Malawi launches mobile banking

Opportunity International Bank of Malawi (OIBM), a provider of microfinance services in Malawi, has launched a mobile phone banking system named 'banki m'manja'. It has done this to encourage rural Malawians’ access to the bank’s services. The OIBM innovation will enable its customers to check their account balance, transfer funds, conduct merchant payments, top-up mobiles, view a mini-statement and change their PIN.

OIBM Chief Executive Officer, Alexandr-Alain Kalanda, said: “We would like to help our customers, who most of the time live in the rural areas where by they spend a lot of money on transport alone to access our services, to have these services right in their palms.”

The service, which is being implemented in collaboration with local telecommunications company, Telekom Networks Malawi (TNM).

Square mobile payment system goes live

Twitter co-founder Jack Dorsey has started to ship out hundreds of free credit card “dongles” that plug into the headphone jack of an iPhone, Android phone or iPad.

The system is called Square, and the free app is available to download now for iPhone OS and Android. Basically, you fire up the app, attach the dongle, punch in the amount (say, whatever you agreed on for selling a couch on say Craigslist), and then have the buyer swipe their credit card through the adapter. No personal information is stored, and the buyer has to sign the phone with their finger. Once that happens, an SMS or email is sent to the buyer confirming the purchase.

It's a pretty simple solution, and it has the potential to revolutionize small business for whom it's quite difficult to get a proper credit card system setup, and the fees can be outrageous. With this, setup costs are essentially nothing, and the fee structure is much more reasonable.

Mobile banking set to rocket

For consumers, mobile banking is about convenience: the ability to check account balances, pay bills and transfer funds from a device they take with them everywhere. For financial institutions, it is a means to deepen customer relationships, streamline operations and cut costs.

Several forecasts predict that by 2015, 50% or more of US mobile users will be conducting transactions from their mobile devices.

“The ubiquity of these devices offers banks an opportunity to connect with customers outside the online channel, including those who are always on the go as well as the under banked and unbanked consumers who lack consistent Internet access,” said Noah Elkin, eMarketer senior analyst and author of the new report “Mobile Banking: Financial Services Firms Look to Cash In.”

Estimates of mobile banking adoption vary widely, although it appears to be growing at a good pace. For example, studies conducted in 2009 by Mercatus, Mintel Comperemedia and Experian Simmons put the usage rate between 7% and 11%.


However, in a January 2010 survey by Luth Research for the Mobile Marketing Association, mobile banking usage was 17% among the overall US population and 19% among mobile phone users. A March 2010 study by OnePoll for mobile billing and message delivery firm mBlox uncovered a 25% usage rate among US mobile phone users.

Research among smartphone users reveals much more extensive mobile banking adoption. Data Innovation’s January 2010 “Mobile Money Study” found that nearly 70% of smartphone users had accessed mobile banking, payment or financial services in the past three months.

Mobile Banking and phishing

Online fraudsters continue to use advanced methods with their victims. Now a phisher has de-activated a bank's mobile alert system.

An SMS alert informing money withdrawals was blocked by phishers after fraudulently obtaining online banking information of a Chennai (India) based victim through a phishing e-mail. A first-of-its-kind case reported here, a thorough probe is under way to find its modus operandi.

The victim received the phishing e-mail in February supposedly sent from a his bank where he held an account with online and mobile banking facility. “Taking it for real, the complainant responded to the e-mail asking to update his online and mobile bank account to refrain from debarment,” said Additional Deputy Commissioner of Police (Cyber Crime Cell) M. Sudhakar.

The victim realized that all the money from his account was withdrawn only after visiting an ATM a few days later. Puzzled about not receiving any SMS alert on his mobile phone on the withdrawal, he contacted the bank and later, lodged a police complaint.

Preliminary police investigations revealed that the phishing mail was sent from Lagos in Nigeria and Rs. 60,000 that was illegally transferred from the victim's account was deposited in two bank accounts in Lucknow and Jaipur. The accounts were blocked immediately and sums of Rs. 43,000 and Rs.17,000 were recovered from them.

