Mobile banking threatens profits of Gulf exchange houses

Potential for mobile services increase as more workers have access to basic bank accounts

Tags: BahrainBanking and financeQatarSaudi ArabiaUnited Arab Emirates
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Mobile banking threatens profits of Gulf exchange houses Etisalat is set to launch a mobile remittance service soon.
By  Vineetha Menon Published  January 15, 2010

Mobile banking is set to threaten the profits enjoyed by exchange houses here in the Middle East as increasing numbers of workers now have access to basic bank accounts and card products.

The United Arab Emirates launched the Wage Protection System (WPS), which obliges all firms to pay staff wages via electronic transfer rather than in cash, in September last year . Around 4.2 million workers employed by almost 270,000 companies across the UAE are now paid under the WPS involving registered local banks.

Earlier this month, UAE telco Etisalat said it was close to introducing a new service, in partnership with Citibank, to allow expatriates to send money home using their mobile phone. The news is a blow to exchange houses in the region that have long been the primary means for labourers to channel their wages to relatives across the sub-continent.

Banking and payment strategy firm Genesis Analytics has warned that GCC exchange houses need to urgently reassess how they do business since the technology, though fairly new, could catch on quickly as the majority of workers own mobile phones.

"Exchange houses must find ways to compete with platforms of this nature, and be alert to changing consumer dynamics that signal the shift to new ways of doing business," says Hanouch. "There is a lot to be done: they should investigate ways to become part of the payroll business, and should start creating linkages and providing services that compliment rapidly evolving business models."

Kenya is an example of the potential adoption scale of mobile banking services where over 8 million of the leading mobile operator's customers signed up for a money transfer service in less than three years  and are now making regular payments through their handset.

A recent deal between mobile payments company Obopay and the world's largest mobile manufacturer Nokia also hints at the possible launch of a built-in application for money transfer. According to reports, Nokia may soon pre-load a mobile payment application on all its phones making it easier for all its customers to make payments using their phone instead of worrying of how and where to download the application from.

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