(Almost) Instant Cash Transfer with Mobile Phones
By Mark Frauenfelder, Mon Aug 09 18:30:00 GMT 2004

A mobile-enhanced cash-transfer system introduced last week in the Philippines is the latest example of the increasingly fluid nature of money.

Money always has, and always will be, an abstract concept. Currency and banknotes aren’t money -- they’re simply certificates proving that the bearer has a specified sum of money. They provide a convenient means to exchange money between two parties.

But what happens when a person has to transfer money to another person far away? Then it becomes more complicated. Take the case of the millions of Filipinos who work overseas and want to send money to their families back home. Until recently, they had to go to a bank and pay them to handle the transaction. Thanks to the red tape built into the process, it can take up to three days for the money to be credited into the recipient’s account.

But last week Philippines' largest mobile phone company, Smart Communications, launched a cash transfer service that uses text messaging to speed up the process. Overseas workers still have to go to the bank to initiate the transfer, but the recipients in the Philippines get a text message on their phone notifying them that they have immediate access to the cash, which is stored in their phone’s "electronic wallet," a feature included in all 16 million Smart Communications subscribers’ accounts. The recipients can then use their Smart Money debit cards to withdraw the cash from ATMs.

An International Herald Tribune article on this story has some interesting details about why this could be a very successful service: Eight million Filipinos work overseas and send $7.6 billion dollars home every year. The average income of a Filipino is under $1000 a year. Nevertheless, 30 percent of the country’s 84 million residents have a mobile phone. Most people use SMS because it is much cheaper than making voice calls. All this adds up to a potentially huge income opportunity for Smart Communications, which is charging about 4.5 cents per transaction.

The next step, of course, is to remove the trip to the bank from the process. That probably won’t happen until concerns about fraud and money laundering are allayed. If and when this does happen, it’ll be just one more conduit through which money will flow, like an unstoppable force of nature.