If you have ever attende a Mobile Money Congress you will invariably meeet an eclectic group of high profile people from the Banks , Telcos , NGO’s , Govt , Vendors to discuss the ramifications of Mobile Money for the unbanked population. For the uninitiated a Mobile Payment platform is a piece of complex middleware ( aka Transaction Engine ) that is built on Java to facilitate transactions on mobile phones using SMS , IVR , USSD or WAP. It sits like a glue on hardware servers to manage accounts, offers optimal user interfaces, processes transactions, and provides the full suite of resources required for a mobile money services. Sometimes it is used as a payment gateway to bring mobile money to an existing financial service.
The mobile payments marketplace is a complex one. The range of players involved in the mobile payments ecosystem; its integration with the online world; and its role in both remote and point-of-sale (POS) payments all suggest that the marketplace will continue to evolve rapidly. Mobile money displays the characteristics of a platform bringing together financial services providers and clients, and providing them a core functionality which they can use to transact, and which can be incorporated into different financial products. As a network infrastructure, and as a platform for financial services innovation, mobile money appears will radically reconfigure how retail finance is done in developing countries.
GSMA estimate s that overall, mobile payment services are expected to reach US$245b in value worldwide by 2014. At the same time, mobile money users are expected to total 340m, equivalent to 5% of global mobile subscribers.To date, many of the most successful services worldwide have originated in developed Asia — where mobile contactless services are well established — alongside money transfer services in emerging markets such as the Philippines and Kenya. Smartphone penetration allied with a more mature e-commerce market is producing a new wave of innovation in handset payments.
Mbanking is predicted to reach 500 million + users in the next three years. Bearing in mind that this number currently excludes the 2.5billion unbanked consumers with no access to traditional financial infrastructure, the actual figure for penetration levels by this time is likely to be far higher. Indeed, today’s 141million mpayment users are only the start with mobile transactions predicted to grow to $1trillion globally by the same year. Even the green shoots of mCommerce can be seen, with 500million people already using mobile devices as transport tickets and over 863 million NFC enabled phones expected in circulation by 2015.
Banks and financial institutions launching mobile wallets in the immediate future should expect to enter a hotly contested market, crowded with own-brand solutions that are limited to the delivery of proprietary services only. The majority of financial institutions will, in the short term, attempt to develop their own proprietary wallets in a partner-independent manner as we have seen in some countries. Only when a secure element (SE) is required, or when core functionalities become too difficult for financial institutions to achieve alone, are they likely to open their solutions and seek to cooperate with other stakeholders. The number, breadth and variation of mobile wallet solutions set to come to market is going to make getting to grips with the technology a challenge for the end-users. This means that banks and financial institutions should think very carefully about their chosen structure and approach to market.
There is no doubt that mobile money is a “catalytic platform.” The variety of new models and approaches being tried could portend a fairly fundamental realignment of the cash-based financial sector moving from all cash transactions mediated by expensive retail infrastructure to greater use of electronic payments through cell phones. Outsourcing cash handling will not only allow financial service providers to serve their clients at lower cost per transaction but also allow them to get more value out of their existing front office infrastructure and staff as they focus on more sophisticated tasks such as customer service, cross-selling, risk evaluation, etc. as opposed to cash handling. On the client side, customers will gain access to a dense network of transaction points, greatly reducing their costs to access financial services. And once clients are on the financial system, and able to transact at low cost with financial service providers, the platform enables a whole new set of services and delivery models which were not previously possible or profitable.
Mpayments will continue to flourish as trust and confidence grows – firstly for traditional transactions, such as bill payment, and then eventually facilitating mobile unique applications such as transfers using mobile phone numbers or NFC proximity payments. As Mobile Money matures, mCommerce services will rapidly transform the consumer experience through seamless ecosystems delivering new levels of service, convenience and satisfaction. The consumer revolution and increasing competition will fuel the growth of Mobile Money from complementary channel to strategic keystone, delivering connected, contextual services that were once unimaginable but now highly in demand.
Operator-led money transfer services have gained traction due to factors such as the high penetration of handsets compared to bank accounts and benign regulatory environments. However, opportunities have yet to be exploited in many developed existing payments channels. In these countries, the mobile channel is more closely connected with the development of electronic payments, while the disparity in coverage levels between banking and mobile infrastructure in emerging countries gives the mobile channel a more singularly transformational role.
Mobile Money is high volume low margin game. We are talking 2 to 3 % per transaction not 10 to 20 %. Since mobile money is about financial inclusion a high per transaction fee excludes the unbanked at the bottom of the pyramid. Understanding and segmenting the target market is critical before rolling out a service. Payment solutions must be carrier grade , scalebale and secure with the functionalities desired by the end user. A motivated Agent network is vital portion of the value chain.
Newer technology platforms to acclerate Finicial inclusion ( such as Bitcoin / Blockchain ) are also in the works .It requires a huge amount of investment for traditional banks to bring their services to emerging markets. Digital finance as financial services delivered over digital infrastructure might be a solution. The blockchain is the new foundation of economic progress, and this looks quite like a financial revolution, by the way.
By using distributed networks of computer users to record and secure transaction data almost instantaneously, the blockchain has the potential to bypass the need for correspondent banking and other intermediaries for international money transfers. However, for those who lack an entrée into basic financial services, blockchain’s accessibility and scalability could make it a practical gateway to the global economy.
Sadiq Malik ( Telco Strategist )