“After obtaining confidential online banking details of the complainant through the phishing e-mail, the culprit de-activated the SMS alert in order to keep the victim unaware of the money transfer from his account as long as possible,” Dr. Sudhakar said.

This is the first case reported here, in which an SMS alert was blocked before money transfer, he added.

Even though the money lost was minimal, the Cyber Crime Cell carried out a detailed investigation into how the phisher in Lagos managed to go to the extent of deactivating the mobile alert system.

On the other hand, police search to track the account-holders of the bank accounts in Lucknow and Jaipur hit a barrier after it was found to be opened for non-existing business houses.

He also said that illegal online money transfer could be reduced, only if banks would verify with the respective customer on every request for an online money transfer from overseas. “The culprit in Lagos cannot be apprehended as there is no international law to extradite him.”

Referring to the case, city Police Commissioner T. Rajendran said that an international body to investigate cyber crime is essential. “The number of arrests made in cyber crime cases here is very low now as most culprits operate from overseas,” he added.

Operational Risk - Computer-based trading under scrutiny after Dow dive

US regulators are scrambling to deal with the aftermath of a wild day of trading on the Dow Jones Industrial Average which shipped more than 600 points in seven minutes before the close of trading in New York on Friday.

The sickening lurch in the Dow caused scenes of chaos in US markets as computer-based programs kicked in and exchanges and currency markets struggled to handle an unprecedented surge in volumes.

The panic spilled over into other markets as investors fled for the safety of government bonds causing yields to drop and pushing the dollar sharply higher.

US regulators are undertaking a forensic investigation of the day's trading in an effort to pinpoint the cause of the collapse as exchanges move to cancel obviously erroneous trades.

Nasdaq issued a statement saying it would cancel all trades executed between 14:40:00 and 15:00:00 that showed a 60% swing in price during the peak trading period.

"There is no indication at this time that a Nasdaq market participant experienced a technological failure in connection with this event," the statement continued.

The Chicago Mercantile Exchange also felt moved to responded to rumors concerning irregular trades by Citigroup in stock index futures: "While our policy is not to comment on individual participation in our markets, in light of volatile market conditions, CME Group confirmed that activity by Citigroup Global Markets Inc. in CME Group stock index futures markets does not appear to be irregular or unusual in light of market activity today."

Whatever the cause, the freefall in the markets will stoke up regulatory concerns about the role played by high frequency traders and automated trading programs in the ensuing market meltdown.

Giles Nelson, chief technology strategist of Progress Software, gives the vendor perspective: "Unfiltered access to trading destinations can end up causing trading errors or even a 1,000 point crash on the Dow Jones Industrial Average. This is why pre-trade risk management tools are absolutely essential - to monitor position limits, trading limits and to catch fat fingered errors before they happen. Banks and regulators must act to stop this happening. It is completely avoidable."

Remittances - National Bank of Pakistan signs deals with 2 Saudi banks

The National Bank of Pakistan (NBP) has signed deals with two Saudi banks for remitting money to Pakistan.

The launch of remittance facilities by Al-Rajhi Bank's Tahweel Al-Rajhi and Bank Albilad's Injaz is expected to start later this week, said Khalid Bin Shaheen, NBP's senior executive vice president, who was in Jeddah recently to oversee the arrangements.

So far NBP, Pakistan's largest commercial bank, has had such an agreement with Samba Financial Group.

Shaheen said the new deals were likely to boost remittances to Pakistan, which in recent months have recorded remarkable growth in money received from its overseas nationals.

According to the latest figures released by the State Bank of Pakistan, the nation's central bank, home remittances in March was $763 million, a growth of 30 percent over what was received in February. Similarly, in the nine-month period ending in March, remittances were up 28 percent over the corresponding period of last year.

March remittances from Saudi Arabia also reflected the global trend. Pakistan received $193.91 million from Saudi Arabia, which was $44.46 million or 30 percent more over February figure.

