No Bank Nearby? No Problem. Cell-Phone Banking Booms In Developing World

From the Philippines to Mexico, things like extreme poverty, topography and security problems often make traditional banking a serious challenge. Global cell phone penetration, however, has opened up a new option: mobile banking.

A rural farmer in the Philippines (kiwanja)
A rural farmer in the Philippines (kiwanja)
David Santa Cruz

MEXICO CITYIn the Philippines, a trip to the bank can sometimes take two days – and might require a boat to get there. Such is life in a country that's made up of some 7,000 islands, not all of which have their own bank branches.

Those who are not willing or able to take an overnight ferry just to pay a telephone or electricity bill can turn instead to a "collector," someone who makes it his business to go from island to island collecting bills and the money to pay them – all for a commission, of course.

In recent years, however, a third option has emerged: mobile banking. Since 2006, the dominant mobile phone company in the country have been converting cell phones into payment platforms, for the cost of a text message and without the necessity of opening a bank account. It could mean an end to "collectors."

Filipinos make some 150 million mobile phone banking transactions annually, including money transfers, service payments and subsidy payments. There's huge room for growth as well – particularly in rural areas. About 40% of the country's municipalities are without a bank. But almost all Filipinos have a cell phone.

"Electronic money is an opportunity to include a large percentage of the population in a cost-effective way," says Nestor Espenilla, deputy director of the Filipino Central Bank.

Safe, cheap and easy

Across the Pacific, Mexico is now thinking about doing something similar. Mexico doesn't have the same geographical challenges that make banking so difficult in the Philippines. But its citizens do have to deal with serious security problems, particularly assaults by gang members.

Proponents of the technology insist that mobile banking is neither complicated nor risky. Putting money in the account is as easy as putting money on a pre-paid cell phone: the transfers are made by text message and don't require a bank account. The deposits are made to a specific telephone number, which reduces chances of account mix-ups. All of this is possible because modern cell-phone chips are identical to the chips used in credit cards.

"Each user has an account with the mobile phone operator, but all of the money is deposited in a bank account," explains the Spanish consultant Ignacio Mas, one of the promoters of worldwide mobile banking.

"The bank issues one account, and the mobile phone operator divides that account into 15 million accounts. In the end, you have the same protections as if you had a bank account, because investment is done with all of the same regulations as a regular bank account," he says.

Mobile banking, sometimes called SMS banking or M-banking, is also gaining ground in Africa. In Kenya, for example, annual GDP per capita is barely $1,600. Two thirds of the territory is arid, unemployment is around 40%, and half of the population lives below the poverty line. Traditional banking is out of the question. But mobile banking can and does work there, since about half of Kenya's population has a mobile phone. This past August, in fact, 16 million cell phones were used to pay for public services, representing about $1.2 billion, according to Kenya's Central Bank director, Njuguna Ndung'u.

"Mobile banking allows us to save about $3 per operation, and if we take into account that we have millions of operations every month, the savings are impressive," says Stephen Mwaura, the director of the National Payments System at the Kenyan Central Bank. "It's not only saving money, but also time and quality of life," he adds.

Like in the Philippines, Kenyans no longer have to travel long distances to take care of financial transactions. "The advantage with electronic money is that it costs the same to transfer one dollar as one thousand," says Ignacio Mas.

The retail distribution model

The Achilles heel of mobile banking continues to be cell phone connection and compatibility problems. With that in mind, many Latin American countries have adopted public policies with two goals: to regulate the industry and make sure it is cost effective; and to make sure that banks, and not just mobile phone companies, are involved in the effort.

"In Guatemala, the banks and the telephone companies have not wanted to launch any new products until there was clear regulation," says Ricardo Estrada, a regulation specialist in Guatemala's banking regulatory agency. Estrada's efforts for clear regulation were supported by a network of policymakers called the Alliance for Financial Inclusion (AFI).

In Mexico, the process began with the creation of banking partnerships, which allow individuals to do basic banking in any store, not just a bank. "The mobile phones aren't really the most important part. It's the ability to forge relationships with stores. If I don't have any way to convert cash into electronic money, then the system doesn't help me at all," says Mas.

