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Mobile phone banking is a financial service where you can conduct common banking transactions using your cellular phone. Mobile phone banking has not really caught on in countries where there is a mature banking infrastructure and where most people have bank accounts. Mobile phone banking has caught on in less developed countries as a viable method to make micro-payments, pay for cell phone usage, and to send money to another person.

The Beginnings of Mobile Phone Banking. Mobile phone banking started with the advent of the prepaid cellular phone. With any prepaid cellular phone, cell phone companies also provide an user account that is decremented every time the cell phone user uses the phone. As prepaid cell phone services matured users began to use their prepaid accounts to buy other things such as ring-tones and other cell phone services. In some countries, cell phone companies started offering their customers other services such as transferring cell phone minutes to other accounts or even “money” to other cell accounts.

Mobile Phone Banking – Stored Value. Mobile phone banking can be conducted using existing bank accounts or using stored value accounts. A stored value account is an account where a retailer or financial institution maintains a financial account for a customer. This financial account does not allow the user to write checks against it, but these stored value accounts can get very sophisticated where they can have many of the characteristics of a bank account. In mobile phone banking, it is usually the cell phone provider that provides their users with a stored value account versus the user using their own bank account, if they have one.

Mobile Phone Banking – Bank Accounts. Most traditional banks do not provide full-service mobile phone banking. Many banks let their customers view online account balances. Some are even allowing their customers to make payments using their cell phone. Eventually, banks will provide mobile phone banking much like most banks provide online banking services today. Most traditional bank customers do not think mobile phone banking is a high priority. As cell phones become more web browser-based, I would expect that most bank customers will access their banks through the internet browser in their cell phone. Another reason banks have not embraced mobile phone banking is because of security concerns and interoperability. It is expected that security and interoperability will be less of a concern as mobile phone banking matures.

Benefits of Mobile Phone Banking. The biggest benefit of mobile phone banking is for persons that do not have a bank account. Especially in developing worlds, many people do not have a bank account. Mobile phone banking has many benefits for the “unbanked”. This includes:

• Paying bills to utility companies.
• Receiving payments from individuals and employers (use retail agents to receive cash).
• Sending payments to individuals and family members, domestic and International.
• Make micro-payments to participating merchants instead of using cash.

See O’Reilly’ Radar’s article, Mobile Banks in the Developing World Prove Simpler is Better, for more information on mobile banking and mobile banks. Other mobile banking postings include: PayPal Mobile, Pay For Products With Your Cell Phones.