Thus solution (M-Pesa) aimed at improving economic activity for the poor needed ‘non poor’ actors in the ecosystem in order to inject cash into the system and thus make it flow and grow initially. Niti Bhan writing in Afrinnovator, March 5, 2012
This is a continuation in our thinking about how large networks of engaged users will play out in Africa with a look at mobile money and its impact on commerce, trade, aid, philanthropy and host of other topics.
According to recent McKinsey report, in July, 2011, there have been more than 100 mobile-money deployments in emerging markets; at least 84 of them originated in the past three years. Only a handful of these deployments have reached a sustainable scale; some notable examples include M-Pesa in Kenya, MTN Uganda, Vodacom Tanzania, FNB in South Africa, and GCASH and Smart Money in the Philippines. Even these players have not gained much traction for financial services beyond simple transfers and payments.
You can’t read about IT in Africa without reading about mobile money. The success of Safaricom’s M-Pesa has generated a slew of initiatives and startups that either, want to build mobile money platforms, or want to build features on top of these platforms. Some of the things we find interesting about mobile money as a large network of engaged users is they provide;
- Access to financial services (banking) that was previously unavailable because of expense, inconvenience or lack of trust.
- Alternative banking to those that are banked, presumably due to its lower cost and convenience.
- Large network of engaged users upon which other direct (e-commerce) or indirect (social, entertainment, etc) products and services may be built.
It’s the last point we’d like to explore more fully in this post. How can these networks offer new products and services and how do they grow and evolve beyond financial transactions?
Is mobile money a banking platform or a trading and payment platform? Mobile Network Operators (MNOs) need to refine their vision, and once positively accepted in the market, develop and deploy “killer applications” that leverage-up mobile money to drive transactions and customer satisfaction. It’s this area of layering up mobile money from person-to-person (p2p) transactions into utility payments, crop insurance, retail payments, b2b commerce, and beyond, that can build network engagement and value and provide a springboard to selling more interesting and complex products and services.
We’re starting to see startups provide integrated services on top of mobile money platforms. Kopo Kopo, PesaPal, iPay, MPAYER, and Slimtrader to mention a few, are all integrating with one or more mobile money platforms. Typically, first generation solutions provide corporate and consumer customers an easy-to-use interface to manage their transactions with little add-on functionality. Efforts such as Slimtrader are bit higher up the value chain as they provide integration between corporate client backend and mobile money platforms to enable customers to conduct commerce using SMS. Another example, Paga of Nigeria is bit different. As a mobile financial service company, granted a license to deliver its mobile money service to Nigeria by the Central Bank of Nigeria (CBN) in February 2011, Paga has now surpassed 50,000 subscribers and works with all mobile networks in Nigeria.
What appears very interesting to us is; as these providers gain experience and sophistication, and as MNOs open up their platform to integration, the ability to provide end-to-end e-commerce solutions irrespective of the deliver method (SMS, internet, and/or native mobile app) nor limited by transaction type (mobile money, credit card and/or bank-to-bank EFT) become available to others that want to integrate e-commerce into their applications or services.
In essence, these mobile money networks just become integration platform(s) that offer features that can be picked and plugged into by business, government, NGOs, or developers to conduct transactions on behalf of consumer or for business-to-business commerce.
The best thing MNOs could do is open up their platforms to business, government and developers to provide interoperability across mobile money networks and encourage the free flow of transactions between parties and across borders.
Ripples, Regionalism and Remittances
In addition to bringing those previously outside the banking system into the mainstream that encourages savings and facilitates trade; we are starting to to see mobile money networks used to streamline back office processes. Mobile money greases the rails of commerce and boost intra-nation commerce. P2p, b2c and b2b transactions within a nation are enhanced by mobile money networks.
