Ammar Hamadien, head of mobile financial services at Zain Group.
Gavin Krugel, chief customer strategy officer at Fundamo, a Visa Inc company.
Jeremy Osborne, MD, Telecommunication Solutions, Africa, Gemalto
Mobile money-transfers are a rapidly growing means of exchanging money in areas where the population lacks bank accounts or needs to make micro-payments on a regular basis. How can telecoms operators position themselves to take advantage of these services?
CommsMEA: Do you see a strong case for mobile payments? If so, in which markets are these services most prominent?
Ammar Hamadien: Yes, we do see a strong case for mobile payments, and the planned roll out of the service across our entire footprint is evidence of that. The case for mobile payments in our footprint in order of strength/importance is: South Sudan, Sudan, Iraq, Jordan, KSA, Bahrain and Kuwait. Apart from offering our customers additional services that they will appreciate, the offering of mobile payment services will play an important part in the growth of several key indicators for our operations.
Gavin Krugel: In developing markets there is massive unmet payment needs with absolute lack of penetration in terms of existing known payment solutions as well as lack of availability of payment products that meet consumers’ needs – especially those consumers with micro earnings and micro payment behaviours. Mobile transfers meet the challenge of providing a payment service that can profitably be offered to the developing market consumer. A clear indication on whether there is a case for mobile payments is given by the contribution to MNO or Bank revenue in successful markets. Looking at the annual reports of organisations such as Safaricom with mPesa in Kenya or looking at the analyst feedback on mobile banking deployments such as First National Bank in South Africa gives us a clear indication that mobile payments are a lucrative business.
Key growth markets where I anticipate the biggest mobile money customer bases are: India, Pakistan, Indonesia, Bangladesh, Nigeria, Mexico and China. Increasingly I see the emergence of the developed world using apps, wallets, mobile web and NFC as enabling technologies to drive mobile payment volumes.
Jeremy Osborne: According to Juniper, of the predicted 200 million active users of mobile financial services in 2013, nearly 40% will be in Africa and the Middle East. These two regions will have the highest concentration of users, covering a large range of use cases.
If we look at Africa alone, more than 70% of the population is either unbanked or under-banked. With the relevant infrastructure already in place and millions of handset-owning people, the mobile phone is emerging as a key tool for bringing financial services to the non-banking population, even in remote places where traditional banking and Internet services are too expensive or non-existent. Money transfer and mobile wallet solutions are taking the lead, especially in Africa offering subscribers mobile access to a virtual bank account.
End users can securely pay bills and make national and international money transfers among others. Those solutions are set to have a strong and positive impact in emerging economies. As an alternative and convenient delivery channel, they ease peer-to-peer transactions, prompt new business opportunities and will help change the way people live and work, over the next decade.
All the largest African markets have already deployed mobile payment solutions and majority of the remaining opportunities are for smaller markets or operators.
CommsMEA What is the best way to deploy the service? Should operators work with partners?
Ammar Hamadien: The deployment strategy for mobile payments depends on the environment that exists in each market. Markets with a high percentage of unbanked inhabitants need more basic services, as opposed to markets with higher proportions of banked or semi-banked inhabitants. Operators should definitely work with partners such as commercial banks, solutions providers and retailers to ensure a wider reach of mobile money services in a particular market.
Gavin Krugel: There are no deployments known today that do not include a partnership of some sort. Every mobile operator owned or managed mobile money service has a bank and technology partner. Often these partnerships extend to super agent or distribution channel managers.
The best way to deploy a service would be to first understand the consumer’s needs and the consumer’s awareness of their needs for financial services. Then to answer what product or service would be best in meeting those needs. Then answer which brand and distribution channel would be required to meet those needs and only then begin structuring a partnership structured that supports the product within the market. Services should not be based on technological innovation alone, nor should they be based on regulatory constraints. Only the consumer of the product can inform the service offering, technology acquisition and partnership structure.
Jeremy Osborne: The best way to deploy services is of course quite case-specific but generally speaking, the answer is ‘Yes’, operators should work with partners. Effective partnerships allow for country-specific insight and expertise which often prove to be a valuable asset. The point of course is that the partnership must translate into increased value for the entire value chain and ultimately for the consumer. The mobile payment industry in Africa was previously operator-led which has enforced a degree of exclusivity for the mobile network operators.
