Philippine Rural Banking Goes Mobile with GCASH
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Merlita Werlan, a client of Philippine rural bank Bangko Kabayan for three years now, started using the Text-A-Withdrawal service shortly after its launch in June 2007. Merlita, who sells mobile phone handsets and accessories at her stall in the local market, beams when asked about the new service, “With just one text message, I can withdraw and use my cash – I don’t need to travel to the bank branch to make withdrawals.” Before Text-A-Withdrawal, Merlita would travel to Bangko Kabayan’s Calaca branch, a town fifteen minutes away from her home in Balayan, and wait for another half-hour to complete her transaction. Merlita’s story sums up the value proposition of mobile phone banking for clients: anytime, anywhere, at less cost.
Bangko Kabayan is one of the first rural banks to offer the Text-A-Withdrawal service, which was approved for rollout by the Philippine Central Bank in June 2007. Text-A-Withdrawal allows registered rural bank depositors to withdraw their funds remotely, in effect creating hand-held automated teller machines (ATMs). It works like this:
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Using the menu on their mobile phone, depositors send debit instructions to their bank. The bank branch then sends the corresponding value – in the form of mobile money - directly to their mobile phone
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The depositor can immediately use this money to pay bills, buy goods, send mobile money to relatives and friends, convert to prepaid airtime, or pay their suppliers.
GCASH creates virtual mobile wallets
Text-A-Withdrawal is one of several new mobile phone banking services available for rural banks in the Philippines. The services use GCash, the mobile money platform of Philippine telecommunications company Globe Telecom. Launched in 2004, GCASH turns mobile phones into “virtual mobile wallets.”
With GCASH, users can buy or “cash in” GCASH credits (converting cash to GCASH), or they can “cash out” their GCASH credits (converting GCASH to cash). GCASH can be converted not only to cash, but also to call or text credits, transferred to other people’s mobile wallets phone-to-phone, used to pay for goods, services, and bills, and sent as remittances. There are over 1,800 authorized cash-in/cash-out outlets throughout the Philippines.
The emergence of a microfinance service delivery innovation
In early 2003, with the advent of electronic loading of airtime credits and the rapid expansion in the number of microentrepreneurs owning mobile phones, the MABS Program conceptualized a plan to offer microfinance services using mobile phones to disburse loans and receive loan payments remotely. Shortly after GCASH was launched, they approached Globe’s subsidiary G-Xchange Inc. (GXI) with their idea of using the GCASH platform to facilitate micro-loan payments. MABS and the Rural Bankers Association of the Philippines (RBAP) finally entered into an agreement with GXI and developed new mobile banking services for rural banks and their clients.
Hurdles in developing rural mobile phone banking
As these mobile banking services were developed, several challenges came up along the way:
Regulatory approval for banks: The Central Bank required rural banks to gain its approval in order to offer mobile phone banking services to their clients. After lengthy discussions, the Central Bank authorized RBAP to screen and recommend the list of banks interested in offering the approved mobile phone banking applications. There are now 364 accredited rural bank branches that offer the MABS-designed mobile phone banking services.
Regulatory approval for GXI: As a telcom, GXI is not currently regulated by the Central Bank. However, it does provide a system through which money flows. To deal with the perceived risk around this unregulated cash flow, GXI submits reports regularly confirming that all mobile money is fully backed peso per peso in a bank account.
Security concerns: When first developed, the GCASH platform was only text-based and the m-pin (the user’s password) was stored on the phone. However, the Central Bank required that the m-pin be masked (****) in order to comply with regulations governing electronic banking transactions. To accomplish this, GXI agreed to develop a new menu-based platform that allowed for the m-pin to be masked and this improved the security of transactions since the sent messages were not stored on the phone. This development facilitated the approval for deposit and withdrawal transactions since simple instructions could be added in an optional message field at the end of the menu to facilitate secure financial transactions.
Coordinating timing of roll-out: In the initial phases of rolling out the mobile phone banking services, coordinating the timing between the agents and the customers proved to be a little tricky. A sufficient number of both customers and agents needed to be activated and ready to begin using the service at the same time. After a few fits and starts – in which registered cash-in businesses stopped offering the service because of not enough clients, or clients lost interest because of not enough conveniently located cash-in outlets – the program found its stride. Now, with the recent rollout of the Text-A-Withdrawal service, banks can identify depositors who are located near borrowers and then time the roll-out of services to other clients to ensure that there are enough convenient sources of GCash.
An array of "Text-A-" Services
Growing fast
In 2006, rural banks processed 43,000 transactions totaling 132 million pesos (US$2.8Mln). This number has already more than doubled in 2007. From January to August 2007, 87,900 transactions were processed, totaling 356 million pesos (US$7.7Mln).
Though there is not yet an accurate count of the total number of rural bank clients using these services, there are over 2,500 emloyees from the banks and other local companies who now receive their salaries via the Text-A-Sweldo service
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With most of the above challenges addressed, the use of mobile-phone banking is growing fast and represents the latest step forward in expanding access to financial services in the Philippines. This initiative has developed the following mobile phone banking applications:
Like Merlita, merchants and business owners in the community are also seeing the benefits of mobile phone banking and are now taking advantage of this new platform to accept mobile payments from their customers. Chicken King, a fast food restaurant in the southern Philippine city of Iligan, offers the Text-A-Payment service via GCASH as payment for food orders. Sales can be easily deposited at the end of the day, since the restaurant has an account with participating bank 1st Valley Bank.
On the horizon
Rural banks are currently planning an initiative to significantly expand the use of mobile phone banking applications and mobile commerce solutions to more microentrepreneurs including tricycle drivers, sari-sari store (variety store) owners, and carinderia (small restaurant) operators. The banks expect to register 8,000 - 10,000 clients per month once this effort gets underway.
Ultimately, the widespread use and acceptance of mobile transactions will benefit the lower-income segments, including those previously un-banked. This will also open up the opportunity for small shop owners to accept mobile payments without the need of going through a lengthy accreditation process, deployment of a point of sale (POS) system, and for transaction fees that are substantially less than those charged by regular credit/debit card companies and commercial banks.
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