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Mobile Money How a low-tech revolution is re-shaping the global economy • • • • •

The most in-depth industry analysis Comparison of business models and technologies 6 detailed case studies of success Using mobile money for financial inclusion Current trends and future developments

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The Rise of Mobile Money How a low-tech revolution is re-shaping the global economy


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Introduction – Half the World is Unbanked

The background of financial exclusion and use of mobile communications

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The Rise of Mobile Money

Geographical trends in the spread of the use of mobile money The definition of mobile money Mobile money business models

The Technology

STK USSD SMS Web (WAP) QR Code Near Field Communications (NFC) Future Developments

History

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Mobile Money, NGO’s and Charities

The first mobile money networks and spread of the technology

How NGO’s, government and charities are using mobile money for financial inclusion

The Future of Mobile Money in the Developed World Can the developed world be persuaded to embrace mobile money?

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Case Study 1: Kenya – The Runaway Mobile Money Success Story

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Case Study 2: The Philippines – ‘Texting Capital of the World’ Embraces Mobile Money

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Case Study 3: India – The Challenges Facing a Bank Led Approach

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Case Study 4: Afghanistan – Can Mobile Money Really Tackle Corruption in Afghanistan

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Case Study 5: MTN – Leading the Way in the Rest of Africa

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Case Study 6: Tigo – Making a Real Difference for Migrant Workers from Central America

What is Mobile Money?

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Conclusion


Introduction - Half the world is Unbanked

Introduction - Half the world is Unbanked

key report from Mckinseys1 in 2009 found that 2.5 billion adults, just over 50% of the worlds’ adult population do not use formal financial services. Of that figure 62% of adults living in the developing nations of Asia, Africa, Latin America and the Middle East are excluded. A recent survey studied the domestic remittances market in sub-Saharan Africa. It discovered that 31 percent of adults used only informal, cash-based methods to move money domestically – such as informal money carriers, sending money via friends, or simply carrying cash themselves to deliver it in person. (Bill and Melinda Gates Foundation).2 Mobile money can, and is, replacing this informal system and spreading the use of banking facilities particularly in East Africa – bill payments, social security payments, microinsurance and more, to the unbanked population of the world.

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In Africa and South East Asia, the number of GSM mobile connections has doubled in the last four years, in Southern Asia, it has more than 1. http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2012/06/110109halfunbanked_0_4.pdf 2. http://www.gallup.com/poll/155132/Payments-Money-Transfer-Behavior-Sub-Saharan-Africans.aspx 3. http://www.newtimes.co.rw/news/index.php?i=15289&a=64632

tripled within the same timeframe. The potential for mobile technology, in particular mobile money, to improve peoples lives vastly increases and the opportunity for increased social inclusion arises. Whilst the developed nations in North America and Europe are seemingly hesitant in adopting mobile money (less than 20% of all UK consumers want to use their mobile phones to make payments) it still seems that the rise of mobile money phenomenon is unstoppable. The International Telecommunication Union (ITU) predicts that there will soon be as many mobile phone subscriptions as people inhabiting the planet, with the figure set to nudge past the seven billion mark early in 2014.3


The Rise of Mobile Money

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The rise of Mobile Money

The rise of Mobile Money

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ecent statistics from yStas4 for 2012 found that mobile payments increased by 70% in 2012 mostly resulting from massive growth in China, South Africa and India. Three digit percentage growth in North and Latin America is predicted showing that mobile money is here to stay. The mobile money industry is expected to grow from $13.8 billion in 2013 to $278.9 billion by 2018, according to a study released this month by global research group MarketsandMarkets, which estimates there will be about 5.3 billion mobile phones worldwide this year5. It is an industry which is continuing to grow rapidly. There are currently 150 live mobile money services, 41 of which were launched in 2012. There are almost 30 million active users of mobile money services who performed 224.2 million transactions totalling $4.6 billion during the month of June 2012. There are 81.8 million registered customers globally and, in June 2012, there were twice as many mobile money users than Facebook users in Sub-Saharan Africa. With over 520,000 registered agent outlets,

there are now just as many mobile money outlets globally as Western Union points of sale.6 Of the success stories globally East Africa stands out with Kenya, Madagascar, Tanzania and Uganda now having more mobile money accounts than bank accounts. There were more than half a million mobile money agents in June 2012, and there are now more mobile money agent outlets than bank branches in at least 28 countries. So far, the most popular use for mobile money has been domestic person-to-person money transfers. This replaces risky, slow and inconvenient cash transactions with a much safer, cheaper and more convenient means via the mobile channel. There is a strong global skew in the uptake of mobile money with the developing world taking the lead. Six of the eight fastest growing mobile money providers are in East Africa. Pakistan and the Philippines also have strong growth

