Mobile money is not the same as mobile banking, although they both must observe compliance with Know Your Customer (KYC) regulations, Anti-Money Laundering, and Combating the Financing of Terrorism (KYC/AML/CFT) rules.
The main distinction between the two is that mobile banking requires that customers have a traditional account at a licensed financial institution, commercial bank or credit union. Mobile money, on the other hand, facilitates the sending, receipt and storage of digital currency using an ‘app’, without an account at a traditional financial institution.
The beauty of mobile money is that it eliminates the need for a traditional bank account, thereby bringing financial inclusion and financial empowerment to the unbanked and underbanked. Moreover, mobile money transactions are faster, more secure, more inclusive, and more cost effective than the traditional options, benefitting individuals and merchants alike.
Growing adoption of mobile money would negatively disrupt the business model of banks and credit card companies that feast on fees from handling and processing payments. That’s because, by eliminating the need to rely on those third-party intermediaries to approve transactions between consumers and merchants, banks and credit card companies cannot collect a commission on those transactions. The more money flows through digital ecosystems, the greater the loss in revenues to banks and credit card companies. And we’re talking billions here.
Here’s an interesting infographic that breaks down how much money banks and credit cards make on a typical $100 transaction.