Availability of mobile financial service for labour migrants and their families


Arpine Karapetyan

12 October, 2013

Global expansion of mobile financial services

In the 21st century, the time of innovation and information technologies, implementation of many traditional functions is facilitated through mobiles, tablets and other devices. Mobiles and similar communication devices are used not only for entertainment, but also for business, and other serious and responsible tasks, such as online financial transactions, health insurance and provision of a number of other financial services.

The number of mobile banking users grows also when relevant service providers take the initiative for development. One of the fundamental prerequisites for successful promotion and expansion of such services is the trust of the customers. A key factor for building up this trust is active cooperation of all the parties involved in different segments of service provision. Mobile banking implies cooperation between mobile operators and financial institutions, and the pace of expansion of mobile banking services and subsequently, increase in the number of customers certainly depends on this cooperation. Such cooperation will enable both parties to ensure provision of a new service, which otherwise, would be practically impossible.

Finextra, a leading independent newswire and information source for the worldwide financial technology community) reports that mobile operators and device manufacturers have given banks unprecedented access to their customers at all times and in all places. However, technology is not enough, and to be competitive, financial institutions should implement targeted marketing and reward programs, because loyalty will be to the company that provides customers with the best value in the form of savings and information. 

Demand for mobile banking services

The great number of mobile banking users in the world shows that people prefer to deal with their banking issues through a mobile phone instead of queuing and wasting their time.  A mobile phone application gives customers easy access to their bank accounts through their cell phones. They can hit one button and immediately get to the login screen. This is a simpler version of the online banking website, and includes just the basics that a customer might want. Depending on the country, banks do not charge extra for the service.

Findings from a survey of over 13,600 consumers on quality of services have shown that SMS text alerts remain the most popular way for customers to bank using their mobiles in most countries. The findings have revealed that the use of mobile banking 'apps' is also rapidly growing - fast overtaking many other banking channels. Indeed, according to Forrester Research (NASDAQ: FORR) in both developed and developing economies, mobile banking will become the main way perhaps most customers will manage their money.

Despite mobile banking being a simple and easy mode of operation, it has disadvantages as well. Like many other innovations or new services, introduction of online financial services also was accompanied with shortcomings, which are being addressed in process. The main disadvantages of mobile banking are the following:

·         Mobile banking users are at risk of receiving fake SMS messages and scams;

·         Regular users of mobile banking over time can collect significant charges for those services from their banks;

·         The loss of a person’s mobile device often means that criminals can gain access to your mobile banking PIN and other sensitive information.

To address the risks of wireless payment technologies, ICT security experts, for instance, have developed an app that makes it possible to extract information on any credit card by simply waving a phone over a leather wallet. Guardian Analytics, a Silicon Valley startup, developed software for banks that analyzes a consumer's past transaction behavior - whether she/he made small or large purchases and how often, in order to determine if her/his phone has been hijacked. There are also security tools that can find out a mobile user's location and verify that she/he is using her/his usual wireless device.

The issue of security cannot and should not be neglected. Otherwise, the losses can be in millions of dollars. Fortunately, modern mobile devices are more suitable for mobile banking. It means that one’s mobile banking “identity” is tied to a specific phone, making security compromises much less relevant.

Indeed, customers can mitigate fraud in real time: SMS and push messages for smartphones allow consumers to help banks monitor for fraudulent transactions as they happen. From this point, new smartphones are already released to leverage this sort of capability. The newest version of the Android mobile operating system uses facial recognition technology to unlock a user’s phone and Apple is setting the stage for voice recognition capabilities.

A lot is being done for the security of the customers. Sometimes customers are granted a chance to regulate the security system themselves. Banks that are using predictive analytics to offer new products and services to customers on mobile channels find that customers do not always accept these smart recommendations. Add-on banking products and services, like, paperless statements, automatic bill pay, additional credit, new cards, new accounts, and investment products can reduce operational costs for the bank and generate new revenue.

Mobile banking plays an essential role especially for people living abroad, as they get a chance to send mobile remittances to their families, friends or make other transactions and do this in an easy and quick way. Globally, migrants support their countries of origin as well, contributing to their economic growth though circulation of their remittances in the local banks. This is a triple win solution for the migrant, his/her family, country of destination and country of origin.

Finally, with more than 215 million people living outside their countries of origin, remittances play a major role in the economic development, GDP and poverty alleviation efforts of many countries. An estimated $350 million in remittances was received by developing countries in 2011, according to the World Bank, which is three times the amount of official development assistance and exceed foreign direct investment in many countries. 

Mobile Banking Services in Europe and Central Asia

The business case for mobile banking in Eastern Europe and Central Asia differs from the case in other parts of the world where mobile banking has exceeded, such as urban Africa and South Asia – where high-density, high-volume populations and the large number of rural communities allow for an efficient operating model. There are a number of examples of commercial and development-led mobile banking initiatives throughout the region. For instance, Russia has one of the largest mobile banking services in the world with more than 100,000 automated payment terminals, with many major banks, such as CitiBank and Russian Standard Bank, and mobile companies, offering mobile banking services.  Russia is following the global trends in the development of mobile banking. This market successfully competes with other methods of payment services, including online (Internet) banking and payment terminals, which also have an influence on the dynamics of mobile banking development.

The amount of payments made through mobile banking in 2011 amounted to 5.8 billion, the largest share of turnover of payments through mobile banking was taken by money transfers (30%). In 2012, the turnover of payments through mobile banking increased by 39% and amounted to 8.1 billion rubles.

Handy Bank and Gazprombank are the ones to provide the most functional applications in mobile banking and payment system. On the list of applications to provide online banking services, only the above-mentioned provide services free of charge. Among those to over diverse application platforms, the leader is Alfa-Bank. Its applications are available for all popular platforms, including Windows Phone.

