Mobile Banking Leads Financial Liberation in Eastern Europe

Summary: Mobile banking is enabling mobile phone users in Eastern Europe to achieve financial liberation. Despite the rapid adoption of mobile banking initiatives by banks the services on offer mostly seek to serve smartphone users. This single focus could risk alienating the region’s unbanked, feature phone subscribers and could create room for alternative financial payment providers, such as M-Pesa to recreate the success they found in East Africa.

Story: The increasingly mobile-centric lifestyle of many Europeans can largely be attributed to the increase and success of mobile channel initiatives focused on providing cheaper, more convenient services. Although still playing catch up to Western Europe, mobile subscribers in the Central and Eastern European (CEE) region are increasingly reliant on their mobile devices and smartphone adoption is increasing.

In 2014, shipments of feature phones to Eastern Europe accounted for 6% of total global shipments which will rise to 7% by 2020 according to Statista. A dichotomy is evident with GSMA predicting 184m smartphone users in the CEE region by 2017. This is also supported by GFK research that reported 69.8m smartphone units sold in CEE in 2014, a 37% increase from the 50.9m units sold in the region in 2013. Although the CEE region showed the lowest global smartphone sales volume compared to other global regions, smartphone sales CEE represented the third highest percentage increase across all global regions.

The rapidly increasing number of smartphone users has driven the increased popularity of mobile banking initiatives. However, Omlis believe that this focus has come at the cost of alienating millions of unbanked mobile subscribers, like the 7m citizens who remain unbanked in countries such as Romania. Recent research from Omlis draws attention to the fact that although a few financial institutions in the region recognize the demand for mobile channel driven initiatives, this attitude is not ubiquitous and does not take into account users of feature phones.

Unfortunately, while there has been an acceleration in the growth of mobile channel services from financial institutions, these are mostly delivered through smartphone devices. This appears to be at the cost of feature phone users who still represent a large majority of subscribers in the region. Such opportunities have created opportunities for new entrants like M-Pesa that previously revolutionized mobile money services for the unbanked in East Africa and come well equipped to replicate their immense success in CEE.

With CEE countries such as Poland ranked in the top 25 territories by eMarketer for predicted growth in smartphone usage, Markus Milsted, founder and CEO of Omlis commented, Financial innovation for the mobile channel in the region is still at an early stage but the recent shift to digital banking strategies is a very positive step in the right direction.

The digital-only model underlines key issues which need to be addressed. The first is the compatibility of more recent mobile financial services with mobile users yet to migrate to smartphone devices. It is not unreasonable to accept that the competitive nature of the mobile device landscape has made smartphone devices more affordable to the majority, under $120 in some territories. However, the presence of alternative payment initiatives such as M-Pesa clearly demonstrates an underserved market.

The second is the issue of mobile security. Ukraine, Poland and Belarus were among the top 15 countries with the highest numbers of users attacked between April 2013 and July 2014 according to a report from Kaspersky and INTERPOL. This also found that Ukraine was in the top 10 countries for reported Trojan-SMS malware attacks and that over 90% of mobile banking Trojan attacks between 2013 and 2014 designed to steal online banking credentials of Android users were targeted at CEE countries.

If mobile driven initiatives are to become a true liberator for the unbanked and facilitate convenient services for banking consumers, a high integrity approach to mobile payments is highly recommended in winning customer trust and loyalty.

This Article is contributed by Frances Stainthorpe from Omlis.

About Omlis: As pioneers in high integrity development for mobile payments, Omlis is reinventing mobile payment security. Omlis is a mobile payment security provider delivering high integrity security for all mobile commerce. The Omlis core encryption is immensely secure, highly scalable and interoperable, to power frictionless transactions and remove barriers to the adoption of mobile payments.