As the memories fade of a short holiday and work starts to
ramp up again for the year, I thought it might be interesting to document my
five predictions for mobile money in emerging markets for the year. If nothing
else, it will be interesting to look back in 12 months to see whether I was
accurate, or wildly off the mark! So, at the risk of looking foolish in 2014,
here are my five predictions for the year.
- Pakistan and Bangladesh will become the new stars of mobile money.
- Agent-initiated over the counter transactions will be recognised as the ‘killer app’ in mobile money.
- Mobile money interoperability will become a reality in some markets.
- Google will launch mobile money in more emerging markets.
- There will be further platform consolidation in mobile money, potentially leaving only three to four big players.
2013 will be the year people stop talking about M-Pesa, and
start talking about other successes in mobile money. I don’t think I have been
to a conference in the last five years where M-Pesa wasn’t the center of focus.
All credit for what has happened in Kenya, but the industry desperately needs
more stars, and this year I think we will start to see them. We have a huge
growth market for mobile money emerging in Bangladesh, with many banks taking
advantage of the regulations to launch agent-banking services. A CGAP
blog post and Bangladesh
central bank report from July last year were both cautious on the success
of mobile financial services at this early stage, however I hear that some of
the first movers are experiencing extraordinary growth in customer numbers, and
more importantly transaction volume. Pakistan is doing exceptionally well, and
in the last quarter of 2012 there were over 31
million transactions and US$1.5 billion in payment volume across the entire
branchless banking system. My understanding is that a lot of this volume is
coming from Easy Paisa given their position in the market (around US$1.2
billion payment volume in 2012 with 60 million transactions), and this leads on
to my second prediction.
Over the counter transactions are becoming the ‘killer app’
for mobile money. Much of the growth for Easy Paisa has come from
agent-assisted transactions for bill payments and cash transfers, with over
160,000 transactions every day and around 4 million unique customers per month.
Essentially a customer of the service does not need to be registered or have a
mobile phone, but can complete a transaction with the agent initiating the
transaction on his or her own mobile phone. Of course, KYC and AML processes
need to be in place to ensure the transaction complies with regulation, however
the process removes the friction of having to register as a customer, and
provides the agent with immediate revenue and transaction volume. WING in
Cambodia has seen spectacular growth in the last 12 months since the
introduction of an over the counter cash transfer product that essentially
allows the service to operate as a domestic Western Union system (take a look
at their great TV commercial here). The benefit of the
over the counter service is that it helps to create a highly trained and
incentivized agent network. The challenge is eventually moving customers onto
individual accounts, although it is far preferable to be doing this with an
existing revenue base.
Interoperability will become a reality in some markets.
There has been much talk about the benefits of interoperability in mobile
money, but not a great deal of action as yet. Visa announced the launch of Mobile
Prepaid in November 2011, with plans for MTN to launch the new product in
Nigeria and Uganda. Over 12 months later we are yet to see this launched,
however there was a recent announcement on the launch of mVisa
in Rwanda, where customers will be able to use shared agent networks of
mobile money providers. This is a very interesting project as Visa has the
potential to bring years of experience in developing rules and regulations for
interoperability as well as technology solutions. The industry should take a
close look at how this program develops, as there will be many lessons to be
learnt, particularly on commercial models for interoperability.
Watch out for Google. I have blogged previously on the launch
of Beba in Kenya. What I really liked about this product is that it uses
contactless technology in a very smart way by removing the friction of two
major issues seen in both developing and developed markets. Firstly, the
contactless acceptance infrastructure, or lack thereof, and secondly, the lack
of mobile phones with contactless capability. Google leap-frogged these two
issues by firstly picking an industry that caused problems for customers.
Over-charging and theft in the public transport industry meant that customers
of and company owners of buses were both motivated for change. Google issued
the bus drivers mobile phones with contactless readers and issued customers
cheap plastic contactless cards that they can top up at agents. By all accounts
the service is well received, and Google have plans to expand into Asia and
other parts of Africa pending regulatory approvals. So my prediction is by the
end of 2013 the launch of mobile payment systems by Google in emerging markets
will be a talking point.
There will be further consolidation in the platform market
for mobile money. Over the course of the last few years we have seen Visa
acquire Fundamo, SAP
acquire Sybase, and most recently Tech
Mahindra acquiring 51% of Comviva. Visa and MasterCard have developed
outsourced services similar to debit and prepaid processors for mobile money. The
platform industry is shifting away from license and maintenance revenue, to
transaction-based models with centrally managed platforms that host a number of
entities. As the industry shifts, it will become harder for smaller companies
that are less well capitalized to continue to invest in development of their
technology, and to fund the cash flow needed to support their business with the
absence of large license fees. Whilst there will always be some clients who
prefer to host their own technology, in 2013 we will see the continuation of a
shift from license models which will cause some smaller providers to look for
some sort of exit, either through merger or acquisition.
So they are my predictions for 2013 in the world of mobile
money. I would be pleased to hear your predictions as well, or whether you
think I am wildly off the mark. Feel free to email me at brad@mobileaccelerate.com, or leave
a comment on the blog.
- Brad Jones