Mobile Money: lessons from South Africa, the Philippines, and Kenya

In many developing economies, more citizens own mobile phones than own traditional bank accounts. A new research report by Mercator Advisory Group stresses the lessons to be learnt from mobile money experiences in South Africa, the Philippines, and Kenya.

For the authors of the report there are a variety of reasons why a large number of consumers remain unbanked, including affordability and accessibility limitations. This is despite the fact that some financial service providers and mobile operators are leveraging mobile technology to increase access to formal financial services, particularly to low-income and underserved consumers. Such mobile phone-based money services include person-to-person funds transfer, prepaid airtime purchases, prepaid electricity purchases, utility bill payment, remittance transmittal, and other functions.

These mobile money services do not require new technology infrastructures or their costs but can be employed using existing technologies in a new application. For example, in the Philippines and Kenya Short Message System (SMS) is used for a variety of financial transactions. SMS can be used in rural areas with limited data coverage, with most account types, prepaid and postpaid, and with most mobile handsets, even low-end and basic models.

The Mercator Advisory Group report yields some highlights:

  • mobile technology is used to increase access to formal financial services for unbanked consumers in developing economies;
  • simple, existing, and affordable technology like SMS is being used in innovative ways to facilitate access to financial services to underserved populations in South Africa, the Philippines, and Kenya;
  • convenience, efficiency, low cost, security, and simple interface are key factors to the success of mobile money services in these markets;
  • regulations should be appropriately adjusted to be proportionate to risks associated with mobile money services, as traditional regulatory frameworks can be prohibitively expensive and difficult to implement; and
  • looking ahead, implications of international mobile money services suggest that opportunities exist for US-based money service businesses and mobile operators.

Elisa Athonvarangkul, analyst in Mercator Advisory Group's International Advisory Service and principal analyst on the report, says: "Customers of mobile money services in developing countries often live on relatively low incomes and are highly cost-aware and price-sensitive. They prefer fee structures that charge per-transaction as opposed to bundled services packages because the former charges for exact usage only and gives consumers more control over services usage and their finances. SMS-based mobile money services, in particular, have been highly successful because they are affordable and consumers already have a high comfort level and familiarity with the technology."

The report also provides case studies and an in-depth discussion of select mobile money services, including Wizzit in South Africa, Smart Money and G-Cash in the Philippines, and M-Pesa in Kenya. Members of Mercator Advisory Group have access to this report as well as the upcoming research for the year ahead, presentations, analyst access and other membership benefits.

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