A study from the GSM Association in June 2011 said 80 percent of global mobile financial transactions were made in East Africa. Mobile money leader M-PESA is transacting over US $1 billion every month through its Safaricom Kenya service.
Wireless Intelligence reports over 70 mobile money systems have been launched in the Middle East and Africa in the last 5 years, equating to over 50% of deployments globally. At a glance one would say yes, mobile payment systems have hit the mainstream in the Middle East and Africa (MEA).
All the ingredients are in place: approaching 1 billion mobile subscribers, of which 90 percent are prepaid and 20% have bank accounts; high accessibility through the use of ubiquitous USSD and SMS; a consolidation of mobile money vendors; and at least one mobile money service already active in most countries.
Yet McKinsey reported in May that according to their accepted metrics, only a fraction of these deployments – 5-10 percent – has reached a sustainable scale. Even leaders such as M-PESA in Kenya, MTN Uganda, Vodacom Tanzania, and FNB in South Africa see most activity in simple person-to-person (P2P) transfers and to a lesser degree payments.
So the evidence suggests mobile payment systems have not yet hit the mainstream in MEA; but the reasons why – and the solutions – are becoming clear.
Many MEA mobile operators and banks continue to treat mobile financial services as an add-on to their core service offering. For mobile operators faced with falling voice revenues and increasing data delivery costs, viewing mobile money as a value added service is a recipe for continued decline.
Speaking recently at CommunicAsia2012 Summit, Don Peppers, founding partner of Peppers & Rogers Group claimed “the average telco is dead.” Like SMS before it, when every mobile operator is offering mobile money transfers, it is no longer a value added service.
For mobile payments to hit the mainstream mobile operators must first regard mobile financial services as core infrastructure, as important as intelligent billing. With the corresponding investment, mobile wallet, point-of-sale and converged services can deliver long-term value to a burgeoning subscriber-base eager for financial inclusion.
In mobile financial services, a mobile operator’s biggest competitors aren’t just other mobile operators; it is cash. To grow a service offering to a sustainable scale, it is imperative mobile operators provide an end-to-end suite of services that attract large amounts of money into the network and then effectively keep it in circulation.
Excellent initiatives to deposit wages, government disbursements, and more recently international remittances directly into mobile money wallets are gaining traction; however in most instances, the money is then being withdrawn as cash from agents or ATMs at first opportunity. For many subscribers, the use of mobile money for payments beyond P2P transfers is an inconvenience, or not available as a formal service.
Operators are now recognizing that in order to compete with cash they need to do more than provide money transfer facilities and a large agent network.
Vodacom Tanzania Managing Director, Rene Meza, recently announced airtime bonus rewards linked to subscriber M-PESA transactions. It is the establishment of rewards and loyalty schemes in conjunction with efficient point-of-sale merchant solutions that will, for example, see Vodacom Tanzania lift their current 30 percent M-PESA subscriber penetration to 60-80 percent.
Mobile money agents are a mobile operator’s on-the-ground brand champions, yet they are faced with several challenges that make it difficult for them to provide a great customer experience.
Agent liquidity – having sufficient reserves to take deposits and offer withdrawals – is one such problem. Liquidity issues can be overcome through micro-finance or removing much of the need for subscribers to deposit and withdraw cash. Mobile operators should encourage large deposits via 3rd party institutions (employers and governments), and complement that with a seamless point-of-sale experience for mobile money transactions with merchants.
Brad Jones of Mobile Accelerate accurately summarizes that “a major inhibitor in growth in mobile money is the clunky process of paying for goods or services at a merchant. The process of having to open a mobile session and then enter merchant or agent identification or phone numbers, and PIN codes either side of the transaction, makes the entire process easily over 60 seconds. This is frankly too long to be attractive to either the consumer or the merchant, and the friction of the experience leads people to pay by cash rather than mobile.”
Understanding this weakness in mobile money, Digicel recently deployed VeriFone mWallet Services in the Pacific. Digicel have shown that NFC is an ideal solution to enable quick and easy “beep-n-go” mobile money wallet transactions at the point-of-sale. Transactions for goods and services that previously took over a minute are now completed as quickly as traditional card swipe transactions. The service is available to all Digicel subscribers today through the use of NFC tags or chips linked to their mobile money wallet – and this in a market with modest ARPU, rudimentary feature phones and a largely unbanked population.
Along with a successful agent experience, interoperability is often seen as the elixir for mainstream mobile payment success. But while mobile operators, banks and over-the-top providers debate who owns the subscriber, the rapid roll-out of mobile financial services continues.
Mobile operators, particularly in MEA, perhaps rightly argue that the subscriber is theirs, they have the relationship, they hold the value, and the subscriber trusts them. In this region, the likely scenario is that mobile operators will continue to build their own services and then, when the market or regulation demands, they will develop cross-operator agreements – with the associated interchange fees.
The mobile operator’s strength in the mobile financial services space is something that even the biggest global player in over-the-top Internet services – Google – has had to accept. Reports have stated that Google Wallet is set for a “re-boot” as they consider better cooperation with operators. For Google Wallet to be a success in MEA – where for most Internet users, their strongest commercial relationship is with their mobile operator – working with the mobile operators for the prepaid element will likely be a necessity.
Gartner is forecasting mobile payment transactions to surpass US $171 billion in 2012. The heavyweights of the global payment and telecom industries have begun to show their hands in MEA. From this landscape of opportunity strategic partnerships and accepted mobile payment models are emerging.
By continuing to innovate, the Middle East and Africa is reaching the tipping point of mainstream mobile payment success and mass financial inclusion. And we can look forward to these emerging markets setting the standards for mobile financial services in the rest of the world.
Ian Allan
General Manager, Marketing, Mobilis Networks Ltd.
Ian Allan is a technical product and marketing strategy professional in the telecommunications industry. Ian carries extensive knowledge of user experience, mobile, multimedia delivery and real-time transaction processing in emerging markets.
Ian has worked in diverse areas including highly scalable converged prepaid and postpaid billing solutions, real-time charging, Intelligent Networks, IMS multimedia switching, IP and mobile messaging, value added services, transactional modelling and marketing and business development strategies for mobile payments in emerging markets. Ian is also active in product development for emerging market mobile financial services including, non-Secure Element NFC for mobile money, device agnostic real-time mobile payments, international remittances into mobile wallets, point-of-sale UX, transit and loyalty solutions and biometric authentication.
Ian is excited by the user experience, designing solutions that meet the market, innovation in payments, and widespread financial inclusion in emerging markets.
About Mobilis Networks Limited
Mobilis is an international software applications company providing highly scalable and secure mobile wallet, mobile payments, mobile financial services and mobile messaging and billing services to mobile operators and service providers globally.
Mobilis is particularly active in the emerging markets of Middle East and Africa and is deploying innovative mobile financial services and contactless point-of-sale solutions for mobile money wallets across the region.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More