As mobile internet has snowballed over the last decade, one service in particular has been growing in near-parallel strength across the globe. Mobile money services are being adopted by mobile network operators worldwide, as they look to expand their service portfolios and drive new revenues.
Although many banks across Europe and the US have implemented online banking services, mobile money services are often seen as little more than an extra convenience. The real demand and urgency for mobile money services is therefore found in emerging markets, where large sections of the population remain underserved by traditional banking facilities.
An important phenomenon
In the last year, Africa has seen a wealth of developments and deployments around mobile money, a number of which have been facilitated by Orange subsidiary, Orange Money.
Thierry Millet, VP of mobile money at Orange, highlights the speed and scale of this growth.
"There are more than 100 mobile money programmes operational today in the world, which is a testimony to how much of a wave it's created," he says. "It is developing very fast, but it is not just hype – it's an important phenomenon that should be looked at very seriously."
Mobile money is becoming an increasingly attractive option for carriers, and even in countries where there are only three or four mobile money service offerings, competition is rife.
Airtel Africa is another key player in the African mobile money market and Chidi Okpala, director and head of Airtel Money in Africa, says that telcos are starting to realise the benefits of investing in the mobile money business.
"There is hardly a telco in Africa without a mobile money offering," he says.
Airtel research shows that out of 54 African countries, only in seven do 40% or more of the population have access to financial services. In the other 47 countries, less than 20% of the population have access to financial services, which provides a clear opportunity for mobile money services.
"To put this in perspective, Africa has an average of three branches and five ATMs per 100,000 people, while Spain has 95 and 120, and Portugal has 51 and 109 respectively," Okpala says.
"This inherently creates an opportunity to leverage mobile telephony as a means of extending financial services to the majority of Africans."
Mobile money is therefore helping to resolve a fundamental issue in most African countries. Companies such as Orange have gone one step further, targeting countries where the banking penetration rate is under 10%.
"We have created an opportunity to develop banking penetration in an innovative way and to offer it to consumers which were deprived from access to financial services. This is what it's all about," Millet concludes.
Calling all operators
Besides Orange and Airtel, a number of other global operators have turned to Africa for mobile money opportunities.
Last November, Airtel entered into an agreement with Belgium's BICS to facilitate mobile money transfers for Airtel Africa customers across the continent. BICS's HomeSend solution is a global service, designed to connect service providers, banks and other financial organisations by facilitating real-time transfers of cash, credit card payments or direct bank transfers.
"The partnership with BICS is another step by Airtel Money to deepen financial inclusion, expand cashless ecosystems and facilitate intra-Africa fund flows across our 17 markets," Okpala says.
Airtel Money services are live in 15 of these 17 markets, while the remaining two will go live by the year end.
BICS has been focussing heavily on mobile money deployments in Africa over the last few years, and recently extended its overall presence in the region by opening offices in Ghana, Kenya and South Africa.
Last October, BICS joined forces with Xpress Money to help facilitate money transfers to mobile subscribers in the region and Daniel Kurgan, CEO at BICS, indicated the scope for such a service in Africa. The company believes the agreement will help open up new remittance corridors and expand the scope of international money transfers.
"This implementation has made it possible to send money easily and rapidly through Xpress Money's agents to mobile wallet users in Africa," he says.
The service effectively connects Africa to the international network of mobile money transactions.
Safaricom is another notable player in the African mobile money market, following the establishment of its M-Pesa platform in Kenya in 2007. Safaricom's M-Pesa platform successfully introduced the concept of mobile money to the telecoms market and the service has since escalated impressively.
"We are the pioneer of mobile payments," says Sylvia Mulinge, general manager of the enterprise business unit at Safaricom. "It was a gamble but it has proved a major success. The first few years were certainly a challenge as you have to make people trust the system and trust how it works, but once we were able to do this and educate the Kenyan people, it experienced massive adoption."
Network know-how
Surprisingly the surge of mobile money services has had minimal impact on networks.
