M-Banking Liquidity Management
This note discusses ways to manage liquidity issues in mobile banking (m-banking).
M-banking works through the use of float accounts. Each agent is required to maintain a balance of electronic money in their agent account. When a customer exchanges cash for e-money, the agent’s e-money balance reduces by the amount of the transaction, and the customer’s e-money value increases. Similarly, when a customer makes a withdrawal, the agent receives e-money and pays out cash, increasing its e-money balance by the amount of the transaction. Ensuring that agents have either e-money or cash when customers require it is the essential challenge of m-banking liquidity management. Emerging lessons demonstrate that this issue can be managed by:
- Selecting agents who handle large amounts of cash;
- Selecting multiple agents in a given location;
- Selecting agents with multiple outlets;
- Encouraging electronic payments for business-to-business transactions;
- Linking to ATM networks;
- Evolving continuously.
The note also discusses various issues with regard to liquidity management such as using m-banking for microfinance, pricing for liquidity, social payments and managing liquidity during scale up.
