Changing the way we use money is one of the most promising and innovative ways that mobile technology is changing lives around the world. Mobile money is already being used by banks and mobile network operators to provide millions of unbanked consumers a way to store and access money digitally. For millions of consumers in developing countries, mobile money is transforming lives by providing access to financial services and the ability to pay and be paid electronically—sometimes for the first time in their lives.
The mobile money industry has rapidly expanded, particularly in developing economies in Africa and South Asia such as India, Bangladesh, and Pakistan. Today, there are over 182 live mobile money deployments worldwide—41 of these launched in the last year alone!—with another 98 expected to debut soon. Consumer adoption of these services in developing countries is growing significantly. The latest GSMA research estimates there are more than 81 million mobile money users globally. (The GSMA, or Groupe Special Mobile Association, develops public policy for the mobile industry.) In Kenya, Madagascar, Tanzania, and Uganda there are already more mobile money accounts than traditional bank accounts, and in 28 countries around the world there are more mobile money agent outlets than bank branches.
While mobile money services represent a revenue opportunity and a way to attract new customers for mobile operators and banks, the fact that most services are limited in geographic reach and are not interoperable—meaning consumers of competing mobile money schemes can’t send money to each other—will inhibit growth in the near term. According to numbers compiled by the GSMA in 2012 only six mobile money deployments had more than 1 million active users. While I would optimistically guess that the number is by now close to 10, clearly this is a highly fragmented industry in need of an open solution.
Currently 25 countries worldwide have more than one mobile money program and could benefit from interoperability. By allowing consumers to transfer money across networks, mobile financial services can achieve meaningful adoption. Consumers won’t have to work around the system by signing up for different services and carrying around different SIM cards.
Some mobile money programs are already benefiting from network interoperability. bKash in Bangladesh is a good example. Launched by BRAC bank in 2011, bKash’s consumer adoption rate has been significant: about 16% a month. The service has more than 4 million registered customers and 45,000 agents—nearly one for every two villages in rural Bangladesh. Because the service reach is not limited to just one mobile network but is offered by the four largest GSM operators in the country, penetration has soared: 98% of mobile users in Bangladesh have access to bKash.
In Nigeria, the next frontier for mobile money in Africa, FirstMonie is another good example of an interoperable bank-led program. Launched by the First Bank of Nigeria late last year, FirstMonie secured partnerships with the four largest mobile networks in the country—MTN Nigeria, Airtel, Etisalat, and Globacom. In its first year, FirstMonie’s target is to sign up 10 million consumers and 10,000 agents. Since the program allows for money to flow among the networks, my bet is that FirstMonie might just reach that goal.
On the consumer side, mobile money users are already becoming aware of how interoperability can benefit them, saving them time and hassle. A recent consumer survey conducted in six countries in Africa and South Asia identified the lack of interoperability with other mobile money services as one of the primary barriers for adoption—a point brought up by nearly 30% of the 2,500 survey respondents.
As the industry prepares for the deployment of interoperable programs—what I like to call Mobile Money 2.0—I see three key elements needed to ensure success:
- Economics: Create business models that benefit all stakeholders in mobile payments, including financial institutions, mobile network operators, agents, and consumers.
- Balanced Regulations: Strike a balance between regulation that protects consumers and domestic economies, abiding by international requirements without hindering potential growth, especially in multi-currency environments.
- Fraud Monitoring and Risk Management: Create sufficient security and reliability to foster consumers’ trust in mobile money services.
I believe that global payment networks like Visa can play an important role in bringing interoperability—along with scale, reliability, and bank-grade security—to mobile money schemes.
Over the past 50 years, payment networks have built the technology that connects consumers, merchants, financial institutions, businesses, and governments. By fostering an ecosystem where parties can collaborate and all stakeholders benefit, they have reached a degree of ubiquity that few industries have achieved. Existing networks can be leveraged to offer mobile money services to consumers in emerging markets with the same degree of payment security, reliability, and easy access that consumers in developed countries have long enjoyed. It will likely transform economies in many countries.
Hannes Van Rensburg (@Rensburg on Twitter) is Founder and CEO of Fundamo, a Visa company, and Head of Digital Solutions for Emerging Markets at Visa Inc.