Mobile Money Remains Largely Confined to Developing Markets That’s the inescapable takeaway from the latest State of the Industry report just released by the Mobile Money for the Unbanked (MMU) program.
And yet most services remain in sub-Saharan Africa Mobile Money Remains Largely Confined to Developing Markets:
run by the GSM Association (GSMA), the organization promoting the GSM mobile phone system, and supported by companies like The Bill & Melinda Gates Foundation and MasterCard. The mobile money industry continues to grow very rapidly and expand into multiple regions, with 52 markets now boasting two or more mobile money services.
Researchers tell us that in 2013, airtime top-up and peer-to-peer (P2P) transfers, the domain of Kenya’s M-Pesa—the biggest mobile money success to date—remained the most widely used services Mobile Money Remains Largely Confined to Developing Markets.
And there is nothing particularly inexplicable about Africa’s continued dominance of the mobile money market. As we’ve noted many times before, consumers in the US and other developed markets have never really warmed to M-Pesa-like money transfers, simply because we have too many other payment options that are either more convenient, cheaper or otherwise more convenient Mobile Money Remains Largely Confined to Developing Markets. .
However, this is not the case in most of Africa, where people in rural villages are cut off from even the most basic banking services. This is why M-Pesa has been so successful in Kenya and other developing countries. M-Pesa basically brought basic banking to people who never had it Mobile Money Remains Largely Confined to Developing Markets.
So it’s little surprise that the MMU report now tells us that mobile money services are spreading like wildfire across the developing world. Let’s take a look at it.
Africa still leads the way
But first, make sure we’re on the same page. There are many definitions of mobile money and it’s easy to get confused. So MMU’s mobile money services include those that Mobile Money Remains Largely Confined to Developing Markets:
Offer at least one of the following services: P2P transfer, account payment, bulk payment, merchant payment and international transfer.
Rely heavily on a network of “transaction points” outside bank branches that make the service available to the unbanked and underbanked. Perhaps the best example is the vast network of M-Pesa agents, which consists mostly of small vendors, where M-Pesa users go to buy virtual credit (e-float) that is loaded onto their phones and can then be transferred to other M-Users Pesa or redeem the e-float sent to them Mobile Money Remains Largely Confined to Developing Markets.
Offer an interface to facilitate transactions for agents and/or users that is accessible on basic mobile devices.
As we learn, mobile money services that meet this definition are now available in most developing and emerging markets. At the end of 2013, there were 219 services in 84 countries, compared to 179 services in 75 countries at the end of 2012. Latin America saw the strongest increase in the number of new mobile money services – a 53 percent year-on-year increase. Yet at the end of 2013, 52 percent of all live mobile money services were still located in sub-Saharan Africa Mobile Money Remains Largely Confined to Developing Markets.
We learned that the mobile money industry is increasingly competitive, and this is especially true in sub-Saharan Africa, as one would expect. This is, after all, the leading mobile money region, with various such services now available in 36 out of 47 countries.
We’re tod that most of the new services launched in 2013 took place in markets where mobile money services were already available. There are now 52 markets with two or more mobile money services, up from just 40 at the end of 2012 and 33 at the end of 2011. 27 markets had three or more such services and nine countries were experiencing these alternatives for the first time. financial services: Bolivia, Brazil, Egypt, Ethiopia, Guyana, Jamaica, Tajikistan, Togo and Vietnam Mobile Money Remains Largely Confined to Developing Markets.
Stronger competition should translate into more options, and mobile money providers are already increasing their investment, as shown in the figure below.
Competition is increasing
Mobile usage on the rise
As of June 2013, more than 203 million mobile money accounts were registered worldwide. Almost half of that total (98 million) was in sub-Saharan Africa – more than double the total number of Facebook users in the region. East Africa alone – the stronghold of M-Pesa – accounts for 34 percent of total registered accounts.
In addition, at least nine markets – Cameroon, Democratic Republic of Congo, Gabon, Kenya, Madagascar, Tanzania, Uganda, Zambia and Zimbabwe – already have more registered mobile money accounts than bank accounts, up from just four last year. In these countries, researchers remind us that the mobile money industry has made financial services more accessible to more people than the traditional banking industry. Here’s how the number of newly registered mobile money accounts has grown worldwide since 2011 Mobile Money Remains Largely Confined to Developing Markets Mobile Money Remains Largely Confined to Developing Markets:
And here is the breakdown of the number of registered and active accounts by region:
Low levels of customer activity, we’re told, is a persistent problem in the mobile money industry. So how do you increase customer activity and therefore average mobile money revenue per user (ARPU)?
Researchers reasonably suggest that the most important interaction may be at the time of registration. This is when the customer learns (or should learn) about how the service could fulfill a particular need.
