In the collective mission to increase financial inclusion, understanding the numerous benefits of mobile banking should come high up the list. Not only does providing mobile bank accounts improve the well-being of workers, but it also enhances business productivity and reduces inequality, among other highly impactful benefits.
In particular, enabling mobile banking options in companies can help reduce the number of unbanked people in our region – an issue that, if not addressed, will expand the rich-poor divide.
Figures for the unbanked in the GCC vary from 22%, according to PwC, to as high as 70%, according to Gulf Business.
Whatever the number, these statistics represent millions of people who don’t have fair access to basic and convenient banking services. This often means that many of them have to pay huge fees to financial intermediaries to access financial services otherwise available to those with bank accounts.
This lack of access is primarily due to the fact that opening a traditional bank account in the UAE comes with requirements that many foreign workers can’t comply with.
For example, most banks require a minimum monthly salary between AED 3,000 and AED 5,000. Those without residency visas must also provide a six-month bank statement and reference letter from the bank they were using in their home country.
However, due to the high smartphone penetration rate in the UAE and other GCC countries, mobile banking has become an effective solution to improving financial inclusion.
Those foreign workers who can’t meet the stringent conditions for a traditional bank account can now access mobile banking platforms that remove those requirements. Bill Gates once said that the world needs banking but not banks and nothing better describes that sentiment than mobile banking.
The adoption of mobile banking has many benefits for workers, employers, and even society at large. In this article, we will consider six benefits of mobile banking in 2022.
[Do you want a payroll system that improves your payroll management and also provides mobile bank accounts for your unbanked employees? Learn more about NOW Money’s digital payroll platform or sign up at NOW Money to access smart, flexible, and effective payroll management.]
1. Improves employee wellbeing and happiness
Mobile banking has the potential to improve the well-being and happiness of your company’s employees in more ways than one.
One of the most important benefits is the ability to send cost-effective and convenient international money transfers.
More than 88% of the UAE population are foreigners. And as foreign workers, one of the most common priorities is to make enough money to send to their family and friends abroad.
However, due to their inability to access traditional bank accounts, many foreign workers have to depend on exchange houses to send money home. There are many disadvantages to this:
- High fees: The high cost involved in maintaining these exchange houses are passed on to the customers in the form of high transfer fees. For example, Ramesh Gari explained to Arab News how he has to pay $7 to transfer $600 to Nepal.
- Low exchange rate: To maximise their profits, these exchange houses will also provide exchange rates that are not in the best interest of expats.
- Inconvenience: Workers will have to travel some distance to access these exchange houses. If any mistake occurs in the process of transferring the money, they will need to make multiple trips. This costs time and money, two essential resources.
- Limited choices: Since there are only a few exchange houses accessible within a reasonable distance, there is little wriggle room to negotiate better fees or exchange rates.
With mobile banking, expats can not only send money abroad more cost-effectively, they can also do it from the comfort of their homes.
For example, in 2019, The National reported that international remittances cost on average 7.012% through cash, 7.11% through a bank account, 6.13% through a debit or credit card, and 4.9% through mobile banking.
Since the main motivation for foreign workers moving to the GCC is to provide money for their family and friends, ensuring that they have a cost-effective and convenient way to send money home will improve their wellbeing.
Cost-effective access to banking services
Without a bank account, the unbanked have to depend on formal and informal financial intermediaries to access certain financial services (e.g, mobile top-up, paying dues and subscriptions, transferring money locally, etc.)
These financial intermediaries will charge high fees to grant access to these services.
Similarly, without bank accounts, the unbanked don’t have the kind of records they need to access loans. Financial institutions that will offer such loans tend to charge higher interest rates to cover for the lack of financial records.
With mobile banking, those who cannot get a traditional bank account can access all the financial services they would have used expensive intermediaries for.
They will also have financial records with which they can access loans more traditionally.
Better sense of safety
Carrying cash around is unsafe. With a mobile bank account, your employees can receive their salaries and other payments digitally and carry out transactions from their mobile phones.
A higher sense of safety is crucial to the well-being of every person.
Better personal financial management
With a mobile bank account, your employees can better monitor their finances.
They can use mobile bank apps to create and follow budgets or check their balance or online statements within seconds to see how they are spending their money. With that information, they can better plan their finances and achieve their financial goals.