4. http://ystats.com/en/reports/preview.php?reportId=986 5. http://www.smh.com.au/technology/technology-news/battle-commences-for-mobile-money-20130226-2f2mr.html#ixzz2MxCVclWw 6. http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2013/02/MMU_State_of_industry.pdf


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What is mobile money?

What is mobile money?

obile money (m-money) is the term used for using a cell phone to make payments to others using a cell phone where value can be stored on an “mwallet” before and after the transaction. A sender loads money into his m-wallet by going to a registered “agent” (sometimes a financial institution, more often not); then the sender can use a secure electronic approach to transfer funds to the recipient’s m-wallet. The recipient can either store the funds in his m-wallet for further mobile money transactions or go to an agent to convert the mobile money to cash.” USAIAD/GSMA definition.7 Mobile money is the provision of financial services through a mobile device. This encompasses a range of services including: • • • • • • • •

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Payments for goods and services, Peer to peer payments and transfers Account enquiries Salary payments/receipts Bill payment – utilities Insurance Loans Cash in/out

Although mobile phones are central to these actions a successful system also requires infrastructure, particularly cash in/out agents. Because of the special nature of the interaction required between banks, telecoms 7. http://pdf.usaid.gov/pdf_docs/PNADW294.pdf

operators, agents and government, mobile money throws together a diverse range of stakeholders, and as the fragmented take up worldwide has shown, a special combination of circumstances, collaboration and regulation needs to be in place to make it successful. Mobile money can be operated using one of three models for business:

Models Mobile Operator Led models Here, the mobile network operator (MNO) launches the service, primarily for mobile money. The balances of the users ‘wallet’ are maintained by the MNO in a bank but, as a combined account. The MNO controls all the account functions for individual users. Kenya’s M-PESA is a prime example of this and if the regulatory framework is in place this can be the fastest way to spread the use of mobile money – particularly if the MNO has the majority of coverage in that country. GCASH in the Philippines is another.


The Rise of Mobile Money

Models

Bank Led Model

As suggested in the name, this model is initiated and run by the banks. The senders and receivers of the money must have bank accounts. This is a slower model to gain traction as the bank needs to work in conjunction with a MNO to operate this system. Users are required to sign up for a bank account. Many do not have access to banks, or formal identification – and MNO’s do not have the incentive to create a large agent network throughout the country. Mobile money in Nigeria is firmly controlled by the banks and the Central Bank of Nigeria (CBN) has recently said that they will not follow the M-PESA model and allow telecom operators to operator mobile money services alone. The CBN deputy governor, Trunde Lemo, said: “We cannot licence telcos to operate mobile money because they lack the capacity to do so. What we are doing in Nigeria is to licence mobile money operators and then ask them to go and discuss with the telco who will

provide them (licenced operators) with the technological platform for their business.” He added that the Kenyan experience was not a good model for Nigeria. “I am sure if the Kenyan central bank had to do it again, they would do it differently because what Mpesa has done is to create one big monopoly for the country. A single operator controls 90 per cent of that country’s mobile money payment, and this is not really good enough for any economy.”8

Third Party Model

This model is where a third party service provider works with one or more banks to launch and operate a service. There are many start-ups the world over launching such services. BEAM in India now has more than 14 million customers after only three years of operating.9 BEAM is operator agnostic – subscribers of any telecom operator can use the service. Other in Africa such as Splash in Sierra Leone has passed its $1m transaction mark and is still growing. Many of these third party agreements are partnerships that offer more than basic mobile money. MicroEnsure has teamed up with Tigo in Ghana, Senegal and Tanzania to offer life insurance products to it’s users

