More than a year after the devasting earthquake in Haiti killed 230,000 people and left almost a million people homeless, the country is still in crisis. In addition to public health and housing challenges, crime is also a problem. A majority of the country’s residents do not have a bank account, so they have no safe place to receive and store money.Haiti’s financial services infrastructure has always been poor. Even before the earthquake, there were only two bricks-and-mortar banks for every 100,000 people, according to Intermedia, a nonprofit research organisation specializing in developing societies. Individuals seeking to cash paychecks and pay bills were forced to stand in line at banks for hours—a time-consuming activity that sometimes meant leaving work and family to travel long distances.
Intermedia said that the earthquake destroyed 30 to 40 per cent of banks and ATMs throughout the country.
Help for the “Unbanked”
In 2010, mobile operator Voilà, Unibank and US software company MoreMagic Solutions teamed up to form “T-Cash,” a mobile-money service designed to bring basic financial services to thousands of Haitians via their mobile phones. Thanks to T-Cash, Voilà mobile subscribers can now use their phones to receive salary payments, make peer-to-peer money transfers and pay bills.
T-Cash funds can be used to make electronic purchases of food and other necessities, or they can be converted into cash. In a country where a large section of the population has never had a bank account, mobile money has created a new level of personal security and economic independence.
The T-Cash service was launched in December 2010 after a nine-month pilot. The pilot, part of the earthquake reconstruction effort, provided international relief and development agency Mercy Corps with a secure, cost-effective way of distributing money to workers across Haiti. With money flowing freely from the organisation into individuals’ electronic wallets, the pilot demonstrated that the system was robust and ready for a commercial operation.
How T-Cash Works
T-Cash does not require a smart phone. In fact, people with phones worth less than $20 can make secure transactions over the Voilà T-Cash network.
Every time a T-Cash user gets paid, the money is directly deposited into his or her personal T-Cash account. The mobile user can then use T-Cash at a participating bank teller, gas station attendent or retailer. They can pay bills, make transfers to friends and family, or withdraw cash to make purchases. The transaction is made using the establishment’s T-Cash ID number, which allows the mobile user to make the transaction via his phone. The customer’s account is debited, and the bank or shop’s account is credited. As of now, 600 banks and stores participate in the T-Cash program.
The technology behind T-Cash is MoreMagic Solutions’ mobile commerce and financial services platform, or MagicSuite™. The platform—which acts as the connection point between mobile providers, banks and businesses—handles money transfers, payments and transactions. The platform is currently used in 60 other countries.
The same mobile payments technology is used widely for mobile “top-up,” which allows friends and family to send gifts of airtime to their families abroad, as well as for mobile ticketing, parking, lottery, bill payment, money transfer, cross-border purchases and microfinance.
Not Just for Developing Countries
Worldwide, the market for mobile commerce and financial services is expected to grow more than $1.1 trillion in transaction value by 2014, according to a 2010 study by IE Market Research. The Haiti T-Cash program is showing developed countries how simple and yet secure mobile money can be.
In wealthier countries, the concept of mobile money is tied closely to the idea of mobile payments enabled by near field communications (NFC), which allows mobile users to use their mobile phones in lieu of a credit card or cash. This requires an NFC-enabled phone, as well as stores to install NFC-enabled point-of-sale terminals. Most industry participants expect NFC-enabled mobile commerce to be about two or three years away.
Voilà’s T-Cash program demonstrates that mobile money can make a significant difference in the lives of unbanked or underbanked individuals now, even without NFC.
The market is not limited to poor countries: In the US, an estimated 7.7 per cent of households—approximately 9 million—do not have a checking or a savings account, according to a 2009 study by the Federal Deposit Insurance Corp. Additionally, an estimated 17.9 per cent of U.S. households—roughly 21 million—are underbanked, which means they occasionally use check-cashing companies, pawn shops, liquor stores or other establishments to cash checks and pay bills.
Mobile money can help the unbanked and underbanked in the US in two significant ways: First, a T-Cash type service helps them save money by avoiding hefty commissions at check-cashing stores. Second, mobile money helps them keep their money safe, without the need for hiding it under the mattress.
Another group of unbanked individuals—affluent teenagers or college students—are also an obvious beneficiary of mobile money. Services like T-Cash can allow either their parents or part-time employers to transfer money to them via their mobile phone. College students could also benefit from using the service for on-campus expenses such as books and meals.
So What’s Next?
The Haiti story is still in its very early stages, but it’s already making a significant difference in the lives of people who need food, shelter and a place to keep their money safe. It is allowing individuals to gain greater control over their finances without having to spend valuable time standing in line at the few banks that remain after the earthquake.
The Haiti T-Cash service has been well received. Voilà, Unibank and MoreMagic expected 20,000 transactions to take place in the first three to four months of launch, but the program reached that number in just two weeks—demonstrating that mobile phone users trusted the system and it met an urgent need in the community.
Mobile money—in the developed world or the developing world—is about efficiency and convenience. It brings together mobile carriers, financial services firms and retailers to simplify lives and save people money. As T-Cash style mobile money programs take hold worldwide, handsets will be consumers’ link to not just to financial services, but also to advertising, shopping, banking, loyalty programs and more.