Sunday, January 6, 2013

My Five Mobile Money Predictions for 2013

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, or leave a comment on the blog. 

- Brad Jones