The Mobile Banking Revolution

N26 is a new bank based out of Berlin, Germany, and it’s just had a really good year – their user base has just tripled to 300,000 customers over the last 12 months. It has only been around since 2015, starting life as a checking account for Mastercard users in Austria and Germany. Now they offer banking and money transfer services being offered in 17 countries across Europe and offering the full range of features that you’d expect from any other bank. But what has got people talking is the fact that this is a mobile bank, and while such things are incredibly popular in other parts of the world, Europe has, on the whole, been very slow to adapt to it. And if N26 had a good year, then UK-based Atom Bank had a really good day, signing up 5,000 users in 24 hours. So is mobile banking starting to take off in Europe? The top ten mobile banking countries by user (based on a 2015 survey) show Africa leading the way by a significant margin. The USA comes in 8th place, and of European countries, only Sweden makes the list. But is this changing, or are we still not quite ready to trust our phones with our wallets?

Using a mobile device to help with your banking has been around for a while. First adopted in Germany in 1999, people were given the option of using SMS for a number of banking-based uses. Primarily, it was used to look up account and balance information, with the SMS being a quick and useful way to provide confirmations of transfers and payments. ‘Online banking’ was quickly adopted by banks around the world – but this was at a time when the internet was only available on desktop computers. It would not be until 2007 and the arrival of smartphones that people would think seriously about mobile banking. But in Africa, a revolution was already underway.

The advent of mobile phones had already changed everything, especially for the pastoral cattle farmers of Kenya. With huge swathes of unconnected land to navigate, farmers would bring their entire herds to market without knowing whether there would be buyers there, or how much stock they would need. Sometimes, they took journeys that lasted for weeks, only to discover that everyone else had already gone home. Obviously, once mobiles appeared, they changed everything. Now farmers could figure out where they needed to be, and by when, how many cows to take with them and what the price would be. Phones became so integral to life so quickly, that they became an economy in their own right. In 2002, researchers at the Commonwealth Telecommunications Organisation noticed an interesting trend – people were trading airtime as currency. In order to formalize this practice, provider MCel offered the first authorized credit-swapping platform in 2004, and by 2007, this had evolved into the first mobile-based money transfer system , M-Pesa.

M-Pesa’s success was immediate and it is now the world’s biggest money transfer service. The reason for its success is because it fills a need easily – namely that many people don’t have easy access to banking services. Since its introduction, the difference it has made to people in Africa is clear. And now it is becoming part of life in other places, solving different problems in the same way. For example, issues of overcrowding. In the US, for example, there are on average, 144 people to every 1 ATM. In rural China, there are over two and a half thousand people per ATM, together with one physical bank branch for every ten thousand people. When the queues are that long, you need a better solution, and mobile banking has proved to be exactly that. 373 million residents of rural China used mobile banking last year, resulting in money transfers that totaled over $5 billion.

Apps, of course, have led to another great leap forward in mobile banking. But while many people are happy to use them, there is a reluctance amongst small businesses. The reasons for this are unclear – it may be that some people haven’t yet caught on to the trend, or just don’t trust their money with new technology just yet – and if they believe the latter, there’s a lot of evidence to back them up. But it seems that this may be the direction we take in the future, whether we’re ready for it or not.