Not necessarily, because banking by phone allows lenders to reach and offer a range of financial services to customers in remote rural areas, plus it offers lower transaction costs which means lenders can offer lower interest rates. Branchless banking alternatives are increasing accessibility, utility and financial inclusion
However, there are challenges – in particular, the lack of internet access in remote locations.
This problem was solved by the recently-announced winner of the Wall Street Journal’s 2015 Financial Inclusion Challenge, Shanghai F-road. The Firm That Gives Millions of Chinese Bank Services Wins Award article describes three IT consultants who founded Shanghai F-road and designed “a secure smart chip that could be added to a mobile phone SIM card. The chip provides secure banking using SMS texting channels that can operate even with weak data signals” and is independent of mobile network or phone manufacturer, making mobile banking available to approximately 10 million rural Chinese customers.
This solution uses SIM overlay technology, originally developed to avoid roaming fees, consisting “of a paper-thin plastic sheet with an embedded chip that can be adhered to the top of any sim card” with “touch points built into the overlay to filter information between the two layers. The hardware provides a means to store and carry any program logic independent of the sim, allowing F-road partner banks to provide the solution to their clients…while minimizing communications costs driving mobile banking functionality.” Using the SMS channel is a key advantage, because it operates on 95-97% of functional phones and requires no internet access.