"Mobile money, like any payment, is very much a transaction-based process," Millet explains. "And when you evaluate the amount of transactions compared to the total data and voice traffic, to be honest, the percentage of resources consumed is not really significant. It's not really impacting the network."
Okpala says that mobile money in fact delivers a huge number of benefits to the GSM business.
"It makes the GSM customer a lot stickier, thereby minimising customer churn and reducing the cost of airtime sales," Millet explains.
Additionally, Okpala notes that Airtel customers with mobile money have a significantly higher ARPU (average revenue per user) than those without.
However, Orange's Millet does note that overall network speeds are an increasingly important requirement for mobile money services.
"For example, how much real-time service you achieve can be a very important differentiating factor for the mobile money service," he says.
Moving on with mobile money
So while mobile money has evidently found its feet in Africa, where will it become established next? Although markets with similarly low rates of banking penetration are the next obvious choice, Okpala notes that there is also a need in more developed markets, like Europe.
"A sizeable number of Europeans do not yet have bank accounts and the mobile phone becomes a veritable tool to extend financial services to them," he says. "And even for those with banks, mobile money provides an extra convenience relative to the bank accounts, being able to offer financial services on the go."
The only difference, Okpala says, is that the result would not be quite as "explosive" as in a region such as Africa.
That said, emerging markets do have the winning potential for such services and Okpala expects mobile money to take off in frontier markets with similar key indicators to Africa.
Myanmar has recently been showcased as a greenfield for telcos following its much-anticipated spectrum auction, which saw operators Telenor and Ooredoo secure licences in the country. In a country where banking penetration levels are typically low, the foundations for establishing mobile money services seem ideal.
"I think fundamentally there is a case for mobile money programmes everywhere where the banking penetration is quite low – this is really the determining factor," Millet suggests.
Millet names the Philippines and Pakistan as other potential markets where mobile money could really take off, but for now, Orange has its sights set on the Egyptian market.
Orange Money, through its subsidiary Mobinil, is looking to roll out its mobile money service – named Mobicash – in Egypt, and has started a pilot phase. Millet does not expect the roll-out of the service to be easy.
"There will be competition between our service and the proposition from Vodafone Egypt," he says.
Vodafone Egypt launched a mobile cash transfer application in June this year, in partnership with Egypt's Housing and Development Bank. The service is designed to quickly and efficiently transfer money between companies, but does not apply to companies and banks seeking to transfer monies stipulated through contracts.
Millet expects a lot of development in mobile money services and believes it is the next innovative step for carriers and enterprises alike.
"We are active in this field of innovation and it will continue," he says. "This has to be looked upon as a development for the next few years, by no means should it be analysed as though it will be stable."
Mobile money around the world
Across the world, mobile money is starting to find its feet in financially underserved countries. Capacity looks at those who are starting to make developments, and those to watch in the coming years:
• Vodafone India has launched the M-Pesa mobile platform in Goa, India. The service is expected to empower the unbanked and under-banked population by providing them with easy access to financial services. The company has partnered with ICICI Bank for the service, which has already been implemented in West Bengal, Bihar, Jharkhand, Rajasthan, Uttar Pradesh and Delhi since December last year.
• Peru’s telecoms regulator Osiptel has approved a number of parameters to pave the way for the launch of mobile financial services in the country. The Standard Relating to Access of Electronic Money Issuers to Telecommunications Services is expected to allow for the deployment of financial services over telecoms networks. The legislation will ensure a level playing field for the services and Osiptel has the power to monitor any deals agreed between financial service providers and network operators for the service. The authority would be able to intervene to set prices and terms should the companies fail to reach a mutual understanding within 60 days.
• Digicel Fiji has transferred its mobile money service to New Zealand remittances operation, KlickEx Pacific. Starting on October 5 2013, KlickEx took over the delivery of mobile transfer services to remitters in Australia and New Zealand to transfer money to customers in Fiji, Samoa and Tonga with a Digicel mobile money wallet. Digicel Fiji says it will continue to work with long-term partner KlickEx to ensure that its financial expertise and commitment to the Pacific region drive the service forward.