According to the Spanish expert, one of the reasons that the mobile phone companies have progressed more than banks themselves is that they understand the retail distribution model better. "You have to have establishments with a large cash flow where people feel welcomed, and that is not always the case with banks," he says.

Read more from AméricaEconomía in Spanish

Photo - kiwanja

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7 Ways The Pandemic May Change The Airline Industry For Good

Will flying be greener? More comfortable? Less frequent? As the world eyes a post-COVID reality, we look at ways the airline industry has been changing through a pandemic that has devastated air travel.

Ready for (a different kind of) takeoff?

Carl-Johan Karlsson

It's hard to overstate the damage the pandemic has had on the airline industry, with global revenues dropping by 40% in 2020 and dozens of airlines around the world filing for bankruptcy. One moment last year when the gravity became particularly apparent was when Asian carriers (in countries with low COVID-19 rates) began offering "flights to nowhere" — starting and ending at the same airport as a way to earn some cash from would-be travelers who missed the in-flight experience.

More than a year later today, experts believe that air traffic won't return to normal levels until 2024.

But beyond the financial woes, the unprecedented slowdown in air travel may bring some silver linings as key aspects of the industry are bound to change once back in full spin, with some longer-term effects on aviation already emerging. Here are some major transformations to expect in the coming years:

Cleaner aviation fuel

The U.S. administration of President Joe Biden and the airline industry recently agreed to the ambitious goal of replacing all jet fuel with sustainable alternatives by 2050. Already in a decade, the U.S. aims to produce three billion gallons of sustainable fuel — about one-tenth of current total use — from waste, plants and other organic matter.

While greening the world's road transport has long been at the top of the climate agenda, aviation is not even included under the Paris Agreement. But with air travel responsible for roughly 12% of all CO2 emissions from transport, and stricter international regulation on the horizon, the industry is increasingly seeking sustainable alternatives to petroleum-based fuel.

Fees imposed on the airline industry should be funneled into a climate fund.

In Germany, state broadcaster Deutsche Welle reports that the world's first factory producing CO2-neutral kerosene recently started operations in the town of Wertle, in Lower Saxony. The plant, for which Lufthansa is set to become the pilot customer, will produce CO2-neutral kerosene through a circular production cycle incorporating sustainable and green energy sources and raw materials. Energy is supplied through wind turbines from the surrounding area, while the fuel's main ingredients are water and waste-generated CO2 coming from a nearby biogas plant.

Farther north, Norwegian Air Shuttle has recently submitted a recommendation to the government that fees imposed on the airline industry should be funneled into a climate fund aimed at developing cleaner aviation fuel, according to Norwegian news site E24. The airline also suggested that the government significantly reduce the tax burden on the industry over a longer period to allow airlines to recover from the pandemic.

Black-and-white photo of an ariplane shot from below flying across the sky and leaving condensation trails

High-flying ambitions for the sector

Joel & Jasmin Førestbird

Hydrogen and electrification

Some airline manufacturers are betting on hydrogen, with research suggesting that the abundant resource has the potential to match the flight distances and payload of a current fossil-fuel aircraft. If derived from renewable resources like sun and wind power, hydrogen — with an energy-density almost three times that of gasoline or diesel — could work as a fully sustainable aviation fuel that emits only water.

One example comes out of California, where fuel-cell specialist HyPoint has entered a partnership with Pennsylvania-based Piasecki Aircraft Corporation to manufacture 650-kilowatt hydrogen fuel cell systems for aircrafts. According to HyPoint, the system — scheduled for commercial availability product by 2025 — will have four times the energy density of existing lithium-ion batteries and double the specific power of existing hydrogen fuel-cell systems.

Meanwhile, Rolls-Royce is looking to smash the speed record of electrical flights with a newly designed 23-foot-long model. Christened the Spirit of Innovation, the small plane took off for the first time earlier this month and successfully managed a 15-minute long test flight. However, the company has announced plans to fly the machine faster than 300 mph (480 km/h) before the year is out, and also to sell similar propulsion systems to companies developing electrical air taxis or small commuter planes.