[NOW Money offers mobile bank accounts with debit cards to workers, all through a digital payroll system that allows them to easily receive their salary payments – even if they make less than $1,000/month. Contact us to learn more about how our smart payroll platform is helping broaden mobile banking access in the GCC.]
“The advantage of online banking is that you can pay bills superfast, and your account is automatically credited or debited for each deposit and payment, making it easier to stay on track,” said Suze Orman, a financial advisor and founder Suze Orman Financial Group.
Given the above points, it’s evident that the absence of mobile banking can greatly reduce the quality of life of a person.
2. Increases employee productivity
A study by Oxford University has shown that employee happiness can increase employee productivity by 13%.
Therefore, mobile banking, by improving employee well-being and happiness, can also increase their productivity.
For example, instead of taking time off work to make multiple trips to exchange houses or other financial intermediaries, the ability to easily transfer money and carry out financial transactions on their phones is a big plus for their work life.
In a survey conducted by NOW Money, we discovered that 75% of users login to our mobile bank app 10 times a month. Imagine if they had to do all those transactions offline.
3. Improves business productivity
A happy and more productive workforce is a plus for every company. A 2020 survey by Glassdoor revealed that the annualised returns of the top 100 companies to work for are 8.3% higher than the S&P 500.
More specifically, one NOW Money’s retail customers reported a 50% rise in sales performance when they decided to pay daily incentives on sales performance rather than a quarterly bonus.
This change was made possible because they could provide easy digital payroll services to their employees.
In essence, they saw the benefits of mobile banking in their bottom line.
Therefore, mobile banking can improve business outcomes both indirectly (through higher employee productivity) and directly (by supporting more frequent payments of incentives to employees).
4. Reduces inequality
The importance of mobile banking is not limited to employees and employers.
Academic research published in SSRN, a social science research depository, shows that “financial inclusion is significantly associated with lower income inequality” in both developed and developing nations.
That is, by increasing access to financial services, a nation can reduce the gap between the rich and the poor.
As we have seen, those who don’t have bank accounts have to pay more fees to access financial services even though they are the less privileged segment of society. A key financial service is loans; however, the lack of financial records means they have to obtain these at higher interest rates.
But with mobile banking, even those on the lower rungs of the economic ladder can access the financial services they need, including services that will improve overall wellbeing.
5. Enhances payroll management
When all your employees have a bank account that can receive salary and any other payments, company payroll management becomes far easier.
With some simple clicks of some buttons, HR and finance teams can automate and digitise company payment systems.
If you had to pay workers cash before, there is the extra stress of going to the bank or an ATM to withdraw cash. Apart from the stress, the insecurity of carrying cash around is evident.
If your employee uses a financial intermediary instead, they will charge high fees. Plus this opens them up to the possibility of fraud.
All these challenges are removed with a mobile bank account.
6. Ensures compliance with WPS regulations
Due to the challenges associated with paying by cash or cheque, the UAE, through the WPS (wage protection system), has made it compulsory for private businesses in the UAE and the Jebel Ali Free Zone (JAFZA) to pay salaries and wages electronically.
But how can you comply with these regulations when 32% and 19% of the working population in the UAE are unbanked and partially banked respectively, according to the Journal of Finance and Risk Management?
Well, that’s where mobile banking comes in, once again.
With NOW Money, a digital payroll platform and WPS agent in the UAE, your employees can open a mobile bank account where they can receive their WPS and non-WPS salary and/or commission payments.
Our mobile bank accounts require no minimum salary or balance and your employees can open them at zero cost. Also, they can transfer money locally and internationally in a few minutes at lower cost and with more convenience.
Other services, such as sending mobile recharges, that would have required intermediaries can now be carried out on the mobile app as well.
For you, this means you can manage your payroll process easily and flexibly. Since all your employees now have bank accounts, you will be able to comply with WPS and also send money more frequently at no extra cost.
Do you want to improve your employee wellbeing and enhance your payroll processing? Learn more about the NOW Money digital payroll platform or sign up at NOW Money to give your unbanked employees access to mobile bank accounts and enhance your payroll management.
Takeaways
- Mobile banking can help increase financial inclusion and reduce the number of unbanked and partially banked.
- Access to mobile banking can improve the well-being and happiness of your employees.
- Happy workers are more productive and more productive workers improve business outcomes.
- By enhancing financial inclusion, mobile banking can also help reduce inequality.
- Mobile banking can help improve your payroll management and ensure compliance with WPS.
