Yale School of Management

China India Insights Program

Delivering new thinking on China, India, and emerging markets.

Is Mobile the Future of Banking?

It’s a somewhat curious phenomenon: mobile banking has gained more popularity in some developing countries than in the West. The logic is simple. The lack of traditional financial services and banking infrastructure in those countries has given mobile banking an opportunity to reach out to the unbanked population and gain popularity. In addition, there are many other factors that also determine the rate of adoption of mobile banking in a particular country, such as technology, the state of the telecommunications industry and government regulations.

Sudhir, James L. Frank Professor of Marketing, Private Enterprise and Management at Yale School of Management, has researched the global mobile banking industry. He believes that different customer needs in different countries, along with different banking and regulatory infrastructure, will create a variety of business models of mobile banking. Therefore, he says, it’s important to understand why current models have emerged in particular places before talking about how mobile banking will evolve in the future.

In this interview, Sudhir talks about how the rise of mobile banking varies from country to country and its implications for the traditional banking industry.

Q. How does mobile banking vary from country to country?

A. Consumers have different levels of infrastructure in banking in different countries. For a new solution to crop up you need to fulfil something that is missing in the current infrastructure in a particular country. If you think about Japan—Japan has one major telecom provider, DOCOMO. Back in 2003 and 2004, mobile payments were already there, which wasn’t the case for the US until 2013. The single most important reason was that Sony made a chip called FeliCa (a contactless identification card system). Since they were the only big market players in the market, they were able to put it into virtually all the cell phones that people were using. The idea of interoperability and the ability to use these was not an issue like in many other countries, so the adoption of these phones was instantaneous. The technology was pretty standard, so people were using them very fast. Even when there were incompatibilities, because DOCOMO has become such a large dominant provider, they can very easily negotiate agreements and things like that, which allowed this ecosystem to grow very fast.

Read the full interview on knowledge.ckgsb.edu.cn

 Written by Neelima Mahajan, Copyright © CKGSB Knowledge