New aircraft designs

Airlines are also upgrading aircraft design to become more eco-friendly. Air France just received its first upgrade of a single-aisle, medium-haul aircraft in 33 years. Fleet director Nicolas Bertrand told French daily Les Echos that the new A220 — that will replace the old A320 model — will reduce operating costs by 10%, fuel consumption and CO2 emissions by 20% and noise footprint by 34%.

International first class will be very nearly a thing of the past.

The pandemic has also ushered in a new era of consumer demand where privacy and personal space is put above luxury. The retirement of older aircraft caused by COVID-19 means that international first class — already in steady decline over the last decades — will be very nearly a thing of the past. Instead, airplane manufacturers around the world (including Delta, China Eastern, JetBlue, British Airways and Shanghai Airlines) are betting on a new generation of super-business minisuites where passengers have a privacy door. The idea, which was introduced by Qatar Airways in 2017, is to offer more personal space than in regular business class but without the lavishness of first class.

Aerial view of Rome's Fiumicino airport

Aerial view of Rome's Fiumicino airport

Hygiene rankings  

Rome's Fiumicino Airport has become the first in the world to earn "the COVID-19 5-Star Airport Rating" from Skytrax, an international airline and airport review and ranking site, Italian daily La Repubblica reports. Skytrax, which publishes a yearly annual ranking of the world's best airports and issues the World Airport Awards, this year created a second list to specifically call out airports with the best health and hygiene standards.

Smoother check-in

​The pandemic has also accelerated the shift towards contactless traveling, with more airports harnessing the power of biometrics — such as facial recognition or fever screening — to reduce touchpoints and human contact. Similar technology can also be used to more efficiently scan physical objects, such as explosive detection. Ultimately, passengers will be able to "check-in" and go through a security screening anywhere at the airports, removing queues and bottlenecks.

Data privacy issues

​However, as pointed out in Canadian publication The Lawyer's Daily, increased use of AI and biometrics also means increased privacy concerns. For example, health and hygiene measures like digital vaccine passports also mean that airports can collect data on who has been vaccinated and the type of vaccine used.

Photo of planes at Auckland airport, New Zealand

Auckland Airport, New Zealand

Douglas Bagg

The billion-dollar question: Will we fly less?

At the end of the day, even with all these (mostly positive) changes that we've seen take shape over the past 18 months, the industry faces major uncertainty about whether air travel will ever return to the pre-COVID levels. Not only are people wary about being in crowded and closed airplanes, but the worth of long-distance business travel in particular is being questioned as many have seen that meetings can function remotely, via Zoom and other online apps.

Trying to forecast the future, experts point to the years following the 9/11 terrorist attacks as at least a partial blueprint for what a recovery might look like in the years ahead. Twenty years ago, as passenger enthusiasm for flying waned amid security fears following the attacks, airlines were forced to cancel flights and put planes into storage.

40% of Swedes intend to travel less

According to McKinsey, leisure trips and visits to family and friends rebounded faster than business flights, which took four years to return to pre-crisis levels in the UK. This time too, business travel is expected to lag, with the consulting firm estimating only 80% recovery of pre-pandemic levels by 2024.

But the COVID-19 crisis also came at a time when passengers were already rethinking their travel habits due to climate concerns, while worldwide lockdowns have ushered in a new era of remote working. In Sweden, a survey by the country's largest research company shows that 40% of the population intend to travel less even after the pandemic ends. Similarly in the UK, nearly 60% of adults said during the spring they intended to fly less after being vaccinated against COVID-19 — with climate change cited as a top reason for people wanting to reduce their number of flights, according to research by the University of Bristol.

At the same time, major companies are increasingly forced to face the music of the environmental movement, with several corporations rolling out climate targets over the last few years. Today, five of the 10 biggest buyers of corporate air travel in the US are technology companies: Amazon, IBM, Google, Apple and Microsoft, according to Taipei Times, all of which have set individual targets for environmental stewardship. As such, the era of flying across the Atlantic for a two-hour executive meeting is likely in its dying days.

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