As African nations get their act together and work on a plethora of problems that stifle regional trade integration of mobile money networks across borders will become a prerequisite. We quote from recent World Bank Report De-Fragmenting aFrica Deepening Regional Trade Integration in Goods and Service
It therefore called on Africa leaders to improve cross-border trade, especially by small poor traders by simplifying border procedures, limit the number of agencies at the border and increase the professionalism of officials, support traders associations, improve the flow of information on market opportunities, and assist in the spread of new technologies such as cross-border mobile banking that improved access to finance
As MNO (or third parties) hook disparate transactions platforms together one would believe a side benefit will be a tighter integration of other MNO services, such as, voice, SMS or data. For it appears logical as mobile money networks become meshed that other MNO products and services will equally become more entwined benefiting consumers and business on both sides of a border.
The clarion call around which the initial M-Pesa story was told “send money home” takes on new meaning when integration of mobile money networks across borders and across transaction types become ubiquitous. For when the diaspora in the West can just as easily “send money home” as “calling home” by charging a credit card with the money delivered to mobile by SMS the next day that we will have eliminated all kinds of layers, expense, complexity and time from the middle of the process will increasing convenience and lowering cost at both ends. That is the benefit of these new networks
And, once this image settles in your mind it does not take much imagination to envision other applications in commerce, philanthropy and aid. If a small holder farmer can publish content to the internet using only a simple feature phone and SMS (which they can) and, that same farmer is on a mobile money network (which they probably are) why do you need aid organizations to help that farmer when “charity can go direct” just like “sources go direct” in news? Apart from accountability, (which too could be crowd-sourced), why do you need an aid organization that does not provide ancillary services to save the children, help the poor, feed the hungry, clean the water, hire the jobless or myriad of other do-good exercises conducted everyday all over the world. Think about it.
Its this flattening of layers, elimination of middlemen, wringing out of cost and complexity from a system while boosting its efficiency that is so exciting about large networks of engaged users when applied to fundamental human needs and desires as found in emerging markets.
MNOs are under a tremendous pressure. They are getting creamed by Apple, Google and other players that are moving customers from high-profit, low-cost services (think voice and SMS) to low (no) profit, high-cost services (think data and VOIP) in an industry that is not known for its creativity or nimbleness. They are in a commodity business — a terrible business to be in.
A new network we watch and admire is Eskimi that is out of East Europe and has 5 million users in emerging markets. It has 2.5 million users in Nigeria and is growing fast. Eskimi is focused on dating (just like 50 million user MXit) but what is interesting to us is they are getting ready to release a virtual currency based on credits against a mobile account.
What if MNOs allowed customers to trade credits on their mobile account like virtual currency? Not only could you pay by credit but customers could receive credits and use them or cash them out. Instead of gifting virtual goods why not trade and exchange real goods and pay for them using your mobile bill? MNOs are already acting like banks why not go all the way and try to eliminate cash altogether? I am sure there are regulatory considerations and we hope to learn about them in the comments. And, getting rid of banks, or at least reducing our dependency on them, and their high fees, or at least providing an alternative, is probably a good thing.
In creating mobile money networks one of the aspects MNOs need to manage closely is their agent network. These are physical store fronts where customers can pay or receive funds. It appears to us that a physical agent network integrated with a virtual network offers the potential for a distribution platform for physical goods. Imagine, if your customers bought product from you on credit using their mobile. You would then physically take the product to your nearest agent whom you probably already know where she would sign for it. Now, what if the agent arranged to ship your product to another agent closest to your customer and then sent your customer a text message that the she could pick it up?
It’s leveraging these large mobile money networks of engaged users that provide the potential to deliver new products and services to address fundamental needs of consumers and business in emerging markets that we are watching, and hope to participate in, and that keeps us up late and gets us up early, and going — everyday.
If you are a provider, or add-on mobile money service and we have not included you we’d like to hear from you in the comments.
How do you see mobile money networks being used in the future for new products and services? What other products or services do you see them developing and delivering? Please give us your insights and opinions in the comments below. We would love to hear from you.
Some additional reading that we used in writing this article
memeburn How M-Pesa disrupts entire economies