Breaking in the Electronic Wallet
By Anne Torres, Thu May 17 00:00:00 GMT 2001

Time to throw out the leather for a cell phone? Mobile banking makes inroads in the Philippines.

The Philippines is dubbed as 'the world’s texting capital' with as many as 75 million text messages sent out everyday. This value-added feature - used as a marketing strategy by Globe Telecom to differentiate itself in the market in 1997 - caught on. Now, they have turned to mobile banking to edge out the competition.

"The most challenging part was convincing the banks to take on this service," says James Ileto of Globe Telecom (Globe) who was part of the team who helped set-up the system. "Banks have the ATM, phone-banking and Internet-banking services already. They felt the market was not ready for this new technology."

The banks also did not believe that you can move all the functions of an ATM into the cellular phone. The incessant security concern was equally affecting the reluctance to adapt mobile banking.

A big stumbling block for the fast push of mobile banking is the Bangko Sentral ng Pilipinas (BSP), the country’s Central Bank. Its regulatory law prevents banks from engaging in any agreements that may endanger its security by opening its database to suppliers from an outside source.

Even though there was low response for the phone-banking and Internet-banking services, Globe was confident that the market would adopt mobile banking just like it did seven years ago when it introduced text messaging.

"We pushed the new technology to the market instead of just providing whatever the market dictates," Ileto says.

The will provides the way

Globe took on an aggressive stance to convince the banks that mobile banking was the way to go. The banks already had an existing interface for ATM, phone-banking and Internet-banking but did not have any interface for cell phones. Globe told them: we’ll take care of it.

Globe said it would pay for the application and the server. The bank need only provide the lease line and the routers. Globe invested US$1.5 million to set up its own system plus an additional US$100,000 for hardware and US$100,000 for software for each bank it linked up with. The interface had to be put within the bank’s premises in accordance with BSP regulations.

This was a win-win scenario for the banks. From the bank’s point-of-view, this added service would differentiate them from other banks. Two, this would reduce the time customers spend using more expensive ways, at least from the bank’s perspective, to get in touch with the bank.

Take for example a transaction that a customer performs in a bank: a balance inquiry. The old way would be to put up a branch to cater to its clients. This entails investment in infrastructure, salaries for employees, etc.

Another alternative is by putting up a call center. It is less expensive than putting up a bank branch but costly nonetheless.

Banking by cell phone, by far, is the cheapest option. According to an article by the Banking Administration Institute, a transaction done by cell phone costs the bank less than US$0.08 compared with US$0.60 for a transaction via call center.

Globe is now linked-up with five banks: Equitable-PCIBank, Standard Chartered Bank, TA Bank, Development Bank of Singapore and Bank of the Philippine Islands. The banks that took a risk got a freebie; banks that eventually would like to use Globe’s mobile banking service would now have to pay Globe to have the set-up installed.

The little engine that could

After less than two years in the market, mobile banking is slowly picking up. According to Ileto, in the beginning, Globe was averaging 5,000 transactions a month. Now, they are targeting 50,000 to 100,000 transactions.

"Eighty percent of the transactions were balance inquiries," Ileto says. "The rest were transactions that involved loading of pre-paid cell phone cards and mobile ticketing."

It was the mobile ticketing feature that pushed up usage. When the Broadway play 'Ms. Saigon' was brought to Manila last year, it was very hard to get tickets. A fast and sure way to get a seat was by buying a ticket by cell phone.

The user was presented a menu on seat preference and whether to debit his or her savings or current account. All the user had to do was present the acknowledging text message sent on his phone or give his cell phone number to claim his ticket at the theater.

Smart Communications, Globe’s top competitor, on the other hand, averages one transaction a day per user. The new technology is being used to check the old, according to Alex Ibasco, head of Smart Communications’ mobile commerce business development.

"Cell phones have become a security blanket," says Ibasco. "It has become the device of choice for validating transactions."

He says even though Filipinos still have a penchant for over-the-counter transactions, say, to deposit money into a checking account, the following day they go to an ATM machine to check if the money was credited to their account. Later in the day, they would check again via cell phone.

It’s a lifestyle thing

Smart is marketing mobile banking as a lifestyle product. It’s all about freedom that enables the user to pursue other interests without having to worry about errands.

Last year, Smart introduced 'SmartMoney,' a breakthrough system that won the 'Most Innovative Service' award from the World GSM Congress 2001 in Cannes.

SmartMoney competes with the wallet, not the bank. For example, a son needs to gas up the family car but does not have any money, good ol’ dad can instantly send money from his SmartMoney-equipped phone to his son’s, and the son can directly use his phone to pay for gas at the station.

Mobile banking transactions are charged just like text messages. It costs about US$0.05 per transaction. Most transactions are done via text message instead of WAP. Filipinos are more comfortable with texting and there are still few WAP-enabled phones that are affordable in the market.

To push the product, both Globe and Smart offered free SIM-card upgrades that allows mobile banking to line subscribers.

So, is it time to throw out your wallets and start warming up those thumbs? Most likely. Because just like the phenomenon of text messaging in the Philippines, it would only be a while before mobile banking becomes the next buzzword.

It's Mobile Money Week on TheFeature. Be sure to check back daily for original reports, interviews, analysis and discussion covering the future of mobile finance!

Anne Torres is a TV reporter for a newsmagazine in Manila, Philippines.