Mobile money - global really does mean global

Details: Category: Mobile Finance; 05 July 2010; 10640 views

Mobile money is a highly topical - and highly successful - area of interest for the emerging telecom regions. As our report shows, mobile money can function in even the most inhospitable conditions. Michael Schwartz looks at some recent trends which can themselves be adopted by entrants to m-banking...

Last year’s mobile money review looked at certain specific markets and also the effects that benefactors such as Bill and Melinda Gates have had and are still having on creating affordable banking. We reported that countries such as Kenya had been very successful in enabling their citizens to enjoy money transfers from hard-working relatives overseas without marathon walks to their local bank.

A glimpse at the website devoted to the philanthropy of Bill and Miranda Gates brings home the enormity in helping the very poorest to become financial players in their own right: “less than 10% of the 2.5 billion people in the world who live on less than US$2 per day have access to formal financial tools to achieve the things that are most important to them. They pawn jewelry, sell a goat, or borrow from a moneylender - often to pay for basic needs such as seeds, school books, or a trip to the doctor.”

Microcredit has made an important difference to more than 100 million households but, in the website’s opinion, “...traditional financial services like savings accounts have been too costly and inconvenient for the poor to obtain and too expensive for banks to provide to clients who deposit just a few dollars at a time. Meeting these needs sustainably, and ensuring these services reach the poorest, will require new models and approaches.”

In Mexico, the Gates Foundation has committed US$3.6 million to bringing affordable financial services to some of Mexico’s poorest and most isolated communities. The Diconsa pilot programme will attempt to find and promote new technologies that will allow the micro-finance industry to reach new customers and efficiently deliver services over four years.

One Mexican government agency involved is Diconsa, which manages a network of more than 22,000 community-owned stores selling food and other necessities in precisely the remote areas where some of the poorest Mexicans live. Diconsa believes its stores can also serve as a powerful platform to deliver social welfare payments and savings accounts to rural poor people. Indeed, the Foundation’s pilot programme (launched in November 2008) allows villagers to take care of simple financial transactions at the very same local grocery stores.

The Mexican Government delivers cash benefits (known as Oportunidades payments) to five million beneficiaries, including 60% of Mexican rural families. Up until November 2008 these beneficiaries were required to travel for a full day to urban centres to collect their payments.

The pilot programme, which started at six test sites, has shown immediate benefits for both recipients and Diconsa store owners. Instead of traveling many miles to collect their payments on a fixed day, beneficiaries now have the convenience of picking them up minutes from home on any of five days during a designated distribution week. According to surveys, the beneficiaries, who are typically women collecting payments on behalf of their families, reported that the new payment system saves them, on average, three to six hours of travel and US$3 in travel costs.

Diconsa store owners are now benefiting from valuable training to teach them how to operate the payment system. They also noted increased sales because of the added “foot-traffic” (personal shopping) to their stores by beneficiaries.

To roll out the programme in all rural areas, Diconsa now needs to install Internet service and telephones in many of its stores to support point of sales devices, which in turn manage payment distribution and enable shopkeepers to confirm the identities of beneficiaries using thumb scans and biometrically-encoded smart cards.

The aim is to expand the program to let an estimated 3 million rural families collect their benefits payments at Diconsa stores. At the same time, the Mexican government plans to explore partnerships with financial institutions to start offering savings accounts through Diconsa stores, giving clients a place not only to collect their payments but also to save and withdraw their cash as needed for expenses and investments, make payments, and gain access to other services.

Other targets for the Gates Foundation are a group of African Countries (DR Congo, Ghana, Kenya, Malawi, Mozambique, Rwanda, Tanzania, and Uganda) which will receive loans totaling $US10 million at low interest rates.

Rwanda: tele-phoenix from the ashes

Rwanda has all too often been associated with human tragedy but the news in recent years has been much more welcome. Mining, for example, is set for massive expansion in the light of new discoveries of gold reserves and easier and quicker planning processes. Telecoms will play a vital role in transmitting this economic development to ordinary people, and mobile banking is no exception.