8. http://www.africanews.com/site/Nigeria_Will_not_Licence_Telcos_for_MobileMoney_Tunde_Lemo/list_messages/42830 9. http://www.economist.com/blogs/schumpeter/2013/01/mobile-money

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T h e Te c h n o l o g y

The Technology

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here are a number of different technologies that are used to deliver mobile money solutions, from STK, USSD to the more recent advances of Near Field Communications and QR codes. Historically it has been STK and USSD that have provided the most easily accessible mobile money platforms – STK is used by M-PESA in Kenya – allowing users of cheaper, non smartphones to have access to the services. M-PESA in Tanzania use USSD to power their service, again for ease of use and accessibility. However, the more developed nations with a high proportion of smartphone users demand a more sophisticated service. It is hoped that developments in technology such as NFC and QR codes will fuel the demand for mobile money services and solutions in areas where the service has historically not proved popular. Also, as the cost of smartphones is falling a move to more advanced technology seems inevita-

ble the world over. Already, in Kenya, Huawei is offering an Android-powered smartphone for under $100,10 and when smartphones begin to be sold on the second- and third-hand market, they will be even more widely accessible. With the improved capabilities of smartphones comes a more sophisticated mobile money service, with more services and more capacity for up selling and advertising different products. These changes will be accompanied by opportunities, such as the chance to use graphical interfaces with illiterate populations.

STK

Mobile money is often delivered by STK technology. In Africa most mobile money operators use this technology including M-PESA in Kenya, and Etisalat in Afghanistan. STK allows carriers to load a simple set of menus and applications on SIM cards. The benefit is that STK works on almost any device and as such allows access

10. http://techcrunch.com/2013/02/04/huawei-microsoft-team-up-to-launch-exclusive-windows-smartphone-in-africa/


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T h e Te c h n o l o g y

to rich and poor for mobile money. An application is programmed onto the SIM to present a menu to the user and obtain the user’s input. Transactions are usually passed through encrypted SMS. This option is only available on GSM networks and usually requires swapping the user’s SIM for one with the application on it. The SIM application toolkit allows for the service provider or bank to house the consumer’s mobile banking menu within the SIM card. The SIM application toolkit is a standard of the GSM system which enables the SIM to initiate actions which can be used for various value added services. The Sim Application Toolkit consists of a set of commands pro-

12 11. http://en.wikipedia.org/wiki/Mobile_pay

grammed into the SIM which define how the Sim should interact with the outside world and works independently of the handset or network.11 The technology is especially useful for applications that require a simple user interface. STK is popular as it is secure, offers good usability and works well on low cost handsets.

USSD

USSD (Unstructured Supplementary Services Data) is used by M-PESA in Tanzania and elsewhere for mobile banking operations. This is a standard for transmitting information over GSM signalling channels and is mostly used as a method for querying the balance in a pre-paid GSM service. USSD is usually faster than


The Rise of Mobile Money

SMS and does not require any application to be installed on the handset or the SIM. This allows high speed interactive communication between the subscriber and application. The consumer sends a payment request to a short code and a premium charge is applied to their online wallet or phone bill. The merchant is informed of the payment and can release the goods. With USSD the user has to dial a short number in order to activate the menu. After each input the data has to be sent to the server and the new menu screen sent back which can be time consuming. USSD is seen as a cheaper and more universal form of messaging than SMS. It is used by India’ s xpWallet amongst others. USSD has advantages over SMS such as allowing for session based communication between the server and mobile device, guaranteed message delivery and is more secure than SMS service.

SMS

This option is a very simple and straightforward implementation involving a direct connection between the mobile money platform and an SMS gateway. Standard SMS messages are used to transmit the mobile money transactions which means no specific application is required on the handset or the SIM. Bulk carriers can be used to manage connectivity to multiple mobile operators and this technology can be deployed on GSM and CDMA networks, making it quite flexible. However, structured SMS is a lot less secure than other options and can present some usability challenges since it is not menu driven.

