A current goal of many financial institutions is to reduce transactional costs due to existing paper-based methods (checks, paper giros, paper money orders, etc.) while also providing target segments of the banking population with electronic alternatives that are low-cost and also deliver improved services to the consumer base.

In other areas where the majority of the population is unbanked and operates from a pure cash economy, there are significant benefits for banks, merchants and consumers to put in place low-risk electronic payments systems that do not require new investment in POS hardware, authorization networks, and card issuance.

A solution that meets the needs of both situations is to put in place a mobile payments service that is funded from a specially designed current account or DDA account, and uses IVR and SMS technologies to authorize and notify the payments. The ubiquity of mobile phones and mobile networks - established even in developing countries - provides the infrastructure.

Developing Countries
In many countries the overwhelming volume of payments transactions are conducted using cash. Credit cards and even debit cards are unknown to most of the population, even those with regular incomes and bank accounts.

The result is huge inefficiencies and inconveniences for both the consumer and the merchant or other payee. Utilities that normally get payment through the post office or in-person payments are prime examples.

The opportunity is to establish a system where consumers can make payments out of their current accounts by entering the phone number or other payment code of the recipient. The consumer is spared the time and hassle of accumulating cash and queuing to pay, and the recipient saves the expense of handling cash.

 Next page