Cell phones serving as electronic wallets

SAN MIGUEL, Philippines - It's Thursday, so 18-year-old Dennis Tiangco is off to a bank to collect his weekly allowance, zapped by his mother - who is working in Hong Kong - to his electronic wallet: his cell phone.

Sauntering into a branch of GM Bank in the town of San Miguel, Tiangco fills out a form and sends a text message via his phone to a bank line dedicated to the service.

In a matter of seconds, the transaction is approved and the teller gives him 2,500 pesos (about $54), minus a 1 percent fee. He does not need a bank account to retrieve the money.

More than 5.5 million Filipinos now use their cell phones as virtual wallets, making the Philippines a leader among developing nations in providing financial transactions over mobile networks.

Mobile banking, which also is catching on in Kenya and South Africa, enables people who do not have bank accounts to transfer money easily, quickly and safely. Such services are spreading in the developing world because mobile phones there are much more common than bank accounts.

The system is particularly useful for the eight million Filipinos - 10 percent of the country's citizens - who work overseas and send money home, such as Dennis Tiangco's mother, Anna Tiangco. Previously, she sent money via a bank wire transfer, which cost $2.50 and took two days to clear. The mobile-phone method costs only 13 cents and is nearly instantaneous.

"The good thing here is, wherever my children are, they can text me and I can send money immediately," she said by telephone from Hong Kong.

Consumers also can store limited amounts of money on their cell phones to buy things at stores that participate in the network, although this practice is not yet widespread in the Philippines.

Many more Filipinos use their phones to send airtime values, called "loads," to prepaid subscribers. A parent, for example, can send a 60-peso load to replenish a child's cell phone, charged to the parent's account.

While Japanese and South Korean consumers have been using cell phones as virtual wallets for several years, those systems use a computer chip implanted in the handset that allows people to buy things by waving the phone in front of a sensor. The Philippine system relies on simple text messages.

The 41 million cell phone users in the Philippines are avid texters.

The Philippines' two biggest mobile-service providers, Globe Telecom Inc. and Smart Communications, have harnessed this penchant for text messaging to enable consumers to enter the world of e-commerce.

Tapping into the cash flow from overseas Filipinos - who sent home $12.7 billion last year - Globe and Smart forged partnerships with foreign mobile providers and banks, as well as with local banks and merchants, to create a network that allows users to send and receive cash internationally.

When Anna Tiangco wants to send cash home, for example, she goes to a branch of her local provider, Hong Kong CSL Ltd., where a clerk credits her cell phone with the amount she has brought with her. She then transfers the money to family members via text messages - in essence instructing her providers to deduct money from her balance and send it to the recipients she indicates.

If a cell phone loaded with cash values is lost or stolen, the money cannot be tapped as long as the personal identification number is not revealed. Control over the funds can be restored with a replacement SIM card from either mobile provider.

The system, said Rizza Maniego Eala, president of G-Xchange, Globe's subsidiary in charge of its G-Cash money-transfer service, was "built for remote payments and for the unbanked markets."