Remittance (Person to Person and Person to Bank transfers) and prepaid mobile recharges were assumed to be top products by transaction volume used by Africans. This is although somewhat true, I realized that mobile money is not just a product but it is the way of life for Africans, where you can buy from vegetable to plane tickets, pay bills, pay merchants and do international remittances all from mobile wallet platform.
Flash Back (History)
Mobile money was launched by SafariCom when they realized that people use talk-time as a barter for payments. Me2You service was used to repay debt in form of talk-time. Safari and Vodafone realized the need and joined hands to form VodaCom and launched M-Pesa. It became an instant hit because using mobile wallets provided cheaper alternative compared to using a full fledged banks. Penetration of banks in Africa is low and maintaining a bank account is expensive. Unlike India, even checking your balance is not free of cost and minimum balance criteria makes it difficult for daily wage earners and low income group. Safety concern is a big driver as mugging is common in Africa and people feel safer to carry less cash.
Mobile money penetration and success was enhanced with increase of mobile usage, reduction in calling rates, reduction in handset prices. Availability of second hand phones enabled fast and deep penetration of mobile money in Kenya and other countries in the African continent.
Gradually moving from the basic P2P (Person to Person), P2B (Person to Bank) and talk time top-ups, operators and service providers started building large merchant network such as multi brand retail stores (NakuMatt), car service provider, construction contractors and so on to expand the usage of mobile money. Basic idea they followed is to on-board the entire ecosystem to increase speed of adoption, for example if I want low income group to use mobile money I should have on-board contractors, labor organizations, unions and suppliers.
Looping in the Government organization to disburse salary through mobile wallet was a smart move to increase the penetration, for example civil servant employees of an entire country receive their money through mobile wallet. Cable TV providers accepts payment through mobile wallet and I saw in Kenya you can even book a plane ticket.
I see lot of innovations in this area, where service providers have enabled cross border or international money transfer to compete with MoneyGram and WesternUnion, which are very expensive routes of cross border remittances. This mobile wallet based transfer holds the strength to revolutionize the remittance industry.
Service providers are tying up with the Visa and Mastercard‘s of the world where the customers wallet is linked to these cards and customer can swipe card and act as a complement.
NFC (near field communication) enabled cards have been launched recently, which are linked to mobile wallet and can be tapped to the receiver to pay quickly by just entering a PIN number. Time will tell whether this can be successful medium as few merchants wish to upgrade to NFC based payment collection option and create a differentiation for them.
GSW (group saving wallets) in the region where not everyone can afford to own a mobile or are educated well enough to carry out cash-out and cash-in transactions, is an attractive proposition. It is very much like cooperative banks in India, where there are signatories who are responsible to carry out transaction on the communities behalf.
Micro loans to the needy or the bottom of the pyramid is fast catching up, where by some companies who wish to offer loans are tying up with operators to leverage their distribution network through mobile wallets. These companies are building customer credit scores using their GSM usage data, social media footprint, mobile money history and few other information. I see a huge potential for such services in India through mobile wallet or payment banks route. I have seen loan value as low as $1 is offered in Africa with interest rate ranging from 11% a month to 17% a week.
As we can see that mobile payments, wallets and transactions can possibly replace every other form of payment and become a way of life for business transactions.
In the next article I will focus on fraud and risk scenarios associated with open wallet and what are possible ways to manage them.
|Vinay Solanki has done PGPX from IIM Ahmedabad and Masters in Computer Science from SUNY. Vinay has over a decade of experience in telecom, finance and technology with companies such as Bharti Airtel, Goldman Sachs, IBM and TCS. He is an IOT enthusiast and avid blogger on mobile money.
Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of The Indian Iris and The Indian Iris does not assume any responsibility or liability for the same.