10 advantages and disadvantages of Mobile Money and Banking

Mobile banking and mobile money are related concepts that both involve using mobile devices to manage financial transactions and access banking services. However, they serve somewhat different purposes and have distinct characteristics.

What is Mobile Banking ?

• Mobile banking refers to the use of a mobile device, such as a smartphone or tablet, to access and manage traditional banking services provided by a bank or financial institution.
• It allows customers to perform various banking activities on their mobile devices, including checking account balances, transferring money between accounts, paying bills, and even applying for loans or credit cards.
• Mobile banking typically requires customers to have a bank account with a traditional financial institution, and the services are often provided by the bank itself through a dedicated mobile app or mobile-friendly website.
• Mobile banking is essentially an extension of traditional banking services to the mobile platform, and it relies on the existing banking infrastructure.

Mobile Banking Examples: Chase Mobile (JPMorgan Chase, USA), HSBC Mobile Banking (HSBC, Global), ICICI iMobile (ICICI Bank, India), State Bank of India (SBI) Anywhere Personal, HDFC Bank MobileBanking and so on.

What is Mobile Money ?

• Mobile money, on the other hand, is a broader term that encompasses various financial services delivered through mobile devices, particularly in regions with limited access to traditional banking infrastructure.
• It includes services like mobile payments, money transfers, and basic financial transactions, often provided by non-bank entities, such as mobile network operators (MNOs) and third-party mobile money service providers.
• Mobile money services are especially significant in regions where a large portion of the population is unbanked or underbanked. It enables individuals to access financial services without needing a traditional bank account.
• Electronic wallet service which allows users to store, send and receive money using their mobile device under financial regulation is known as mobile money.
• A digital wallet is virtual wallet which stores all the contents in digitized format which allows easy payments and other money related transactions.
• It can hold not only money but also coupons, loyalty points, value and membership cards etc.
• It provides support for financial services such as payments, transferring money, paying for goods and services using mobile device.

Mobile Money Interfaces

• The figure-1 depicts mobile money interfaces. Mobile money model consists of banks, MNOs (Mobile Network Operators), Payment Gateway Providers, Payment Processing Agents, Payment platform Providers, Mobile subscribers and customers.
• The examples of mobile money solutions include Alepo, Obopay, DeeMoney etc.

Mobile Money Examples: M-Pesa (Safaricom, Kenya), GCash (Globe Telecom, Philippines), Tigo Pesa (Tigo, Tanzania), Paytm (INDIA), PhonePe (INDIA) , Google Pay (Tez) in INDIA and so on.

The system operates as back-end as service model from a secure cloud with offering as follows.
• Automated User and Merchant Onboarding
• E-wallets
• Card Payments acquiring and clearing for merchants
• Affiliates management
• E-shop Integration
• Payment Switch
• Closed and Open Loop Card Scheme management
• Mobile Money and Mobile banking
• Peer to peer loans
• Remittance Solutions

10 advantages of Mobile Money

Following are 10 benefits or advantages of Mobile Money :
1. Mobile money is available 24/7. Hence using this solution, money can be transferred almost anytime and anywhere, even when there are no banks nearby. This increases accessibility in rural areas.
2. It enables cashless payments which reduces dependency on cash and allows tracking of transaction records. This increases financial security and reduces inherent risks of cash handling such as loss, theft or fraud.
3. Mobile money has lower transaction costs with improved security compare to credit card method.
4. Customers need not require middlemen for money transfers anymore. Hence it increases transparency.
5. It reduces the need for physical visits to banks or payment centers. Moreover it avoids long travel to send/receive money or to pay bills by standing in long queues. This provides great comfort to the customers.
6. Purchasing of online goods and services have become easier and provides more options based on pricing/features selection.
7. Mobile money system provides services to the people who are geographically inaccessible and/or having very low income.
8. Mobile money platforms are accessed through most basic mobile phones with low transaction costs.
9. They are distributed by vast network of agents which provides person to person contact and training to those who are unfamiliar with the mobile money technology.
10. Mobile money services can reach unbanked and underbanked populations, providing them with access to financial services they may not have had otherwise.
11. Mobile money transactions are typically secured with PINs, passwords, and encryption, enhancing the security of financial transactions.
12. Transactions are processed quickly, enabling rapid money transfers and bill payments.
13. Users can easily track their transactions and account balances, helping with budgeting and financial planning.

