10 Things You Need to Know about Mobile Money Services by Mahindra Comviva

10 Things you Need to Know About Mobile Money Services

ÂŠ Copyright Comviva Technologies Limited. 2015

1. Developing Nations Leading the Way  Surprising but true.  Developing nations are leading the way in adoption.  Kenya is at the forefront  Kenya has 93% adult population who uses mobile money services  Out of this, 60% use the service actively.  Tanzania, Zimbabwe, Uganda, Pakistan, Bangladesh, and Somalia have shown immense promise are

2. Major Problems - Agent Liquidity & Inactive Customers  The main problems faced is common operational issues like agent liquidity challenges and managing inactive customers.  Customers register but fail to start off transaction.  66% of registered customers for mobile money services are still inactive.  This leads to a huge amount of revenue loss.

3. Usage Pattern Varies Geography-Wise  East Africa - Airtime top-ups and person to person payments are the dominant transaction  South Asia - bill payments, airtime top ups and domestic person to person payments.

4. Largely Cash Based  It is largely over the counter cash transaction.  Some service providers like Easypaisa in Pakistan, conduct extensive promotional campaigns to encourage customers to transact with agents.  Bangladesh-based service provider bKash found out that customers feel comfortable handing over cash to agents.  This dependency on agents is increasing the cost of operations.

5. Promising future of small value credits & Savings  Bill payments, remittances, and airtime purchases are the dominant transactions.  Slowly and steadily, a number of financial products are being linked to mobile wallets.  Biggest success story - M-Shwari, a product launched by Safaricom and Commercial Bank of Africa.  Through this product, mobile wallet subscribers who are registered with a particular mobile wallet like mpesa for a minimum period of 6 months can get a loan of value $1.15 to $235 for a 30 day period.  The scheme has earned m-pesa 5 million active users with a total deposit amount of $5.2 billion.  It has also been beneficial for Commercial Bank of Africa, which recorded a rise of deposit accounts from $35000 to $5 million in one year.  This rise has helped Commercial Bank of Africa to be the second largest bank in Kenya.

6. Free Life Insurance Coverage is Gaining Popularity  Tigo in Ghana first launched the free insurance coverage tied up with cell phones.  It gained tremendous popularity and has been launched in various other markets across the globe.  It remains one of the most popular attractions till date.  These insurance products are simple in nature and are usually linked to the wallet usage – a win-win for both customers and service providers.

7. Mobile Data is the Silent Revenue Generator  Data available from mobile wallet usage are used for a variety of purposes.  Chinese finance company AliFinance has developed its own credit rating model based on mobile wallet usage activity.  The credit rating obtained through online activity is used to determine the financial eligibility of a person.  There is no contact between borrower and lender.  All transaction happens online.

8. The Continuous Emergence of Innovative Microfinance Modeling  Tremendous scope for MFIs and other financial service providers to tap the mobile wallet market.  Best example of efficient usage - Kenya.  Financial service providers like Faulu, KWFT and SMEP have leveraged m-pesa for various functionalities like load repayment, savings mobilization, loan disbursement, etc.  Companies in every geography are innovating and bringing in newer products on the table every day.  Most of these innovations are done either to make the best use of technology or to save the cost of human interaction.

9. Financial Inclusion  Financial inclusion is a major factor affecting the popularity of mobile wallets.  United Nations has extended their support for mobile wallets simply due to this fact.  With the recent demonetization drive of India, mobile wallets are going to gain immense popularity, especially in remote areas where access to banks still remains a problem.

10. The Role of FATF  The Financial Action Task Force play a pivotal role in ensuring mobile money services play a fair game in the industry.  This intergovernmental body has been developing and promoting policies to prevent money laundering and terrorist financing across the globe.  They have issued guidance documents governing prepaid cards, internet-based payment services, mobile payments, etc.  The guidance affects all geographies where mobile money services are in force.  The guidance helps national regulators in the dual task of controlling the mobile financial services industries and promote financial inclusion in their own countries.

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