Web (WAP)

A set of protocols for connecting mobile phones and other radio devices to the internet. It takes existing webpages and rewrites them into a simplified language. The consumers use web pages or ‘apps’ installed on a mobile to make a payment. WAP

was developed for mobile money uses back in the late 1990’s and was incorporated in a range of first generation smartphone devices for web services. However there were problems with cost and speed. Benefits include follow-on sales, where the mobile web payment can lead back to a store or to other goods the consumer may want and high consumer satisfaction for quick payments. Many operators will use WAP alongside other systems – YuCash in Kenya use WAP, SMS, Voice, USSD and STK. Lipuka, with 60m + subscribers throughout SubSahara Africa also utilise WAP for information services and bill payment.

QR Code

QR (Quick Response) codes are square bar codes first introduced for the automotive industry in Japan. A QR code is read by an imaging device and interpreted by specific software. More generally used for marketing purposes recently enabling the scanned image to direct consumers to a URL this technology has now been embraced by the mobile money market for sales. Customers can simply scan the QR code for instant purchases. They are becoming more popular in Europe and most recently MMN have launched a QR code promotion in conjunction with Thorntons for Easter allowing consumers try out this technology and buy one of a selection of Easter eggs for just 1p.12 Customers can scan the related QR code through their app and instantly purchase products via their mobile phone.

Near Field Communications (NFC)

It is estimated that global NFC mpayment transactions will account for almost US$50 billion worldwide, and 300 million smartphones will be NFCenabled by 2014. Near Field Communications, or NFC, is a contactless radio technology that can transmit data between two devices within a few centimetres of each other. NFC chips

12. http://www.thedrum.com/news/2012/03/02/thorntons-range-1p-easter-eggs-promoted-qr-codes-mobile-money-network

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SIM Application Toolkit

USSD

Sending a payment request to a short code

SMS

Sending SMS

Web (WAP)

Web page or ‘app’ installed on a mobile

QR Code

Scanning software

Code

NFC

Embedded NFC chips into SIM card

Near located other device (mobile phone) with NFC chip

Biometrics

ID system (fingerprint scanning authentication)

Encrypted SMS

are now being embedded into SIM cards in mobile phones, enabling an array of new digital services, such as ticketing and payments. NFC is used mostly in paying for purchase in store. Phones loaded with a smartcard can be picked up by a reader and do not require authentication. Charges can be deducted from pre paid account, charged to a mobile account or directly to bank account. Peer to peer mode offers interaction between two active NFC equipped phones. Payments can be made to other people or businesses by tapping two phones together. 13 NFC technology has come to its maturity with big ICT and telecom industry players such as Google, Samsung and Nokia having embraced the technology.

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This technology is more applicable to developed world economies at present where the infrastructure is in place to roll the technology out. Many operators have identified NFC use in mobile money as the conduit for increased sales and take up of mobile money in more developed world while the increased popularity of smartphones worldwide has made it the technology of the future for mobile money. 13. http://ijcir.org/volume6-number1/IJCIR%20Volume%206%20Issue%201-new.pdf 14. http://www.cgdev.org/files/1425165_file_Gelb_Decker_biometric_FINAL.pdf 15. http://www.verifonemobilemoney.com/

Merchant

Consumer T h e Te c h n o l o g y

STK

Future developments – Biometrics

The Center for Global Development estimates that over 450 million people in developing countries have had their biometric data recorded, and this number is expected to triple over the next five years.14 The most ambitious biometric program – India’s Project Aadhaar, which is aiming to provide a universal ID system for all citizens, including iris scans, ten fingerprints, and a picture of each face. Financial inclusion is cited as key driver to collect this information. These identification schemes are typically associated with security initiatives, but they are also seen as a means of improving delivery of cash by governments and development agencies. Biometrics are being used increasingly by mobile money operators such as Digicel Pacific introducing biometric fingerprint scanning authentication on payment acceptance devices.15