Customers with a positive experience during the sign-up process—perhaps because the sales representative took the time to thoroughly explain the service—may be encouraged to actually use the service the same day. To test their hypothesis, the researchers looked at data from “one anonymous operator.” Here’s what they saw:
the data reveals a huge difference in future activity between customers who transact at sign-up and those who don’t. The former are more likely to become future active customers (26 percent more likely) and have significantly higher mobile money ARPU (95 percent higher) than consumers who leave after signing up but without a transaction.
Accordingly, the authors approach offering operators specific ideas on how to increase the likelihood of a customer transacting at the point of registration, but these may not concern us here, and you can view the suggestions in the report Mobile Money Remains Largely Confined to Developing Markets Mobile Money Remains Largely Confined to Developing Markets.
So once again, mobile money remains very much a developing world phenomenon for the reasons I’ve already mentioned. This state of affairs is unlikely to change, even if the number of users—both of the registered and active variety—what.
Achieving fully interoperable mobile money services that meet customer needs remains a goal for both the industry and the financial inclusion community.
Despite the complexity of the concept, not to mention the fact that the pronunciation of the term can be a tongue-twister, interoperability is quite common. Interoperability is happening every day in emerging markets, sometimes more so than in developed economies.
New evidence from six markets sheds light on why this is so, and these findings are captured in our report published today. As more countries consider and implement mobile money interoperability solutions, we conducted a study that further substantiated the GSMA’s research to date. Our latest report builds the evidence base on lessons learned from the field to ultimately expand our collective understanding of the prerequisites necessary for success. The captured study conducted a mixed method analysis including secondary research, in-country assessment and 32 key informant interviews Mobile Money Remains Largely Confined to Developing Markets.
Read the message
In the payments environment, interoperability refers to the ability to electronically transfer money between two accounts held at different institutions. In the specific context of mobile money, interoperability involves the transfer of mobile financial services between providers, many of which are mobile network operators (MNOs), and between those providers and banks. This is known as account-to-account interoperability Mobile Money Remains Largely Confined to Developing Markets Mobile Money Remains Largely Confined to Developing Markets.
Similar to the early days of voice and SMS messaging, mobile money has moved from a previously “closed-loop” environment where it was limited to the powers of a single network operator. Today, the widespread use of mobile money in 95 countries around the world is transforming legacy payment infrastructures, most of which are high-value banking-specific transactions that generate revenue through interest. Meanwhile, the mobile money business model relies on fees from high volumes of low-value transactions. Mobile network operators are diversifying their revenue stream as they move to a platform approach.
Mobile money services are now integrated with banks in 48 countries worldwide. In 19 of these markets, mobile money providers are integrated with each other to enable cross-network P2P transfers. In addition to domestic interoperability, mobile money is also increasingly integrated with players in the international financial system. In 2019, $7.3 billion in international transfers were processed through mobile money platforms Mobile Money Remains Largely Confined to Developing Markets Mobile Money Remains Largely Confined to Developing Markets.
When mobile money interoperability is commercially viable, it has the potential to significantly reduce the economy’s dependence on cash, which in turn brings a number of benefits to consumers, businesses and governments. In many emerging markets where cash remains “king” and where mobile money is the main route to access a formal financial account, successful interoperability ensures that more value remains digital. Against the uncertain backdrop of COVID-19, reliable and integrated digital payment channels become paramount in limiting the further spread of the virus.
The report provides an updated and comprehensive overview of the interoperability pathways of six markets. It highlights how industry leaders in markets such as Tanzania and Madagascar have proactively pursued mobile money interoperability among themselves to find mutually beneficial arrangements and how this can positively impact consumers. It highlights a renewed approach in Jordan, one of the few markets in the Levant that is deliberately pursuing mobile money interoperability Mobile Money Remains Largely Confined to Developing Markets.
It illuminates how Pakistan, a country with relatively mature roots in branchless banking, is adapting its approach to interoperability. It also shows how in Ghana and Uganda different technical approaches to interoperability have been implemented by the industry, including private aggregators.
In doing so, the report confirms the importance of a set of mutually reinforcing factors that help determine success, which is largely measured by the growth in the use of interoperable transactions. The findings highlight the following areas as critical to an effective framework: the decision-making role of mobile money providers; enabling regulation; commercially viable solutions; favorable consumer prices and; a user experience that is seamless and familiar for use cases on the same mobile network Mobile Money Remains Largely Confined to Developing Markets.
Outlining our findings from six markets, the report also revisits key discussion topics around mobile money interoperability as the concept gains traction. It connects the dots between how mobile money interoperability relates to financial inclusion and competition between mobile money providers. We’ve also unpacked the increasingly common discussion of agent interoperability to highlight what’s really possible for the mobile money business model in the long term.
Finally, because achieving a successful mobile money interoperability framework is also based on the technical infrastructure that lays the foundation for the nuts and bolts of implementation, the GSMA’s in-depth companion report offers a selection framework to guide industry and regulators through the process Mobile Money Remains Largely Confined to Developing Markets. .
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