Mobile phone technology brings rural banks to another level

Feature: G-Cash

It was a monthly errand that Evelyn did not mind making. She walked a few blocks from her employer’s Makati condominium to the mall and made her way to the familiar Globe Hub outlet at the Power Plant Mall. Evelyn handed over a thousand pesos to the smiling salesclerk, filled out a form, showed her ID card, and paid the P10 cash-in processing fee. A few minutes later, Evelyn’s phone beeped with the familiar message "You have received 1,000 of G-Cash from BC-Rockwell Hub on 9/15/06 at 12:40 PM."

It only took Evelyn another five minutes to key in instructions to transfer her G-Cash balance directly to her brother’s savings account with the New Rural Bank of Victorias (Bank Victorias) in Bacolod City. Edwin, Evelyn’s brother, does not own a mobile phone but through the new service, Text-A-Deposit, Evelyn can send G-Cash directly to his Bank Victorias deposit account.

Evelyn returned to work, happy at the thought that later, during her brother’s afternoon break, he would go to Bank Victorias’ Bacolod City branch, present his ID, and claim the cash. She was sure that upon arriving home tonight, he will be able to give the money to their mother. The amount was Evelyn’s monthly "allowance" to her mother, who saved a fraction of the sum and used the rest for food.

Evelyn used to send through a large commercial bank, paying P100 for every transaction, while her mother had to travel for two hours to and from their house to Bacolod City to claim the cash.

"I also tried the remittance services of courier companies; they were charging a processing fee of P130 which was 13 percent of the amount I was sending. Now, I only have to shell out P10!" Evelyn relates.

The introduction of G-Cash, Globe Telecom’s electronic money service and subsequently, person-to-person or phone-to-phone (P2P) money transfer, greatly benefits Evelyn and other subscribers who regularly send and transfer funds to suppliers, shops, and even regular "allowances" to loved ones and family members in the province.

The widespread use of short messaging services (SMS) or "text", in addition to the introduction of G-Cash, has facilitated domestic and international transfer of money. Like Evelyn, many other Filipinos working away from their places of origin (within and outside the Philippines) have started using SMS-based services to transfer money - in Evelyn’s case, from the Power Plant in Makati to the rural town in Negros Oriental where she lived before moving to Manila to work as a yaya.

Globe introduced G-Cash in late 2004 as a service that "turns mobile phones into virtual electronic wallets". Subscribers can load electronic money (cash-in), store the "money" in their "wallets", and use it to pay bills, make purchases, or transfer money that relatives and friends can convert to cash (cash-out). All transactions – registration, authentication, authorization, and confirmation – are conducted through SMS.

Program managers of the United States Agency for International Development (USAID)-supported Microenterprise Access to Banking Services (MABS) Program quickly recognized its potential as a platform for microfinance banking applications.

The MABS Program aims to substantially increase the level of banking services being provided to the microenterprise sector by assisting rural banks to develop the capability to profitably provide loan and deposit services to the sector. Although its core activity is delivering training and technical assistance, it also introduces and develops new and low-cost banking technologies to further improve its participating banks’ efficiency, productivity, and outreach.

Seeing this and with the support of MABS, the Rural Bankers Association of the Philippines (RBAP) and Globe Telecom entered into an agreement in November 2004 to develop and launch mobile phone banking applications for clients of rural banks.

The first service was the Text-A-Payment, that allows micro loan borrowers of accredited rural banks who are Globe or Touch Mobile subscribers to repay their microloan amortizations through SMS via G-Cash. This service reduces the clients’ transaction costs since they no longer need to make the trip to the bank to make a payment.

It reduces the banks’ collection and transaction costs, since it eliminates field collection. Banks are able to pass on these savings to their clients through reduced interest rates and service charges. Text-A-Payment also greatly reduces fraud and theft since the transactions are fast and secure.

In 2006, MABS developed and introduced Text-A-Deposit, allowing clients to send deposits to or receive remittances through their bank account via SMS for fees as low as one percent. The service greatly reduces the costs of remittances and bank transfers, since fund transfers are made directly to their rural bank deposit accounts. Depositors who do not have mobile phones can still receive remittances, as long as they have an account with a G-Cash accredited rural bank.

The widespread use of G-Cash and the banking applications it supports largely lies in the ability to encash the stored value or pay for goods and services at a significant number of merchants. Globe, RBAP, and MABS are working to help to expand the ecosystem of merchants, especially microenterprises, who can now more easily utilize G-Cash to sell goods and services and then settle their G-Cash sales directly to their deposit accounts via Text-A-Deposit services with an accredited rural bank.

There are now more than 200 G-Cash accredited rural bank branches approved to offer G-Cash services. Clients can now purchase (cash-in) or claim (cash-out) G-Cash, Globe’s electronic money facility, at any accredited rural bank. In addition to regular cash-in and cash-out services some banks are now facilitating payroll services using G-Cash.

Philippine Rural Banking Corp. (PR Bank), a rural bank with a network of 27 branches extending from Tuguegarao to Pasig City, is offering Text-A-Sweldo (Text-A-Salary) for their employees and for other interested companies in their area. They now disburse employees’ salaries using G-Cash; this drives the use of G-Cash and is helping to expand the ecosystem of G-Cash in their community even further since more people are directly seeing the benefits of using G-Cash.

Merchants and business owners in the community are also seeing the benefits of mobile phone banking. Ronald, a Globe Auto-load sub-dealer who owns three stores all located in the Cauayan City center, has been a depositor of PR Bank for two years now and recently started using G-Cash services when the bank started offering cash-in/cash-out services. Ronald now uses G-Cash to pay his distributor and sends G-Cash to his retailers.

In the coming months, rural banks will be launching other initiatives to further promote the use of mobile phone banking applications and expand the ecosystem of merchants, especially microentrepreneurs like tricycle drivers, sari sari store owners, and carendarias who can now all accept electronic payments using G-Cash to earn more money.

Electronic and mobile banking are fast proving to be the technological solution to providing less costly, easy-to-access, and fast and efficient banking services to previously un-banked clients.

Ultimately, the widespread use and acceptance of mobile transactions will benefit the lower-income segments-those previously unbanked and those who transact in amounts outside of the minimum transactions covered by credit and debit cards. People like Evelyn, Ronald, and Alain – who will greatly benefit from a few hundred pesos of savings per money transaction.

Evelyn ended the day very happy with the thought that her mother would have a nice dinner that evening. She had called her neighbor and confirmed that her mother had received her "allowance."