Smartphones and mobile phones are beginning to have more of an impact on the world of finance, and a new report from the McKinsey Consulting Firm suggests that compared to banks, it's mobile devices that could have a bigger impact on finance in developing nations over the next decade. One reason for this according to the report is because a large portion of people in developing nations have mobile phones (not necessarily smartphones), with that number sitting at around 80 percent and due to increase another 10 percent within the next four years. This paired with the increase in software upstarts that are offering financial services similar to a traditional banking system in these regions is just part of why people in countries with developing economies are seeing less of a reliance on standard means of finance.
Although cash and the traditional banking system is not likely to completely disappear in developing nations, at least not anywhere in the near future, it makes sense why citizens would at least give the world of mobile finance options a try, considering that options like these are nearly accessible anywhere so long as there is a way to connect to the local cellular network and communicate with the system. Convenience seems to be a big factor.
McKinsey uses a system called M-Pesa as an example of how developing nations are starting to see this shift away from regular banks. M-Pesa, a startup with less than 10 years under their belt, operates in Kenya and provides around 70 percent of the adults in the country with a means to access their digital money. This is, of course, just one example, but it does serve the purpose of displaying how much of an impact these systems are having on finance and the economy. In addition to details like these, McKinsey's report states that by 2025, annual economic activity on a broad scale could see an increase of $3.7 trillion as a result of digital finance, although specifics in terms of where exactly the biggest impacts would be were not mentioned. The report also details that big opportunities for economic growth come from moving away from cash to digital payments, as digital payments can afford people more economic opportunities that simply aren't on offer when relying on cash is a factor.
While the move away from traditional banking systems into a more digitally available economy will likely be a slow process and won't be without its challenges due to systems that are already in place in developing nations, the mobile networks that serve as a backbone for these digital systems to work are up and running in many areas and the networks play a big role in the transition. The report also mentions that the mobile networks are the most expensive part of the whole equation, and with that out of the way, the transition could start to pick up. In places like the U.S. and other larger economies, traditional banking is still the standard, but options like Android Pay, Samsung Pay, and Apple Pay are gaining ground with more and more compatible devices and an increase in establishments that take these forms of payment. These still rely in some part on traditional banks, of course, as the payments are connected to credit cards and debit cards from these banks. Traditional banks are also doing all that can to stay relevant by transitioning into the digital age with their own mobile wallet and payment apps.