developed markets, mobile remittances represent an avenue for banks to initiate relationships with unbanked consumers – who are heavy users of both remittance products and mobile phones – with an eye to fueling deposit inflows through later cross-sale of traditional banking products like checking accounts. On the receiving side, mobile remittances will spur evolution of the financial sector in developing countries and economies, so recipients can direct remittances to checking accounts, bill payments, and microfinance applications.
Garcia also recently issued another report examining the overall evolution of mobility in the financial services sector, titled “Transforming Customer Interaction: Mobile Banking Delivers Adoption as Wheels of the Market Align.” As with mobile remittances, mobile banking overall is fast emerging as an indispensable business asset for banks to retain customers and reach new segments (youth, ethnic, unbanked) to secure deposits.
TowerGroup estimates every month until the beginning of 2009, between 150 and 300 banks and credit unions in the United States will sign contracts for mobile banking solutions. Mobile banking will reach close to 6 million users by the end of 2008, and TowerGroup forecasts 42 million US active users of mobile banking by 2012.
“We believe the rise of next-generation mobile banking and payment solutions will forever change banks and payments companies,” said Garcia. “Mobility has the potential to enable timely, relevant, and actionable outreach that will ignite customer engagement unlike any other channel. Ultimately, TowerGroup expects mobile phones will do for financial services what Apple iPods did for music – foster a significant change in the way consumers access services and suppliers deliver them.”
The TowerGroup report on mobile remittances, titled “Disruptive Technology Spawns Market Revolution: The Ascent of Mobile Remittances into the Mainstream,” is co-authored by Charul Vyas, an analyst in the Emerging Technologies practice at TowerGroup.
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