In 2012, Pew Research conducted a study to determine consumers’ perceptions of the use of mobile devices for online money transfers and other monetary transactions, including in-store and online purchases.
The rise of online money transfers
65% of the respondents agreed that by 2020, most people would have embraced and fully adopted the use of smartphones for mobile transactions.
As at 2020, the GSMA Industry Report on Mobile Money indicated that there were about 1.21 billion registered mobile money users worldwide – double the rate that the GSMA earlier forecasted.
By 2023, the number had grown to 1.75 billion, and the global mobile money market was valued at $1.40 trillion, with international money transfers reaching $29 billion annually.
Clearly, the Pew Research respondents were right about the impact of mobile phones on money transfers.
So, how did mobile phones come to have this much influence on money transfers?
Rise of Mobile Phones in the Money Transfer Market
The history of mobile phones in money transfers can be traced back to December 2000.
Three inventors, Helen Shan-Shan, Terence Wing-Cheong and Charlie Qing Yang, filed the patent for a payment method using a mobile phone, making use of credit cards and debit cards.
The patent aimed to create a system that automatically processes and verifies a customer’s transaction while protecting the customer’s confidential details (including card number and signature) from the mobile payment merchant.
25 years later, this concept remains a fundamental aspect of the modern mobile transfers.
As mobile phones became increasingly available around the world, especially in the global south, the online money transfer market also grew exponentially.
Rapid technological advancements and advanced internet security also made online money transfers far more secure, faster, affordable and more convenient than ever imagined.
This led to less reliance on traditional over-the-counter money transfers, which are generally tedious, slow and time-consuming.
The continued use of mobile phones for money transfers led to the use of the term “mobile money transfers.”
Why Phones?
At the time Helen et al. submitted their patent, they envisioned that mobile phones would become ubiquitous and a very common and necessary part of everyday life.
That much is true today.
In a world of 8.1 billion people, there are 5.78 billion unique mobile phone users – about 71% of the global population.
The proliferation of mobile phones is based on versatility.
Besides the fact that mobile phones facilitate borderless communication and connectivity, they also provide great convenience.
You can practically complete most transactions with your phone.
There is basically less need to walk around with cash or coin-filled wallets, or your credit and debit cards. All the information and money you need to complete payments can be accessed through your phone.
- Forgot your wallet or card? You can simply pay with your phone.
- Need to send money locally or abroad? Why go to the bank when you can use your phone?
- Need to top up your phone or initiate an international mobile top-up for a loved one somewhere around the world? You can do that with your phone!
Mobile phones have proven to be indispensable for online money transactions, leading to a rise in the number of fintech companies relentlessly innovating and creating to redefine how we use our phones for mobile money transfers.
Mobile Money Transfer Channels
The wheel has been reinvented multiple times, and we have seen many ways we can use phones to complete transfers, including USSD codes and web services.
However, mobile money transfers are usually processed via two key channels:
- Mobile money transfer apps: Mobile applications specially designed to allow money transfers between users or from a user to a non-app user. Top mobile transfer apps, such as BOSS Money app, are readily available for iOS and Android devices.
- Digital Wallets: These are similar to mobile apps but can also be available as an online service, allowing users more accessibility options. Digital wallets, like Apple Pay and Google Pay, allow users to store money virtually or save their credit or debit card info within the platform for making contactless payments at the point of sale.
Mobile money transfer apps are more popular for online, local and international transfers as they integrate payment gateways with access to local banks across the globe.
Hence, you can safely and securely complete international money transfers across borders. Say, from the US to Ghana, Mexico, Kenya, Bangladesh and so on.
Even better, you can check the rates across countries before transferring money.
Digital wallets, or mobile wallets, on the other hand, are most-preferred for completing online payments for products and services.
Some providers merge the features of both channels in one app to provide an all-in-one platform that facilitates local or regional transactions.
For the foreseeable future, it doesn’t seem like there is any device coming up to assume the role of mobile phones in online money transfers.
Ideations and innovations happening in the global online money transfer markets are centred on improving the flexibility and agility of mobile money transfer solutions.
As regular joes, we are left with the choice of leveraging these innovations to safely and securely send money – avoiding the risks and inconvenience of traditional money transfer systems.
The post The role of mobile phones in the rise of online money transfers appeared first on Payments Cards & Mobile.