The Rise of Mobile Money

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History

History

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n 2007 M-PESA launched its mobile money system in Kenya. In an unusual sequence of events for a technology led business model the rise of mobile money has been led by the developing world, most particularly Kenya. Whilst the idea of mobile money has been around in more developed nations for some time, the demand for take up hasn’t. Access to banks, ATMS, online banking etc has made mobile money less appealing and less of a necessity. Developing nations such as Kenya have had the lack of infrastructure and access to more traditional banking models to drive the massive take up of mobile money and have led the way in it’s development. Kenya is the outstanding success story of mobile money (please see case study for more information). M-PESA launched in 2007, and now has over 70% of the population using it and is a conduit for 25% of the GDP of Kenya.16 Mobile money has now spread rapidly throughout the developing world and has large markets in the Philippines, India, East Africa and increasingly China. It has rapidly enabled huge populations who were previously excluded from the banking system to gain financial inclusion. As mobile money networks grow they increasingly become more sophisticated. While the focus in countries such as Afghanistan, India and Bangladesh are initially to improve the reach of the mobile money networks to the poorest and most remote, as the system develops and covers the country,

Graph – ref GSMA graph (source: GSMA 2012)

increasingly sophisticated models emerge allowing operators to offer more services to those in need, micro finance initiatives such as micro insurance, small loans, and other financial services. The needs of the poorest are met and financial inclusion becomes a reality. For example M-PESA in Kenya are now offering loans for solar electric systems and small loans for their customers. ‘Mobile money also plays a critical role in any national financial inclusion strategy. It not only reduces dependency on cash by enabling digital payments through a mobile device, but also provides a platform for customers to access a much broader range of financial services. The complex infrastructure (mobile connectivity + networks for cash-in and cash-out services + mobile money account) that people use to transact and store their money electronically can be used by a range of financial institutions to offer other services and products, which improves efficiency and competition in the financial sector.’17 The developed world can only look on and watch the rise of mobile money in the developing world while telecoms operators and handset manufacturers try and think of ways of enticing American and Europeans to the market

16. http://www.economist.com/blogs/schumpeter/2013/01/mobile-money 17. http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2013/02/MMU-Enabling-Regulatory-Solutions-di-Castri-2013.pdf


The Rise of Mobile Money

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M o b i l e M o n e y, N G O ’ s , c h a r i t i e s

Mobile Money, NGO’s, charities

t has long been known that lack of access to financial services limits people ability to climb out of poverty and slows economic growth. As mentioned above, the rise in mobile money has mostly taken place in the developing world economies which have a limited banking infrastructure. Mobile money has been identified as a major conduit to increasing the financial inclusion of the world’s poorest and most remote. The mobile money revolution has backing from charities and NGO’s, The Bill and Linda Gates Foundation has given large sums of money to aid the development of mobile money, a $10m grant for Shorebank International in Bangladesh, $3.2m for Digical and Voila in Haiti: ‘We believe that the combined effect of these interventions will accelerate the rate at which poor people transition out of poverty and decrease the rate at which they fall back into poverty. Our strategy also recognizes that countries are at different stages in developing an inclusive digital financial system and that we must tailor our interventions accordingly.’18

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USAID has been supporting developments in Afghanistan and Haiti, and 18. http://www.gatesfoundation.org/What-We-Do/Global-Development/Financial-Services-for-the-Poor 19. http://betterthancash.org/

other charities and governments are looking to mobile money to revolutionise the lives of millions. The case study on Afghanistan demonstrates how governments, and NGO’s are uniting to develop mobile money networks in countries. Statistics from the Better than Cash Alliance19 has shown that consistently mobile money networks in many different economies have helped:

Reduce the cost of cash payments

In Brazil Bolsa Familia grants made through electronic payments reduced costs from 14.7% to 2.6% and in the Philipppines GCASH helps the government provide cash transfers to hundreds of thousands who have no access to bank accounts.

Increases transparency and reduces corruption

Afghanistan National Police (see case study) have massively reduced corruption by paying salaries via their mobile phones, while in Argentina a move to electronic payments has resulted in those paying bribes to reduce from 3.6% to 0.3%.


The Rise of Mobile Money

15%

Safer cash movements 14,7%

As in Kenya – people no longer have to send their cash to their families by bus or third parties. Electronic payments have transformed the cash movements in this country.

0,3%

3,75%

As the mobile money network gets established a new range of services become available to those excluded from the formal financial sectors. Micro finance initiatives –micro insurance and small loans all become more accessible. In Ghana over 300,000 were able to get access to insurance for funeral expenses via Tigo. Poorer Kenyans now have access to small loans via M-PESA services.