Shaheen said the credit for the growth goes to the structural changes that have taken place following the launch of Pakistan Remittance Initiative (PRI) in August 2009. PRI, a joint venture of the Ministry of Finance, Ministry for Overseas Pakistanis and the State Bank, is an effort to increase the flow of remittances through official channels.

Along with PRI, the State Bank has launched Real Time Gross Settlement (RTGS), which has drastically reduced the time it takes for funds to be settled between the many banks in Pakistan.

Shaheen said the deals with Al-Rajhi and Bank Albilad as well as Samba ensure free of cost cash to cash transfer through large number of NBP branches in Pakistan. "No account is required for this service. Payment will be made on proper identification," he said.

Instant electronic transfer from account to account is also free of charge. NBP has reduced the requirement of minimum balance of Rs.3,000 unlike other banks which have set the limit at Rs.10,000.

Remittances - Money transfer firms target mobile services

The shifting fortunes in the money transfer market are pushing traditional agents such as Western Union and MoneyGram to develop mobile solutions, which they are relying on to recapture a share of the local market.

Hit by declining market share following the advent of mobile money services, the two operators have had to change strategy as they move to defend their core business.

“If it’s a remittance transaction, we want to touch it, whether online, by phone or at one of our global agent locations. There will be more opportunities ahead for mobile transfers and more transfers direct to cards,” said Thomas Christophersen, MoneyGram’s head of new product and channel development.

According to data from Financial Service Deepening (FSD), traditional money transfer operators have lost significant market share since the advent of mobile money services such as M-Pesa and Zap.

Their market share in Kenya has fallen to just three per cent of the total transfer market, down from a tenth of the total transfers market in 2007.

FSD says that the proportion of people using the service stood at 17 per cent before mobile money transfer commenced, a figure that has dropped as the telecommunications firms continue to eat into a larger share of the money transfer market.

In 2009 MoneyGram moved to double its agent locations in Kenya while Western Union implemented a lower tariff structure as they both attempted to fend off rising competition from mobile operators by adding PostBank’s branches to its agent network.

Many users cite the high cost of transferring money using operators such as MoneyGram and Western Union as a barrier to access, preferring the lower rates offered by mobile service providers.

World Bank estimates indicate that reducing remittance commission charges by just two to five per cent could increase the flow of formal remittances by 50-70 per cent, which would boost local economies.

Reducing the cost of sending each individual remittance encourages the delivery of lower value remittances, says the World Bank, at values far less than today’s average transfer of $200.

Previous data from Safaricom and Zain indicate that most Kenyans who use the service typically send smaller amounts, ranging between Sh1,000 and Sh2,500 at an average cost of Sh55.

In December, MoneyGram joined forces with SMART Communications, to kick off the pilot phase of its MoneyGram mobile money transfer service that allows delivery funds from any MoneyGram agent location direct to any SMART Money account.

For its part, Western Union has formed partnerships with mobile firms aimed at defending its share of the international remittances market, said to be worth US$300 billion.

The two operators will have to fight off a growing number of mobile service providers who have found that offering financial services through mobile handsets can add to the attractiveness of mobile money services, and help to retain customers to networks.

Rohit Bhatia, CEO of Seamless, a Swedish software company specialized in solutions for Mobile Money, prepaid e-Top Up, and Value Added Services, says the lack of basic services like banking and fixed internet, high growth markets will use the mobile phone as the main service enabler, especially for functional services like remittances, purchases and payments.

“Our research shows a major interest for such functional services in emerging markets, and this will drive innovation. These low ARPU (average revenue per user) markets’ and low income segments will adopt new functional services faster than the global average.

MNOs (mobile network operators) that recognize mobile money as a growth potential and a differentiator will emerge winners,” said Mr. Bhatia.

Players in the financial sector and mobile industry view mobile money as a fast, easy and new way for the un-banked to carry out their everyday money transactions.

“If MNOs can leverage existing airtime distribution networks, keep their proposition to stakeholders simple and yet innovative, expand slowly and steadily, simplify registration and subscription to the service, and above all, select a long-term business partner as their technology vendor, they are sure to be winners in the mobile money space,” said Mr Bhatia.