1.1 Core Banking Solutions and Mobile Phones

Early in 2009 the World Bank predicted that the global economy would shrink this year for the first time since the Second World War as the impacts of US housing market implosion and the ensuing credit markets turmoil pulls the global economy into recession.  And though no one can predict when the present recession will end, it is a safe bet that it will, and that national and international financial systems will be all the stronger for having weathered the storm.  In fact, many of the same technologies that have been deployed to fashion this single global market system are also likely to become part of the solution to a financial rebound.

This study looks at technologies and markets at the intersection of mobile phones and financial systems.  We examine eight applications in which mobile phones and various aspects of banking, finance, and consumer spending intersect. 

The creation of financial applications for mobile phones is part of the larger picture of automation of the financial applications themselves.  The most influential automation trend in the financial sector is undoubtedly occurring in what the financial services industry and the banks call “core banking solutions”.  “Core” banking is the business conducted by a banking institution with its retail and small business customers—its core customers.   Core banking solutions is financial industry jargon related to platforms that leverage the Internet and other communications technologies to further the bank’s business reach.  A physical manifestation of this reach is the growth in the number of bank points of presence (PoP).  Core banking adds automated teller machines (ATM) and user devices such as PCs and mobile phones to the list of bank PoPs. The influence of core banking application automation extends beyond conventional banking functions and encompasses the large variety of financial services offered by the institutions including stock-broking, credit card issuance, and insurance among others.

Although the finance services vertical has traditionally been an early adopter of IT solutions, core banking automation is not being rolled out uniformly around the world.  In most countries, regulatory directives by the respective Central Banks have been the primary drivers for banks to adopt core banking automation, and though the rate of adoption thus varies by country, we can safely say that in the past five years the roll out has picked up speed across the globe—especially in emerging markets of Asia, Africa and Americas.  These core banking roll-outs have also coincided with the “telecom boom” in many of these same markets. As a result, some of the most practical and innovative adoptions of financial applications for the mobile phones are popping up first in the emerging markets. Moreover, banking sector reforms in most countries have facilitated entries of multi-national banks across economies, increasing competition all-around, making it increasingly necessary for banks to reach out to the customers on a personalized level—and nothing epitomizes that personalization like the mobile phone.

 In this study we have examined the impact of the following eight mobile financial applications........

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