Around the world, and particularly in India, more and more people are using cell phones as costs fall.
Until now, mChek’s payment software has had fairly limited applications; its 500,000 registered users employ it mainly to top up prepaid accounts with Airtel, India’s dominant mobile-phone company. (Most users are in India, but some are in Sri Lanka, the only other country where mChek now operates.) But in theory, the technology could be used for any financial transaction; entering a PIN and making a few clicks on the keypad shifts money from one place to another.
When I met with mChek CEO Sanjay Swamy in his third-floor office suite, overlooking a thoroughfare crawling with cars, motorcycles, and yellow motorized rickshaws, he was enthusiastic about the prospect that mChek could bring mobile banking to the masses. When Indians sign up for their first cell phones–a process that involves identity verification in a country that has no counterpart to the U.S. Social Security number–they could open a bank account simultaneously. Considering that Indians are signing up for 16 million new accounts monthly (the net increase is smaller because some accounts expire), “that’s a half-million accounts per day, or about six accounts per second,” Swamy told me. “By the time I finish this sentence, we lose the opportunity to bank a hundred people! That’s how stunning the opportunity is. If they are sophisticated enough to learn how to use a cell phone, chances are they are sophisticated enough to use it for other applications.” India’s regulations, unlike those of some other countries, do not allow telecom companies to enroll people in bank accounts; only banks and nongovernmental organizations, including microfinance institutions like Grameen Koota, can do that. So for now, mChek hopes to form partnerships with such organizations.
To get some sense of the potential benefits for the Indian economy, consider just one type of transfer: the payment of phone bills themselves. Today, most Indian cell-phone users pay for service in advance, in cash; the average monthly expenditure is about 250 rupees. If only 10 percent of India’s 305 million mobile-phone subscribers opened bank accounts and started paying just these bills electronically, more than 7,600 rupees, or $160 million, would exit the cash economy and enter the banking system every month.
And to grasp how ordinary people could benefit, consider the life of the average farmer in the Bangalore area. Typically, a farmer spends hours trekking into the city for a 4:00 a.m. auction to sell his goods. The auction concludes by 6:00 a.m., after which the farmer takes an IOU to a bank, waits for it to open, and collects his money. Then he returns home, risking theft on the way. “We looked at the model and said, What if the retailer could use mChek to pay farmers electronically, and the farmer would receive notification on his cell phone?” Swamy says. The company conducted a pilot project with Citibank and a Bangalore retailer that buys fresh produce; they learned that 85 percent of the farmers attending the auction already owned cell phones. And some reported that if they could accept payment electronically, not only would they save hours queuing at banks, but they might skip the journey altogether, sending a son or a hired laborer in their place.