3,6% Reducing corruption in Argentina

7,5%

2,6%

11,25%

Reducing the cost of cash payments in Brazil

New market Access

Research from the Bill and Linda Gates Foundation has shown that rather than solve all financial exclusion in one leap countries will pass through stages of development of a mobile money system, starting with connectivity, passing onto remote payments and eventually onto providing a range of financial services. This model has most definitely been seen in Kenya where a sophisticated range of products is becoming available.20 A large number of government organisations as well as NGOs are working together to make financial inclusion a reality. From MercyCorp in Haiti to USAID in Afghanistan to Save the Children in Pakistan mobile money is being seen as the tool than can make a difference. NGOs assume the role of advisors, educators, and even consumer by using the systems to distribute funds. Emily Martyr, Mobile Money Africa programme director. “We see some enduring themes – like how to suc-

20. http://www.gatesfoundation.org/ 21. http://africabusiness.com/tag/africa-awards/ 22. http://www.cgap.org/blog/measuring-financial-exclusion-how-many-people-are-unbanked

cessfully monetise services, as well as the challenge of reducing risk and improving security. She continues: “at the same time, the more developed mobile money markets in Africa such as South Africa and Kenya are seeing exciting, and increasingly sophisticated services emerging. Consumers are responding well to new offerings like microfinance and insurance policies via mobile, and there are also signs that new technologies like NFC will be gaining ground in the near future.”21 Mobile money presents an unparalleled opportunity to deliver a basic service of modern financial services to the “unbanked” millions across the world. The World Bank predicts that by 2020, mobile money could impact the lives of some 2 billion people in developing countries, allowing banking to be used by the poor and isolated. The mobile revolution, which has already reached millions of the poor, can be used to improve lives, increase financial inclusion and stimulate economic growth. While it can be seen that mobile money is transforming the lives of those in the developed world a recent report from the US found that 8.2% of households in the USA are also unbanked which equates to 17 million adults. More unofficial banking channels are being utilized in the US, aswell as Europe – payday loans, cheque cashing, pawn shops etc. A recent World Bank report highlights that 11% of the unbanked actually live in high income economies (compared to only 18% in North Africa and Middle East).22 Can the lessons from the developing world be applied to developed countries to create a more equal society?

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The future for Mobile Money in the Developed World

The future for Mobile Money in the Developed World

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o while the developing world has seen a massive expansion in the use of mobile money the take in the developed world has been slower. Access to an established far reaching banking service, with bank branches and ATM’s readily available has meant that no urgent need to change exists. People are mostly happy with their banking arrangements. A recent Yougov report reported than only 23% of the UK population are interested in using their mobile phone instead of cash and only 10% say they are likely to use such a service in the future. • While 5% agree that they will get the technology as soon as it’s available, almost half (48%) won’t be in a hurry to use the mobile service • More than a third (36%) of respondents admitted they didn’t know if their existing phone was enabled to make cashless payments with a technology known as Near Field Communications (NFC)


The Rise of Mobile Money

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The future for Mobile Money in the Developed World

The main reason for respondents not planning to use mobile payment in the future is that they are happy with the way they pay now (67%), while concerns about security and fraud (56%) were also a factor

Yougov concluded that: ‘There will always be consumer concerns about adopting any new technology, from data security to theft, changing mobile providers to correcting mistaken payments. Consumers need to see that these genuine worries have been addressed before they wholeheartedly embrace mobile payments. Our research suggests that consumers see using NFC technology as inevitable, and they are expecting supermarkets, mobile phone and consumer electronics retailers to be the first retailers to offer contactless payments.’23 Mobile money has not seen the uptake that it has in the developed world but that is beginning to change. Recent data from tealeaf24 show that the younger age groups are changing their habits. In the UK 57% of 25-34 year olds and 53% of 18-24 year olds say they have accessed banking on smartphones or tablets whether via app or mobile web. Data from the Mobile Payment Index25 has shown that awareness of contactless mobile payments has doubled since May 2012, ownership of NFC devices has also doubled over the past six months and over half (52%) of those that already have the technology on their phone have used it.

