The GSMA State of the Industry – Mobile Financial Services for the Unbanked 2014 – Report is a really interesting insight into the mobile money landscape. The report compiled by GSMA’s Mobile Money for the Unbanked (MMU) team is a must read for anybody interested in mobile money, the unbanked and financial inclusion. Following are 10 themes that I noted as I read through the report – my focus as ever is mobile payments….
1. Mobile Money – The Opprtunity
There are 2.5 billion unbanked people in the developing world. Due to the inaccessibility of the banking network, especially in rural areas, the unbanked population becomes dependant on cash or informal financial services which are often unreliable, expensive and cumbersome.
Over 1 billion of the unbanked population have access to a mobile phone, and therein lies the opportunity to provide this often neglected population with a range of financial services.
2. Mobile Money Is Revamping Financial Services
- According to the GSMA Report, there are 255 mobile money services live in 89 countries
- Mobile money sector is very competitive, but collaboration within the industry is enabling cross network and interoperable services – for example in Pakistan, Sri Lanka and Tanzania mobile money customers are able to send money across networks within these countries
- Regulators recognise the value of mobile money in enabling financial inclusion and are in some instances creating a more regulatory friendly environment
- Mobile money operators are expanding their services beyond mobiles payments, into other financial services
3. Important Mobile Money Trends in 2014
- Mobile money operators are having to invest in their underlying technology due to the increasing number of users and the increasing volume of transactions
- Merchant payments via mobile money are growing, previously there was a lack of interest and willingness amongst institutional and business users
- Because of the considerably lower costs of sending money via mobile money there has been a jump in international remittances
4. Mobile Money Services Are Increasing
As mentioned already, mobile money offering is expanding beyond mobile payments – other financial mobile services include:
- Mobile money – enabling money transfer and payments via the phone
- Mobile insurance – offering micro-insurance services
- Mobile savings – providing savings services
- Mobile credit – granting credit services
The report gets into further details, but the 2 most important things that differentiate the above from ‘regular’ financial products is that they are provided in the absence of traditional banking services (such as a bank account, ATM) and must be available and accessible through a basic mobile device
5. Mobile Money Regional Comparisons
- Sub-Saharan Africa has the most live services globally (53%), followed by South Asia, Latin America & the Caribbean, East Asia & the Pacific Middle East & North Africa and Europe & Central Asia
- The number of new mobile money launches is decreasing in many developing countries as the mobile money model starts to reach maturity
- Europe & Central Asia on the other hand have more planned versus live mobile money services
6. Interoperability is the future
Many operators recognise that cross network interoperability will drive higher transaction volumes, improve the customer experience and ultimately result in increased earnings
7. Factors hindering mobile money implementation
Mobile money services are currently not available in 54 countries. There are 2 main reasons for this:
- Limited interest by the key mobile money players (mobile operators and banks) because of the small domestic market, which in turn makes it difficult for operators to deliver low cost and scalable solutions that can be profitable
- Regulatory barriers that prevent both implementation and customer adoption of mobile money solutions, for example
- Not granting a license or not authorising non-banks the ability to provide mobile money services
- The way in which AML (Anti Money Laundering) /CFT (Combatting the Financing of Terror) and KYC (Know Your Customer) rules and regulations are compiled and implemented
- Restrictions preventing mobile money operators from linking accounts across countries
Other preventative measures include:
- Physically reaching rural areas to set up and establish mobile payments schemes, and agent networks, by the operators
- Educating and engaging rural communities to adopt mobile money services
- Developing a simple and user friendly solution
8. Agent Networks Are Growing
- In December 2014, there were 2.3 million mobile payments agent outlets – often mobile money agents outnumber bank branches!
- The number of ATMs also grew in 2014, enabling mobile money users to cash in / cash out
- Mobile money providers are working with petrol stations, bus companies to increase their reach
9. Mobile Money Accounts versus Bank Accounts
- At the end of 2014, there were 299 million registered mobile money accounts, up from 155 million in 2012
- In 2013 there were 9 countries with more mobile money accounts than bank accounts, this increased to 16 countries in 2014
10. The creation of a Mobile Money Ecosystem
Governments, utility companies and other merchants are increasingly using mobile money to make salary, social security, benefit and bulk payments. Of all payments processed in December 2014, 23.1% related to bulk, bill and merchant payments. This is significant because mobile payments were traditionally seen as a person to person payment method. These stats suggest the growth of mobile payments services beyond P2P.
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There is increasing recognition and awareness amongst all participants in the mobile money ecosystem that this is now a provision that is enabling financial inclusion across both the developing AND developed countries. With mobile money available in 61% of developing markets (according to GSMA), this clearly indicates a significant amount of progress in a relatively short amount of time. But it also highlights the task ahead to enable mobile payments in the remaining 39% of developing markets. This together with a need to strengthen the solutions particularly in rural and remote areas in existing markets underlines the need for continued innovation in the mobile money space.