However, things are changing as the banking regulators are playing a far stronger role like in Angola, Nigeria or Sudan, where the mobile payment licenses are being awarded to the banks and not to the operators. Moving forward, mobile operators need to ideally partner with banks and leverage the fact that one will have the banking license (the banks) and the other will have the market reach, agent distribution network, marketing and brand power among others.
CommsMEA What are the main factors to make mobile payments a success?
Ammar Hamadien: Important success factors for mobile payments include, a progressive regulatory framework that clearly specifies the Anti-Money Laundering (AML) and Know-Your-Customers (KYC) rules and regulations, a scalable and flexible ecosystem, a well designed and robust route-to-market strategy, a wide and far-reaching distribution network and a strong technical platform that is ISO 8583 certified.
Gavin Krugel: It can be split into three categories, proposition and marketing, agents and distribution and organisation and partnerships.
Each deployment of a mobile money service must contain elements that are market-specific. The mobile money community has learnt that it is simply not possible to provide a “one size fits all” approach and expect to see significant uptake across multiple markets. No provider has achieved this yet. The factors that determine success vary by market, but often include regulatory conditions, the competitive landscape, the extent of alternative financial services and socio-economic factors within the target customer base.
Most banks and MNOs in emerging markets will offer mobile wallets and whilst the regulatory context for these will vary, there will be little sustainable competitive advantage to be gained from a basic mobile money offer to the mass consumer, making it vital to future proof your services by constantly adapting to consumers’ growing needs. Getting the distribution aspects of mobile money correct is critical. It is also imperative that the mobile money operator is properly equipped and has the training and technical functionality behind them to do the job well.
Jeremy Osborne: Security and privacy issues are a crucial part of the sustainable success of mobile financial services. These concerns are particularly salient for the unbanked who depend on their phones not only for communication but also for financial services.
Security sets two big challenges. First of all, to enable mass adoption, the level of security must be adapted to the level of risks taken. If the solution is not perceived as secure, the end user may try but not ultimately adopt the service, whatever the benefits. If the complexity of using or registering for the services outweighs the benefits, this can also prevent mass adoption.
CommsMEA What are some of the classic mistakes operators can make?
Ammar Hamadien: One mistake that is often made it to focus on the technical solution rather than the commercialisation of the service. Both are equal critical factors in ensuring its long term viability and appeal to customers.
Gavin Krugel: Some classic mistakes include, incentivising agents for registration and not for active customer usage, not primarily resolving the previously unmet needs of the consumer, not having a relevant and substantial back office operation geared to manage a financial services business as opposed to a more traditional value added mobile service and not engaging the regulator directly but rather being reliant on the partner financial institution to engage.
Jeremy Osborne: Focusing on technology only at the expense of the customer experience and benefits is a mistake. With a user friendly interface, also comes convenience and to ensure subscribers can easily benefit from mobile money services and load money on their phone (cash in) or exchange mobile money for cash (cash out) anywhere, anytime, mobile operators need to develop a wide and effective agent/outlets store distribution network. This is key to reaching the unbanked market and educating the market on the ground.
CommsMEA What are the main benefits to operators by deploying these services?
Ammar Hamadien: Benefits include venturing into adjacent and “growing” businesses, and creating a strong customer acquisition and retention tool. Mobile money is another telecom service that clearly identifies the customer centric mobile operators.
Gavin Krugel: Some of the benefits to operators are, increase in non-traditional ARPU, competitive differentiation, market share growth, new substantial revenue contribution, customer retention, leveraging existing assets for entry into adjacent industries.
Jeremy Osborne: In Africa, a large part of the population is unbanked and deploying mobile payment transfer services first allow mobile operators to address customers’ needs which are not satisfied by financial institutions. The rapid public acceptance of these services in Africa has demonstrated that this technology brings real benefits to people who previously could not access financial products or services. These new services also offer new revenue streams to mobile operators, allowing them to offer enhanced services to existing customers while acquiring new ones and in many instances, mobile financial services have far surpassed traditional banking services in terms of customer numbers.