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In the USA Tealeaf data shows that while accessing banking via a desk or laptop is still by far the most popular at 80% having done so, 28% of 18-24

year olds do so via smartphone website and 29% via smartphone app. A year ago Barclays launched PingIt which allows customer to link accounts via their mobiles with a SMS. The service was signed up to by 500,000 users in 6 months.26 In November the UK Payments Council announced it was working on an industry wide money transfer service. The new service which will be launched in Spring 2014 will enable secure payments to be made directly to and from an account without the need to disclose bank details, simply using a mobile phone number. Eight banks representing 90% of UK current accounts have committed to the scheme. Visa believes that by 2020 more than half of all payments made in Europe will be done through mobile devices and is continuing to invest in the sector.27 They have teamed up with Monitise to provide payment solutions and mobile banking technology to financial institutions in the region that currently covers 3000 banks in 36 countries. It seems that the mobile money revolution is about to start in Europe at least. Contactless payment and NFC is also making gains in the developed world market with a number of new players entering the market. Research from ICM28 shows that while consumer awareness is high at 80% only 8% of people had actually used contactless payment methods. Reasons for this include lack of retailer support and in store promotion as well as real security concerns – what happens if I lose my mobile? What if the battery runs out?

23. http://yougov.co.uk/news/2011/06/17/mobile-money/ 24. http://www.tealeaf.com/digitalconsumer/ 25. http://ecustomeropinions.com/survey/survey.php?sid=803032426&pagenum=0&ecos_live_sessionkey=ecos_sesh_332441&doneskipping=1&vault= 26. http://thenextweb.com/uk/2012/05/09/barclays-money-transfer-app-pingit-passes-500000-downloads-3-months-after-launch/ 27. http://techcrunch.com/2013/03/06/visa-inks-59m-deal-to-extend-mobile-money-partnership-with-monitise-in-europe/


The Rise of Mobile Money

and Visa are all working hard to get a share of the mobile money market. They need to make the service accessible, easy to operate and secure before people will readily take it up – incentives will help. The mobile money revolution is coming to the developed world – just a bit slower.

Conclusion The mobile money business must Key finding from the report are: • • •

34% of consumers would use their mobile as a wallet This figure rises to 46% when asked just to smartphone owners More than half would use a mobile wallet if their security concerns were addressed

Jamie Belnikoff, Associate Director at ICM Research who led the research concludes: “Mobile wallet is about more than just paying: it allows consumers to manage their vouchers and discounts, loyalty cards, event tickets and public transport passes all in one place. Whilst people appreciate these advantages, they expect a range of incentives and benefits to get them to pay this way. However even with this encouragement, their genuine security concerns – and, as we’ve seen in our recent research into contactless payments, – the lack of terminals in shops and absence of in-store promotion are also preventing broader consumer take-up. A wave of new mobile wallet products are hitting the market aimed at persuading the developed world to embrace the mobile money revolution, Google Wallet, Apple’s Passbook, 28. http://www.icmresearch.com/2013-the-year-of-the-mobile-wallet

stand alone as the only technological advancement that has been embraced and developed in the developing world before the more developed nations. Mobile money has paved the way for financial inclusion and has been seized by governments and charities alike as a mean of improving the lives of millions of poor and excluded people. In countries such as Kenya and Afghanistan it has revolutionized the way in which a huge portion of the population carry out their finances and has opened up a whole raft of micro finance products that was previously just not available to these people. While the telecoms operators and banks try and find a way to increase their coverage and sell more products in the developing countries the operators in the developed world face the challenge of actually getting mobile money accepted by a population who already have access to services and products it is offering. There is no doubt that mobile money will take hold the world over but in what guise it takes in these developed economies remains to be seen. New technologies, entrepreneurial investment, and the shear number of large players competing for the market makes the mobile money space a fascinating area of technological development 23


Kenya/M-PESA –

Kenya/M-PESA – The Runaway Mobile Money Success Story

The Runaway Mobile Money Success Story

aunched in March 2007 M-PESA (Pesa means cash in Swahili) has been the overwhelming success story of the mobile money phenomenon. Within a month of launching in 2007 M-PESA had 20,000 customers, 2 million by the end of the first year, and just under 10 million within three years, representing 50% of the country’s population - statistics and growth that no other company, or country has been able to emulate even closely. Continent wide Kenyans far exceed others in the use of mobile money with 60.3% of all Kenyans sending or receiving mobile money compared to Tanzania’s 14.1%, Nigeria’s 0.5% and South Africa’s 3.2% usage.29 Graph mobile figure Source: World Bank 2010

