Many developing economies face significant challenges in extending financial services to consumers. Placing bank branches in remote and rural areas is often impractical and inefficient, and even the more populated cities also experience infrastructure challenges that impede the distribution of financial services. A culture reliant on hard currency and distrust among certain customer segments of transacting through financial institutions further compound the challenges.
With the almost universal adoption of mobile phones, emerging-market financial institutions are excited about the potential for mobile banking and payments to boost their customer base.
Mobile payments and a move towards more electronic financial services are also high on the agenda for the governments of many developing nations. The economic benefits of transitioning away from cash are many, hence the leaders in these countries are keen to encourage change that will help them increase the standard of living for their people and support a more transparent economy that appeals to the global investment community. However, as the move towards electronic payments gains momentum, financial institutions face new consumer demands, new disruptive entrants (largely non-banks) and regulatory requirements that impact how they serve their target customer segments. To remain at the centre of the financial services ecosystem, it is essential that banks adopt innovative market strategies. Fiserv’s experience with ACLEDA Bank plc in Cambodia is a great example of this.
Cambodia is one of the world’s fastest growing economies, with a forecast real gross domestic product (GDP) growth rate of 7.7 per cent to 2017. The country is developing so fast that it has not had time to create an extensive financial services infrastructure. Currently 85 per cent of Cambodians do not have a bank account. Consumers and businesses find it difficult to borrow funds due to lack of credit history, and businesses are restricted to in-person, cash sales, which limits their ability to grow.
Remittances from migrant workers to their families are also difficult and costly to send. The challenges are numerous, and the Cambodian government and key Cambodian institutions highlight the lack of banking infrastructure as one of the nation’s most pressing challenges.
Cambodia’s mobile-phone infrastructure has the potential to extend the reach of basic financial services. Mobile usage is over 85 per cent, and smartphone market penetration is 20 per cent and rising fast. Mobile penetration is common in rural areas where it might not be practical to operate a bank branch. With the right technology and processes, any mobile phone can be turned into a virtual bank branch (and every phone number into a bank account number).
Cambodia’s largest bank, ACLEDA, saw the potential for mobile phones to enable a new distribution model for financial services to individuals without a banking relationship, as well as their existing customers, and partnered with Fiserv to bring a full range of banking services to any Cambodian with a mobile phone.
Branded as ACLEDA Unity, the highly acclaimed project launched in 2012 included the implementation of Mobiliti Reach from Fiserv, enabling consumers to execute a remarkable range of banking transactions, including person-to-person, merchant and biller payments via a mobile account.
Customers can use their phone to make cardless cash ATM withdrawals, pay bills, check their balance, and request notifications and alerts. Cambodians now have access to an account through which they can perform common banking transactions and make payments to people and businesses alike without having to visit in person. They also have access to a secure account in which they can save money.
With the almost universal adoption of mobile phones, emerging-market financial institutions are excited about the potential for mobile banking and payments to boost their customer base
Utilising the mobile channel has allowed ACLEDA to serve far more consumers than the bank could have with a branch-centric approach.
“Our experience in other nations suggests that when people open a bank account for the first time they are a little suspicious,” says Sunil Sachdev, managing director, international payments, Fiserv. “We see people withdrawing their entire cash balance the moment it is paid in by their employer or the government and storing it under their mattress.
“It takes a while for them to understand the benefits of banking, especially when the financial payments ecosystem is not well developed. But with a mobile account there is an existing degree of familiarity and trust. People already do a lot with their mobile and it is not that great a leap to add financial services to that list, which is why the mobile approach is so desirable.”
The wide range of mobile phones used in Cambodia was also a tricky issue. The elite and growing middle class use smartphones, but there is no shortage of less versatile feature phones.
“It is not uncommon for banks to have more than one mobile-banking solution to cater to a smartphone and feature-phone customer segment,” says Mr Sachdev. “This becomes problematic when the bank needs to manage multiple product roadmaps and has to transition customers when they upgrade phones. To avoid this problem, banks should enable a single mobile financial services platform that is able to support both the smartphone and feature-phone user like we did with ACLEDA”.
ACLEDA Unity, among other innovations and investments from the bank, has had a profound impact for ACLEDA Bank plc. In the last year, assets have grown 28 per cent to $1.91 billion, deposits are up 27 per cent to $1.46 billion and loans have leapt by 24 per cent to $1.23 billion. Net profits after tax are up 29 per cent to $64 million.
“Extending financial services to so many Cambodians, who previously did not have bank accounts, has so many benefits,” says Mr Sachdev. “Before ACLEDA Unity was introduced, the only way for millions of people to pay bills was to queue in a long line using cash. Now, they can pay in seconds using their phone.”
Fiserv is a leading global provider of information management and electronic commerce systems for the financial services industry. Ranked number one on the FinTech100 international listing of top technology providers to the financial services industry for six of the last eight years, Fiserv drives innovation that transforms experiences for more than 16,000 clients in over 80 countries worldwide, including banks, central banks, national payments processors, billers, mortgage lenders and leasing companies, brokerage and investment firms, and other business clients.