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Customer Experience World Conference 2011

Mobile Money: Transforming The Wireless Paradigm

By Lucas Skoczkowski


Definition of Mobile Money Services – a Global Opportunity

Mobile money, m-transactions, micro-payments, mobile banking and mobile commerce – no matter how you refer to it, the ability to use a mobile device to access bank account information or to execute financial transactions is providing an unparalleled level of flexibility and convenience to a growing number of subscribers worldwide. A transaction could be anything from transferring funds to a friend's mobile account, withdrawing funds from an account or receiving a remittance from an overseas relative, to paying for a service such as a taxi or purchasing a candy bar at the corner convenience store.

Customer Experience World Summit, London 2011

The concept of performing real-time mobile financial transactions is clearly becoming increasingly acceptable. In fact, there is a latent and growing demand for mobile money services in emerging markets where financial infrastructure is not readily accessible. The ability to transfer funds via a mobile phone in ‘under-banked' regions means that people can avoid many hours of travel between remote villages in order to pay bills or collect wages. The inherent value of mobile money services is also not lost on network operators, who can charge service fees to complement existing SMS and voice revenues - all while increasing subscriber loyalty.

Mobile Money and High Growth/Emerging Markets

According to the GSM Association, fewer than 1 billion out of 6.5 billion people worldwide have bank accounts. At the same time, the penetration of mobile subscribers in emerging markets is increasing rapidly – with 85% of the next billion subscribers expected to come from areas such as Africa , Latin America and East Asia . However, the growth of mobile money services in emerging markets has been partially hindered by both the lack of interoperability between operators and potential regulatory concerns.

Issues of interoperability can be readily addressed by integrating the billing infrastructure of network operators – as in the case of the KAMA KAWAIDA service offered by an alliance of six East African operators. KAMA KAWAIDA allows the subscribers of alliance member operators to move freely across the five countries just as they would on their home network, including the ability to recharge their mobile account as well as transfer funds between accounts. Regulatory issues stemming from concerns of taxation and money laundering can be readily addressed by providing the applicable regulatory agencies with full visibility and traceability of any mobile transaction.

Short message service (SMS) and unstructured supplementary service data (USSD) are expected to remain the technologies of choice when dealing with mobile payments in high growth markets until 2011, when improved handsets will support alternative internet-centric mechanisms for fund-transfer. For now, keeping handsets, as well as the access mechanism, simple and affordable is paramount – particularly where literacy levels or familiarity with communication services may be low.

The are many flavors of common mobile money services currently being implemented in high growth markets, including international remittances, airtime reselling, mobile wallet and roaming recharge.

International Remittances

Remittances are transfers of money by foreign workers to their home countries. They are generally international person-to-person fund-transfers of a relatively low value (sub $200 US). An end-to-end mobile remittance service would involve the sending mobile operator, an international money transfer service (e.g. Western Union) and a receiving mobile operator – with the resulting transfer service charge being apportioned between the three parties. Generally, the greatest flow of remittance traffic is from the developed countries to adjacent developing regions, for example, from the Middle East to Bangladesh and Pakistan or from the US to Central/South America.

Airtime Reselling

Airtime reselling extends the dealer network of the operator to smaller population centers by allowing any subscriber to become an airtime reseller. An airtime reseller purchases airtime from the operator distribution network at a discounted price via SMS on his mobile handset. He then sells airtime, once again via SMS, to end subscribers at the full price – keeping the markup and thereby earning an income. In addition to creating an entrepreneurial framework, the operator benefits from reduced overhead and distribution costs, as well as the elimination of theft/fraud write-offs associated with distributing physical vouchers.

Mobile Wallet

A mobile wallet provides the equivalent of a bank account to the “unbanked”, and allows cash deposits and withdrawals. The mobile wallet is accessed via the mobile network and enables the subscriber to check the status of the account, make micropayments to a given merchant for goods or services (e.g. a taxi driver), and even receive his/her weekly wages via the mobile wallet. The mobile wallet can be complemented with other mobile money services, such as the ability to recharge or “top-up” their mobile service account. As emerging markets develop, linkages with financial institutions will increase to extend the utility of the mobile wallet to contemporary financial services.

Roaming Recharge

Roaming Recharge allows mobile top-ups and transfers of minutes between subscribers of an alliance of operators. Subscriber benefits include the convenience of topping up while roaming (by using the vouchers in the roaming network) as well as being able to conveniently transfer funds between subscribers of different operators. From an operator's perspective, roaming recharge services enable increased roaming revenues for prepaid subscribers as well as incidental revenues from any applied service charges.

Mobile Money and Mature Market Opportunities

Research suggests that the unbanked population in mature markets, such as the US, is significant and growing - mainly as a result of the migrant worker population. With over $278 billion in transfers being sent over traditional means from industrialized countries to the world's emerging markets in 2007 alone, the potential for growth in the mobile remittance market cannot be overlooked. Mobile revenue from international money transfers in North America is expected to grow from $27 million in 2008 to $1.4 billion by 2012, whereas revenues from national transfers will only reach $17.5 million in the same time frame.

Although the mobile remittance industry is growing, the primary focus thus far on mobile money services in mature markets has been associated with an increasing need for real-time access to account information – coined ‘nano-economics'. In the case of mature markets, mobile banking services offer subscribers real-time access to account balances, the ability to transfer funds and make payments, or validate transactions. The largest inhibitor presently affecting consumer acceptance of mobile banking pertains to subscriber concerns with respect to security for personal data. This will be alleviated over time with the improved adoption of mobile security standards and tools.

Another form of mobile money is the area of payments using Near Field Communications (NFC). Designed to work over very short distances, this ‘contactless technology' essentially involves a mobile phone that has funds stored on its SIM card. When the phone is placed close, say within less than 4cm, to a point of sale terminal supporting the same technology, the subscriber is allowed to make purchases when a PIN code is entered. The subscriber would need to regularly top-up the ‘wallet' in his SIM card via a trusted services manager, which could be the operator, a third party or a bank. Many operators are working on enabling NFC technologies, and commercial GSM handsets supporting NFC are expected to hit the market this year. It remains to be seen whether it will reach the necessary critical mass in the terminal base and retail markets in order to stimulate mass adoption. Revenue generation would likely follow the bank card model, with the operator getting a share of the transaction fee due to the key role it plays.


Collectively, the forecasted increase in mobile money services, such as the increase in global mobile banking transactions from 2.7 billion transactions in 2007 to 37 billion by 2011, will contribute close to $8 billion in incremental revenue to mobile operators by 2012.

If analyst forecasts are sound, the mobile money opportunity is considerable and cannot be ignored. With the inclusion of mobile money services the wireless paradigm is indeed changing once again, and subscribers, dealers, operators, banks and money transfer agencies are all reaping the benefits from the convenience and revenues these services generate.




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Mobile Money: Transforming The Wireless Paradigm, Article by Redknee CEO Lucas Skoczkowski, Roaming Recharge, Mobile Wallet, Airtime Reselling, International Remittances