Feature Story
Mobile Payments in the
Developing World: What Are They Telling Us?
by Andy
Hicks,
Senior Research Analyst, Communications, IDC CEMA
I recently spent a rewarding day judging the Mobile Money for the
Unbanked category for the GSMA Awards to be announced at the Mobile
World Congress in February. Although honor bound not to discuss the
finalists until the winners are announced on February 16, I can say
that I was impressed anew with the power of mobile as a channel for
services, over and above its vital role in communication.
Across the developing world, mobile networks are bringing basic
financial capabilities to people with no credit, no cash savings, and
in some cases no verifiable, unique tokens of identity. Most notably in
Africa and the Subcontinent, mobile payments are increasing asset
liquidity and fungibility – especially in rural areas
– and
bringing thousands of new participants into financial networks, which
in turn should eventually increase the average level of wealth.
From an African perspective, the twin giants of Vodafone and Zain would
seem to dominate mobile payments. But as the entries showed, there are
still enough differences of approach as well as unserved populations
and use cases that the market for mobile finance is by no means
saturated. And hopefully the maturation of these services in the
crucible of developing markets – where literacy is low, bank
accounts a rarity, and handsets often capable only of 2G voice and SMS
– can influence the usability and spread of mobile financial
services in developing markets as well.
IDC will be publishing a detailed report on mobile payments in MEA
later in 2010; what follows are some of the overarching issues that
inform our interviews with service providers and financial
clearinghouses.
- The mobile phone is a token of identity. To
customers
in the developed world, the idea of the mobile phone as a financial
terminal can be a scary one: people lose their phones, have them
stolen, or break them; how much information and access to your money do
you want to have on that device? But customers with no government ID
are happy to have a personal device that enables them to send payments,
and governments like mobile money because it helps them regulate
financial transactions and move their countries away from traditional,
undocumented financial networks. In Afghanistan, for example, police
now receive their salaries via mobile phone transfer rather than
through a series of middlemen who each took a cut. Some police
employees only learned how much they were supposed to be making once
mobile transfers began.
- Simple technology can accomplish great things
with
the right service design. A time-tested way to go broke in mobile
technology is to try to duplicate Japanese services elsewhere. Despite
the Japanese embrace of near field communication, mobile phone wallets
are still in the proof of concept page in most of the rest of the
world. Compare that limited uptake with the millions of developing
world mobile users who use simple services like SMS and cell broadcast.
While developed world financial regulations are often more strict,
service designers should still look at emerging market services to see
what design principles they can borrow.
- Mobile payments may not be a profit center.
Safaricom
Kenya’s M-Pesa was unprofitable for months after it became an
internationally remarked success, and may not bring in much marginal
revenue even today. But successful mobile payment networks can greatly
deter churn, and train whole generations to think of the mobile phone
as a service platform.
- Partnering with banks can help mobile payments,
but
also weigh them down. Traditional banks and financial services
platforms are trying hard to insert themselves into the mobile payment
chain, and some mobile SPs are getting quasi-bank certifications. But
even if local regulators require a banking relationship, study closely
whether the traditional trappings of a bank account – from
bank
card to account number – will help or hinder uptake of your
service. If regulators view your mobile service as a stepping stone to
a traditional banking relationship, how will you be rewarded for
bringing customers into that system?
We are planning our mobile payments research now. Clients who are
interested in our upcoming report or mobile payments providers based in
CEMA can contact me at ahicks@idc.com
to inquire about our research or suggest an interview.
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