In Georgia, the International Fund for Agricultural Development (IFAD) in cooperation with the International Organization of Migration (IOM) attempts to establish a favorable regulatory and policy environment for remittance transfers through mobile banking, lowering the transaction cost in particular for transfers to rural areas.

Romania also implements an active policy for the development of mobile banking. A number of commercial banks and microfinance institutions have begun offering mobile banking services over the recent five years. Other countries in the region having witnessed the progress in their neighboring countries have shown increasing interest in creating an enabling environment for mobile banking.

There are certainly a number of challenges to offering remittances through mobile banking platforms. Regardless of the fact, the practice is expanding. According to a study by Juniper Research, $55 billion in international remittances will be transferred via mobile devices by 2016. Offering remittance services through mobile banking in ECA countries provides an opportunity to include the large populations of rural communities in active financial transactions.

Development and implementation of mobile banking services in Armenia

Studying international practice of mobile banking makes it possible to outline the potential development of mobile banking services in Armenia. The Armenian reality is not so familiar with the services offered in Europe or Central Asia. In case of mobile operators, only VivaCell-MTS provides such services, called MobiDram. To become a MobiDram user you should simply register with MobiDram, and deposit some money on your account through one of the MobiDram branches, your ArCa virtual card, or commercial banks operating on the territory of Armenia (incidentally you can easily withdraw the funds available on your account). According to the provider, MobiDram was launched in November 2011, and there are yet no statistical data on the customers.

Besides the fact that the Armenian mobile market is not well familiar with the above-mentioned applications, there is another reason why such financial services are not provided in Armenia. As the representative of one of the mobile operators mentioned, the development of mobile banking in Armenia is strongly linked to the opportunities the Armenian legislation provides. For instance, MobiDram is registered as a subsidiary of VivaCell-MTS, and it operates separately from VivaCell services. In the context of Armenian legislation, mobile operators have many reasons to be reluctant to introduce mobile banking, since the legislation does not offer any simplified procedures for developing such service packages.

A survey among several banks, namely VTB-Armenia, UniBank, ACBA Agricole Bank, AmeriaBank and HSBC Armenia, has shown that currently only AmeriaBank is providing such services. The services it offers are available for customers worldwide through only for users of iPhone and iOS. The system enables them to view current account balances, account statements at any time, loan agreements and payment schedules, deposit agreements, exchange rates, make money transfers within and outside Armenia, carry out currency exchange, loan payments, and utility payments, send and receive free format messages.

Still, in Armenia there are many prerequisites that will contribute to the development and expansion of mobile banking services. One such factor is large migrations flows and the significant volume of remittances sent by labour migrants to their families in Armenia.  Thus, mobile banking can serve as a useful bridge for sending money home in a fast and secure way. Unfortunately, here in Armenia, the number of service providers is limited which results in a low level of demand for the mentioned services. In addition, promotion and advertisement of such products are very limited in comparison with other products of the same company.

Another challenge is that the use of Android or iOS-based mobile phones is also limited. In Armenia, a large number of people do not use or cannot afford to use Android or iOS-based phones or other devices. Thus, the probability of using mobile banking is low, and this reduces the possibility of actually using mobile services. It should also be mentioned that the level of awareness and trust regarding banking services is rather low in Armenia. For instance, in developed countries 80% of population generally prefers to use plastic cards and only 20% would like to get their money in cash. In Armenia, it is the opposite.

Indeed, the market of mobile banking services generally lags behind, comparing with other countries in the region. Many banks and mobile operators are making their first steps in this regard. Currently, there are new initiatives and projects to introduce mobile banking services. However, the demand for such services is yet insufficient.

Opportunities for the development of mobile banking are directly related to labor migration flows. Large numbers of migrant workers, who earn money for their families increasingly get more and more competitive needs, and hereby, mobile banking services can provide the for these very needs: a low price service, fast transactions any time without the necessity of internet connection, transfers and payments, monitoring and self-management of their own accounts, etc. In this case, the development of mobile banking services and effective cooperation of banks, mobile operators and other financial institutions becomes inevitable. 

Still, before eliminating the technical barriers and challenges impeding progressive development of mobile banking services, there is a need for establishing a conducive environment, to break the existing stereotypes, prove the credibility of the system and build up trust.


1.      http://www.e-wisdom.com/news/banking/money-market/mobile-banking-popularity-surges-110210065/

2.      http://www.finextra.com/News/FullStory.aspx?newsitemid=24289

3.      http://www.thinkmoney.co.uk/news-advice/mobile-banking-how-are-people-using-it-0-3929-0.htm

4.      http://mauconline.net/2013/03/07/advantages-and-disadvantages-of-mobile-banking/

5.      http://www.sfgate.com/business/article/Mobile-payments-open-new-door-to-thieves-3925013.php?goback=%2Egde_123922_member_173241720#photo-3238498

6.      http://www.businessweek.com/debateroom/archives/2012/02/mobile_banking_is_more_secure_than_online_banking.html

7.      http://www.personetics.com/news/20120917.html

8.      http://www.bankfutura.com/2012/09/a-list-of-mobile-payment-technologies/

9.      http://bankingbeyondbranches.com/2012/01/23/are-remittances-through-mobile-banking-the-key-to-financial-inclusion-in-eca/

10.  http://mts.am/en/mobidram/what-is-mobidram

11.  http://www.ameriabank.am/content.aspx?id=online+ameriabank+retail&table=productlistmenu&page=99&lang=28

12.  http://www.paymentsjournal.com/Content/Blogs/Mercator_Blog/16605/


13.  http://www.json.ru/en/poleznye_materialy/free_market_watches/analytics/rossijskij_rynok_mobilnyh_operatorskih_platezhej_mobilnogo_i_sms-bankinga/



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