Start-up pushes for mobile banking among poor in Latin America

Computerworld - Mobile banking isn't as popular in the U.S. as banks had hoped, although new smart phones like the iPhone 3G may help speed the pace of adoption with better interfaces and faster networks.

There are some places in the world, however, where mobile banking is ideal, including developing countries where there is neither a wired infrastructure nor easy access to banks for the poorest residents.

For example, in Venezuela, a start-up company called Diemo is launching mobile banking in August with GSM network provider Digitel. The service will give remote and generally poor residents the ability to transfer money wirelessly via a cell phone to a store where a third party can receive the cash, said Diemo CEO Roman Martinez in an interview.

The service, now in a "soft" launch, is available to any of Digitel's 6 million customers in Venezuela and will be provided in Colombia later in 2008, Martinez said. In coming years, Martinez said it would make sense to offer mobile banking in U.S. cities such as Miami, where there are large numbers of residents who have no bank accounts and no easy way to establish credit.

"At least 30% of poor people don't have a bank account, but 60% of the poorest have a cell phone," he said. "In economies where you have less money, your cell phone is your status symbol."

Martinez said Diemo can lower the "immoral" cash transaction fees that some people pay. Western Union and other agencies charge upward of 15% (or $30) to send $200 in cash to another party, while Diemo's fee would be about 1.5% -- or $3 -- on $200, he said.

Diemo announced its service this week with XIUS-bcgi in Bedford, Mass., a division of Megasoft Ltd. Diemo, based in Homestead, Fla., has signed with XIUS-bcgi for a three-year, $15 million contract to provide the mobile banking and related services in South America and elsewhere, according to Martinez and G.V. Kumar, CEO of XIUS-bcgi. XIUS-bcgi will provide security software for the service, client software for each cell phone and network support, Kumar explained.

Kumar said the service is the first of its kind, although it grew from XIUS's experience setting up mobile banking for Citibank for a short time in 2003. XIUS purchased bcgi last year, and the new entity manages some electronic payments for Sprint Nextel Corp. and handles some credit card services for Telefonica in Ecuador, among other businesses.

Kumar said mobile banking around the globe and in the U.S. is "set to take off," although it won't be for a wide range of banking applications. Instead, he expects it will be used primarily for small payments of less than $100 and for certain groups, such as those Diemo is addressing in Venezuela.