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Mobile Banking Expands Where Smartphones Are Rare

Barcelona, Spain — In a technology conference devoted to the slick and snappy, a small French company proudly displayed a chunky, antiquated Nokia cellphone that is allowing mobile banking to happen in places where smartphones are rarely found.

It was a message heard often during the four-day Mobile World Conference in Barcelona, which ended Thursday. While companies in wealthy nations struggle to get customers to pay for products with sophisticated mobile gadgets, millions of people in poorer nations are adopting the practice with clunkier cellphones as an efficient, practical alternative to cash.

In such places, the features required by many of the latest mobile payment systems, such as cameras capable of reading digitized codes, are too costly. But build a system on the things that even the most rudimentary cellphones already can do, and a massive new market potentially unfolds.

The French company, Tagattitude, transmits a unique, coded burst of sound — almost like the chirp of a digital bird — between phones to complete transactions in 20 countries. Many other mobile banking services rely on text messages to open accounts and transfer money.

“All these phones have a microphone, and all those microphones are capable of capturing data from a financial transaction,” said Yves Eonnet, the voluble chief executive of Tagattitude, showing off the clunky Nokia and several other handsets that would be at home in a museum of mobile technology history. “At the end of the day, there is no business model that is sustainable for NFC.”

Not long ago, such assertions would have been apostasy in the mobile tech world. Google and many other companies have built elaborate wallet systems around NFC, an acronym for “near field communication” technology. But even in the United States, adoption has been slow. The popular iPhone doesn’t have NFC. Many newer Android devices have NFC chips embedded within, but several wireless carriers have not activated them in the phones they sell.

At least 150 different companies — most of them wireless providers — offer mobile financial services for people without traditional bank accounts in emerging markets, mostly in Latin America, Asia and Africa, according to a survey released this week by GSMA, the mobile technology trade group that hosts the Mobile World Congress.

The same survey reported that 30 million active users of these services made 224 million transactions worth $4.6 billion in June alone. A huge majority used traditional phones technology, such as text messaging.

The Turkish wireless carrier Turkcell initially invested in NFC technology for its mobile banking system in a country where 40 percent of people do not have traditional bank accounts, said Emre Sayin, a top company official who spoke in Barcelona. The system gained far more popularity when the company began relying on text messages. “We learned this early,” Sayin said. “Don’t get hooked to payment methods like NFC. Text messaging works just fine in most cases.”

The potential growth in mobile banking is massive, experts and company executives say. About 3.2 billion people — nearly half the population of the earth — have cellphones, according to GSMA. In many countries, there are far more people with cellphones than with bank accounts or credit cards.

In the United States, Europe and parts of Asia, bank accounts and credit cards are nearly universal. Smartphones such as Androids and iPhones, meanwhile, have reached hundreds of millions of people. That combination has generated interest in mobile payment technologies that allow for more than the mere exchanging of money.

A Google executive, Peter Hazlehurst, said his company’s mobile payment system, Google Wallet, will allow users to have credit cards, loyalty cards and coupons always ready for use — without bothering to carry them around. Unlike some other systems, Google Wallet uses NFC technology for payments and generates revenue mainly from advertising, not transaction fees. When customers use digital coupons to get discounts while using Google wallet, the company can collect higher advertising rates from the merchants that benefit, he said.

Hazlehurst acknowledged, as did many others at the conference, that getting customers to adopt mobile payment systems has been difficult in places with easy access to credit cards and other modern banking services.