10 disadvantages of Mobile Money

Following are 10 disadvantages of Mobile Money :
1. The customers are required to obtain compliance from the respected banks. This can be restrictive for businesses or large transactions.
2. Lack of interoperability between networks restricts reach and makes transactions cumbersome. Any mobile network service interruptions can disrupt transactions.
3. Adoption of mobile money usually requires multi-party involvement (viz. agents, governments, corporations etc.). The trust is needed between these in order to have successful mobile money platform.
4. The ignorance and illiteracy from people need to be reduced in order to have wide acceptance of the system.
5. It requires app to be installed which is not available in all the mobile phones. Smart phones are needed for this purpose.
6. Mobile money services can be susceptible to fraud, such as phishing attacks or unauthorized transactions.
7. Mobile money services often have transaction limits, which can be restrictive for businesses or large transactions.
8. Users may have concerns about the privacy of their financial data and transactions when using mobile money services.
9. If a user's mobile phone is lost or stolen, their mobile money account could be at risk if proper security measures are not in place.
10. Mobile money services may not be accepted everywhere, limiting their usability in certain situations.

10 advantages of Mobile Banking

Following are 10 advantages of Mobile Banking :
1. Convenience: Users can access their bank accounts and perform various transactions from the convenience of their mobile devices, eliminating the need to visit physical bank branches.
2. Accessibility: Mobile banking is available 24/7, allowing users to manage their finances at any time and from anywhere with an internet connection.
3. Quick Transactions: Mobile banking enables fast and efficient transactions, including fund transfers, bill payments, and account balance inquiries.
4. Security Features: Mobile banking apps often incorporate robust security measures, such as biometric authentication, encryption, and two-factor authentication, to protect user data and transactions.
5. Real-Time Alerts: Users can set up alerts and notifications for account activity, providing instant updates on transactions, account balances, and potential fraud.
6. Paperless Transactions: Mobile banking promotes paperless and eco-friendly banking, reducing the need for physical checks and paperwork.
7. Financial Management: Mobile banking apps often include budgeting and financial tracking tools, helping users monitor their spending and saving habits.
8. Remote Check Deposits: Some mobile banking apps allow users to deposit checks by simply taking photos of them, eliminating the need to visit a bank branch or ATM.
9. Investment and Trading: Many mobile banking apps offer features for investing in stocks, mutual funds, and other financial instruments.
10. Loan and Credit Card Management: Users can apply for loans, credit cards, and other financial products through mobile banking apps and manage these accounts conveniently.

10 disadvantages of Mobile Banking

Following are 10 disadvantages of Mobile Banking :
1. Security Risks: While mobile banking apps have strong security measures, they can still be vulnerable to hacking, phishing, and other cyber threats.
2. Device Compatibility: Users need a compatible smartphone or tablet and a reliable internet connection to access mobile banking services.
3. Limited Functionality: Some complex banking transactions, such as opening certain types of accounts, may require a visit to a physical bank branch.
4. Dependency on Technology: Mobile banking relies on technology, and technical issues or outages can disrupt access to banking services.
5. Learning Curve: Older or less tech-savvy individuals may find it challenging to navigate mobile banking apps and understand their features.
6. Privacy Concerns: Users may have concerns about the privacy of their financial data when using mobile banking apps, especially if they are not confident in the app's security measures.
7. Transaction Limits: Mobile banking apps often have transaction limits, which can be restrictive for businesses or large transactions.
8. Account Management Complexity: Users with multiple accounts or complex financial portfolios may find it challenging to manage all aspects of their finances solely through a mobile app.
9. Dependence on Mobile Networks: Mobile banking relies on mobile network connectivity, and service interruptions can disrupt transactions.
10. Regulatory and Compliance Issues: Mobile banking services must adhere to regulatory guidelines, and changes in regulations can impact service availability and features.

Conclusion : In summary, while both mobile banking and mobile money involve the use of mobile devices for financial transactions, mobile banking is typically associated with traditional banking services provided by banks, while mobile money encompasses a broader range of financial services, often provided by non-bank entities, and is especially relevant in areas with limited access to traditional banking infrastructure.

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