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Observations from 2015 Mobile Money and Digital Payments event in Mexico City

 

Numbers can be misleading.  For example, with over 250 active mobile money projects around the world today, one could conclude there must be many success stories.  However, my participation at last week’s 2015 Mobile Money & Digital Payments Americas event in Mexico City leads me to question this conclusion.  This blog shares my observations from this event and on the—still mostly nascent—state of mobile money.

 

The 2015 Mobile Money & Digital Payments Americas conference agenda included two full days of presentations and panel discussions covering the varied issues facing financial institutions, acquirers, merchants, regulators and, of course, consumers within the emerging domain of mobile money and digital payments.  My overall observations from this event are as follows:

 

1. Although there is much excitement for mobile money in Latin America, the industry is still searching for flexible multi-issuer/-acquirer platforms and innovative business models to enable mobile money interoperability.

Thus far, only four countries in the world—Tanzania, Indonesia, Pakistan and Sri Lanka—have worked through the business model issues and made the necessary commercial compromises to enable this critically important element of interoperability.  Over time, interoperability should help drive greater usage and enable positive network effects.  (Reminder:  M-Pesa in Kenya is unique because its Mobile Network Operator driver, Safaricom, has approximately 80% market share there.)  Lastly, interoperability is not a technical issue; rather it demands new and flexible business models, which has proven to be a very high hurdle for the 250+ mobile money initiatives around the world.

 

2. A large majority of mobile money implementations in Latin America and around the world have not met desired “ignition” expectations. 

When you remove mobile phone air time top-ups as a transaction type, unfortunately, the overall mobile money story—aside from M-Pesa—has not been good.  This phenomena is described further in an article, entitled “Unbanked Mobile Money Still Has Some Way to Go.”  That said, it is still certainly “early days” for several initiatives, and more time is needed before success can be determined.

 

3. There is widespread agreement that a holistic ecosystem approach—combined with focused investments around consumer education—has the best chance of achieving successful ignition.

Mobile money projects which succeed typically require much more than a single company can provide.  This is why partnerships are critical.  Successful mobile money initiatives require a holistic ecosystem approach where multiple issuing banks, acquirers, merchants, MNOs and consumers all derive new value.  There is optimism about this ecosystem approach in Latin America; in Peru, the central bank and several key players across multiple industries have created ASBANC, which may—over time—become a leading model for mobile money success.

 

In closing, numbers can be misleading, but true value cuts through the clutter.  People will inherently gravitate toward solutions which provide new value to make their lives easier.  To provide greater safety.  To save time.  To save money.  Mobile money has this opportunity, and a holistic ecosystem model enabling interoperability along with investments in consumer education is the best path for success.  Let us know what you think.

 

 

2015 Mobile Money and Digital Payments event in Mexico City
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Comments: (8)

Prasenjit Das
Prasenjit Das - NIIT Technologies Limited - Noida , India 02 April, 2015, 22:20Be the first to give this comment the thumbs up 0 likes

More than making life easier for customers the banks can actually bring into fold and also make life easier for them by enmasse relocation of customers which may not be to the banks liking to keep them in branch.In a bid to reach the unbanked India suceeded in opening 115 million bank account of which 80 million have NIL balance.In a emerging major economy like India where there is a huge potential for mobile payments given the fact in India  could cut the use of cash in an economy where nine out of 10 transactions are still paid in notes and coins .The potential to  kick-start the use of low-cost payment forms like mobile money given  that it is being used by only one in every 300 Indians is indeed enormous.So enormous that an Outsourcing company has applied for licence.

A Finextra member
A Finextra member 02 April, 2015, 22:58Be the first to give this comment the thumbs up 0 likes

Hi Prasenjit,

Thanks for sharing the situation within India. You are definitely "preaching to the converted" as I see mobile money, or digital cash, as a win-win-win-win opportunity--for banks, merchants, consumers, and governments (central banks).

You can read more at:  http://www.quisk.com/blog/2014/05/09/case-digitized-cash-win-win-win-win-opportunity/

 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 03 April, 2015, 19:27Be the first to give this comment the thumbs up 0 likes

Sorry to rain on the parade but this research paper finds Indian mobile money services to be duds. Unfortunately, my personal experience with one of them does nothing to repeal this notion: Omnichannel Fiasco No. 2: M-PESA. The saving grace is that the aforementioned paper finds mobile money to be flops in many other countries as well.

A Finextra member
A Finextra member 04 April, 2015, 00:24Be the first to give this comment the thumbs up 0 likes

Hi Ketharaman,

Thanks for your comment and reality check.  Yes, most "mobile money" initiatives--the bulk of which have been driven by Mobile Network Operators--have been "duds" (to use your words).  We believe the time has come for "mobile money version 2.0," which would be bank-led (with MNOs participating), interoperable and more useful (i.e., broader range of  consumer transaction types).

And as the research paper highlights, regulators do play a BIG role in ensuring successful mobile money "ignition."

 

Prasenjit Das
Prasenjit Das - NIIT Technologies Limited - Noida , India 04 April, 2015, 01:351 like 1 like

As regards India the regulator has done a feasibility and reality check before calling for 'payment bank ' license .The commitee set up as a to evaluate has tried to borrow the success stories as well from other parts of the globe.

In India partnership between banks and Community Service Centres (CSC) as well as mobile phone companies is a possibility that is being seriously explored .In fact many CSCs facilitate opening of savings accounts (checking Accounts), distribute government payments and distribute loans as well. Its probably no more a possibility rather on the sidelines of truth as Axis bank has partnered with mobile operators Airtel and Idea to spread to the rural hinterland. Else where in Mexico Diconsa, an operator of 22,000 grocery stores in rural Mexico, began a program to deliver cash payments from government benefit programs to people in its stores .That has succeeded

Here is how Dans' thought gets validated :)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 07 April, 2015, 11:47Be the first to give this comment the thumbs up 0 likes

@DanG: Where mobile money has taken off, a common driver has been the existence of a segment of market (e.g. Rural Kenya) that has money but no banks to bank with and a regulator who looked the other way when MNOs served this market or total absence of regulator. None of those conditions exists in India. Re. money, RBI is the only regulator, regardless of whether the transaction happens via branch or web or mobile. Now RBI is also the banking regulator and the central bank, so there's little chance of MNOs serving this market assuming there's one. IMO, the key to ignition of mobile money is existence of multiple regulators and power play between them!

A Finextra member
A Finextra member 07 April, 2015, 17:48Be the first to give this comment the thumbs up 0 likes

Ketharaman,

I certainly am not an expert with respect to mobile money and regulations specifically within India; agree that wise/prudent regulation is a critical ingredient for successful ignition--in any country.

That said, it is interesting the mobile money empirical research report you highlighted mentions Bangladesh, with their bank-led model (and no KYC tiers, etc.), has achieved mobile money ignition.  Fascinating market space!

Asenath Raja
Asenath Raja - besant technologies - chennai 28 April, 2015, 08:49Be the first to give this comment the thumbs up 0 likes

Why does Kenya lead the world in mobile money?

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