Urwego Opportunity Bank of Rwanda (UOB)’s has adopted mobile banking as a way to provide financial services to Rwanda’s working poor. Its newest branch is a mobile branch; Sara Strawczynski, who is serving a placement with UOB, takes up the story:

“Instructions: Start with a plain white van. Insert several computers. Connect to a power supply as well as a backup power supply. Build connection to a central network. Apply a splashy paint job and finish with enthusiastic staff. Result: A bank on wheels. Okay, the recipe is not that simple, but UOB’s motto is Bank for All (or Banki ya Bose in Kinyarwanda).

“Achieving this is a huge challenge in Rwanda, where eight in ten people live outside cities and most live on less than a few dollars a day. UOB has a network of branches and credit offices throughout this small country (Rwanda is about the size of Maryland) but clients and potential clients still report that the cost (both time and money) of traveling to the closest bank is a major barrier to accessing financial services.

“The mobile branch provides an alternative banking point where clients can open accounts, deposit savings, apply for loans, withdraw funds and make repayments. It allows UOB to expand its reach by extending banking services to several small communities once or twice a week.

“Several vendors in the market were already UOB clients. Thanks to this new economic engine, they no longer have to drive forty minutes to the nearest bank to complete their financial transactions. The mobile branch certainly stands out, promoting the bank and building interest among potential new clients. It also allows UOB to test new markets and evaluate where to build new branches. The mobile bank is driving UOB forward, so that all of Rwanda’s working poor have a chance to steer themselves out of poverty.”

M-banking in current trouble-spots

While Rwanda may have put the worst behind her, there are still current trouble-spots which can benefit from mobile banking. Difficult environments can still produce success for user and investor alike.

Asiatell, Iraq’s largest private telco - and claimed to be the only one providing coverage throughout Iraq - has arranged a partnership with a banking consortium called Amwal. Asiatell will pioneer the provision to Iraq of advanced banking and transaction via mobile phones.

Under the arrangement, the AMWAL/Asiacell system will enable prepaid customers to purchase airtime, buy goods and services from registered merchants, check their bank account balances, and make mobile-to-mobile and bank-account-to-bank-account money transfers. Transactions will link directly with subscribers’ bank accounts at AMWAL member banks, using a secure transaction system.

Asiatell has the advantage of being a nation-wide player - there is no need for complicated contracts between regional players and the momentum from operating nationally is there for exploitation by marketing-conscious companies. Mobile banking also means that the physical risk of visiting a commercial location during a war is removed.

Showing Iraq the way is another area experiencing political unrest, Pakistan. One of Pakistan’s banks, MCB, has taken just eight months to achieve US$10 million in m-banking transactions. The bank now has 70,000 m-banking customers who have performed over 500,000 mobile transactions in the short period mentioned.

In this case there is a “shared platform” approach, which means that all banks and mobile operators can use the same technology to deliver mobile financial services to end-users. The use of a single, flexible technology platform frees banks and operators to focus on developing services that appeal to consumer needs, rather than implementing proprietary technology solutions.

Qasif Shahid, EVP, MCB Bank, is not only very proud of his bank’s achievements but also recommends it as an international standard, “The Pakistani regulator is one of the most proactive in the world and this shared platform would not have been possible without its support. This is a truly unique approach that stands apart from the piecemeal, proprietary implementations in other countries. It should be viewed as a blueprint by other nations looking to emulate our early success...After the early success of MCB Mobile, we are now set to extend banking services to some 50 million, mobile savvy, unbanked consumers, offering them secure and convenient access to financial services.”

In a more settled environment, mobile payments specialist MoreMagic Solutions has announced a partnership with Splash Mobile Money to expand Sierra Leone’s first mobile money transfer system. Launched in early 2008, Splash Mobile Money designs and delivers mobile payment solutions in West Africa. Splash is itself Sierra Leone-based, and is Sierra Leone’s first and only cross network m-banking system.

In this case, all network operators in Sierra Leone are covered by the Splash system, including Africell, Comium, and Zain. Splash customers can now receive payments from employers, and pay for goods and services by sending “Splash-cash” to merchants, in addition to sending money via mobile phone.

The pilot scheme was launched in Sierra Leone last September, and 12,000 clients had enrolled in four months. To send money, the customer registers with an agent and loads money into a Splash account. The customer can then send that money to another mobile phone user, using just text messages.

