Prospects of The Future: Telebirr and Banks

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what if anyone owning a cell phone, whether rich or poor, also had access to financial services with the ability to save and send money safely, no matter where they are located?   it is already happening in Ethiopia, which has become part of the giant Ethio telecom company.

Mobile money is an electronic wallet service. This is available in many countries and allows users to store, send, and receive money using their mobile phones.

Safe and easy electronic payments make Mobile money a popular alternative to bank accounts. It can be used on both smartphones and basic feature phones.

In terms of monetary stability, mobile money can enable more effective monetary policy by transferring currency and assets into the financial system and enhancing financial depth.

Financial inclusion should target to give attention to a population that has been excluded from the financial sector due to their location, level of income, type of activity, and financial literacy. Despite Ethiopia having over 20 banks including governmental and private a few banks are accessible in different areas of the country.

Today, banks are at another competitive crossroads. This time the new contenders in financial services are telephone companies. The banks’ latest challenge is at hand, literally, in the form of the increasingly existing mobile phone. Unlike early experiments with consumer finance technology, which were often based on tortured business logic, underdeveloped technology mobile devices look like a natural channel for consumer financial services.

The comprises either unemployed or casually employed adults whose income levels are considerably low, making it impossible for many of them to operate formal bank accounts.  However, the evolution of mobile money technologies could make financial inclusion and innovation possible for all residents.

If mobile money increases saving by offering consumers a secure way to store money. This could reduce demand and therefore inflation. On the other hand, if mobile money increases consumption, it could increase overall demand. Given that the two mechanisms work in opposite directions, the overall impact of mobile money on both aggregate saving and consumption, and therefore inflation, is an empirical question.

Thus, Ethiopian telecom is in a race to provide content that will generate sufficient revenue to bring them a return on their investments in infrastructure. Media and entertainment are possibilities, although there are different business models to condense the profit like using media and entertainment financial content are literally where the money is.

It is also appealing because combined banking–mobile communications product is a way for wireless telecoms to move beyond commodity voice services and differentiate their products to improve customer retention in a business with a notoriously high preferable rate.

Financial inclusion should target to give attention to a population that has been excluded from the financial sector due to their location, level of income,  type of activity, and financial literacy.

Telecoms and financial services have other similarities. both industries have histories of state ownership. Although banks mainly operate in the private sector today, telecom and financial services are heavily regulated everywhere. banking and telecommunications are still undergoing domestic and regional consolidation. Finally, both sectors were early movers in harnessing the Internet to create new business models.

Although banks have been dominating mostly in Addis, in partnership with the telecom banks will not have to painstakingly build a customer base, because its mobile phones are already in the hands of the customers. the telecoms are key because they are the ones that own the wireless infrastructure that will be the backbone of the payment system.

Telecoms need certain capabilities to provide wireless finance services. Those they do not already possess, they can acquire relatively cheaply by allying themselves with banks. For example, in countries like Kenya, the expansion of mobile money lifted two percent of households in the country above the poverty line.

The necessary payment functions that banks possess are commodity capabilities that can be provided by many banks, and the combination can create a competitive advantage. Alternatively, a telecom could build such capabilities from scratch, avoiding the cost of managing old technology, but it would face the steep learning curve of developing new technology.

Anticipating the likelihood that telecoms will be shopping for banks, either to buy or to partner with, banks have strong attributes they can promote, including brands that evoke security and reliability, skills in credit management, and physical distribution channels. The right telecom partnership will allow some banks to leapfrog their competitors as the marketplace changes. Banks that move first will gain formidable allies in the fight for market share in all consumer financial services products, both domestically and internationally.

Joining a telecom rather than trying to beat one gives banks a hedge against tough new players that are using technology to develop and launch financial product offerings more quickly, and at a lower cost than banks can. For now, wireless newcomers to consumer finance face the problem of acquiring customers and building the requisite degree of trust, but that hurdle will come down as they build infrastructure to increase the efficiency of payment services.