Tie-up with a global brand

Established names in banking and finance can undoubtedly help mobile-banking operations get underway, whether in terms of technical advice or by lending a prestigious name to an m-banking alliance.

How about Western Union as a partner? The recent arrangement between Fundamo and Western Union is directly oriented towards the emerging markets, extending Western Union Money Transfer services to mobile finance initiatives in Latin America, Africa, the Middle East and Asia.

Fundamo has as a consequence obtained certification and endorsement from Western Union, allowing it to act as a key partner in the Mobile Vendor Programme. Specifically, Fundamo will facilitate Western Union mobile money transfers from the US, the UK, the UAE, Singapore and Hong Kong, ie, developed markets, directly to emerging-market subscribers with mobile wallets on the Fundamo platforms.

Background to the new contract was a pilot programme in 2Q08 under the auspices of the GSMA. This allowed early mobile financial service concepts to be sold and trialed by the GSMA’s operator members. The latest announcement is, in fact, the start of the next phase, where the solutions can now be deployed commercially through licensed vendors.

Stick to what you know...

...because nothing succeeds like success. A cliched sub-heading but the M-PESA system which has been successful in Kenya has made its way to South Africa, where Vodafone has a market of 26 million unbanked to approach. As a precedent, the M-PESA system has attracted more than 11 million registrations in Kenya, Tanzania and Afghanistan.

Cenk Serdar, Director of Mobile Payments at Vodafone Group, explains, “Mobile technology in Africa has already improved the lives of millions simply by allowing them to communicate far beyond their immediate surroundings...It is now set to transform the way we send and receive cash. The successful take-up of M-PESA in Kenya has clearly demonstrated the demand for easily accessible, secure payment services particularly in emerging markets.

“There are many benefits of using mobile phones for micro-transactions in a country like South Africa, where only 60% of people have a bank account in the formal sector, and yet the mobile penetration rate among the total adult population is more than 94%.”

Financial services are regarded by Vodafone as critical for economic development and inclusive financial services for the unbanked are essential for poverty reduction. Lack of access to banking services is forcing many to rely on a cash-based economy with little security. Mobile technology can assist in enabling millions to take part and benefit from a more formal economy which will in turn drive economic development.

One physical factor behind Vodafone’s venture into South Africa is the release of the Vodafone 150 and Vodafone 250, Ultra-Low-Cost Handsets (ULCH) which will retail at under US$15 and are intended to give those on low incomes the opportunity to share in the benefits of mobile technology for the first time.

Find a large workforce sending lots of money home

How about the Asian workforce located in the Persian Gulf region? For decades, workers from countries such as Bangladesh have been building up the physical infrastructure of Kuwait, Dubai, Saudi Arabia, and many of their neighbours.

Very appropriately, the Doha-based Qtel intends to make mobile money services available throughout the 17 countries of its operations and its 53 million customers. Literally millions of dollars are remitted by expatriate workers on the Gulf and this is exactly where Qtel intends to be at its most successful.

...and you can always ask an expert

Following its investment in Obopay two years ago, Nokia has added mobile payments to its portfolio; its pilot scheme is with Yes Bank of Pune, India. This has come to the attention of Yiru Zhong of Frost & Sullivan, “In Frost & Sullivan’s mobile payment study released last October, we expressed optimism that Nokia’s mobile money initiatives can accelerate the wider adoption of mobile payments...”

Why stop at Pune? Yiru Zhong continues, “We reiterate that market conditions in Eastern Europe are conducive for mobile money. As payment trends in this region have always been different from other parts of Europe, there is a natural demand from financial institutions to offer different payment options to its customers. This motivation from financial institutions, coupled with the enthusiastic embrace of mobile payments by the telecoms industry, could generate interesting success stories in this region.

“In Poland, there have been innovative banking products ranging from payWave products to NFC-enabled payment stickers, to mobile payment for public transportation via SMS. A clear trend emerges from such examples in Poland – uptake in mobile money will be driven by high frequency and low-value transactions supported by widespread, cashless transaction systems that are cost-effective and secure.”

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