24 29. https://blogs.worldbank.org/ic4d/files/ic4d/mobile_phone_usage_kenyan_base_pyramid.pdf 30. http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2013/02/Safaricom-Feasibility-Study.pdf

So what circumstances have allowed M-PESA and its operator Safaricom to achieve such massive growth in such a short time? In a country where almost two thirds of the population live below $2 per day, M-PESA have proved that there is clearly a massive market for mobile money amongst the poorest, unbanked population. A recent report produced for the World Bank has in fact found that over 60% of the poorest Kenyans own a mobile phone and very few of those use any other application than M-PESA. However, it is not only the poor who have embraced mobile money with 73% earning over $2 per day using M-PESA.29 M-PESA and Safaricom are not alone in the mobile money market of Kenya with Airtel’s Zap, Orange Money and Yu Money competing for a share of the market. However with Safaricom holding 64% of the mobile subscription market in Kenya (with Airtel 16%, Orange 10% and Yu 9%)30 they are in prime position to control the market. It is generally accepted that M-PESA has been so hugely successful in Kenya because of Safaricom’s significant market dominance, strong branding and the openness of the Kenyan regulator to encourage innovation – allowing M-PESA to emerge and flourish, while the social, cultural and economic make up of the country has produced a perfect environment for growth.


The Rise of Mobile Money

Graph ways of transferring money before and after MPESA (source World Bank 2010) 50% 45%

2009

2006

40% 35% 30% 25% 20% 15% 10% 5% 0% M-PESA

Hand

Bus

Post Office

Direct Deposit

The aspects of convenience, accessibility, cost, support, and security of mobile payment systems have led to high usage by individuals and microbusiness operators in Kenya. Prior to M-PESA, there were few financial alternatives, especially for domestic remittances. The most common way of sending money around the country prior to M-PESA was either through the bus system or the post office system, both of which were expensive, inconvenient and risky. Prior to the widespread uptake of the M-PESA application, Kenyans incurred extensive cost and time expenses to send money to their relatives in the countryside, go to ATMs/banks, and transact. M-PESA has significantly helped to relieve these inconveniences. There are over 40,000 M-PESA agents in Kenya today. Studies have shown that about 40% of M-PESA money transfers are sent to parents and 8% to children suggesting that it has filled a domestic role in a country where sending money to parents is still of strong cultural importance. With the huge and increasing urbanisation of the Kenyan population this method of sending money back to traditional family homes is vital to many Kenyans. 31. http://www.centralbank.go.ke/index.php/cbk-annual-reports

Money Transfer

Cheque

Someone else

Other

So, can Safaricom and the other mobile money providers continue this massive growth and can Safaricom hold onto their massive market share? Data from a Central Bank of Kenyan annual report 2012 show that the amount of money transacted by Kenyans using their mobile phones grew by over 50% to hit Sh1.4 trillion in the year to June 2012. The number of transactions increased by 39% to 507 million transactions per year. M-Pesa accounted for over 76% of the number of agents with Zap at 19%, Yu 2.8%.31 The CEO of Safaricom, Bob Collymore, has recently said that M-PESA is a key driver of the company’s revenue which now directly employees 50,000 people. Revenue from M-PESA increased by 43% to $203m, has 40,000 agents after it increased the numbers last year by a staggering 46% while registered customers grew by 6% to 14.9million. As recently as March 2013 Kenya’s largest mobile operator Safaricom increased the cost of moving funds through M-Pesa following a new tax on transaction fee earned from mobile money transfer. Safaricom said customers transferring more than Ksh101 ($1.2) will have to pay 10 per

25


Kenya/M-PESA – The Runaway Mobile Money Success Story

26

cent more on account of a government decision to introduce a similar tax on earnings from the service. Safaricom is opposed to the new tax arguing that it would add more costs to customers and therefore negatively affect the sector. “As Kenya’s largest taxpayer, we appreciate the need to support government as it seeks to reach its financial obligations. However, we maintain our position that a tax on mobile money is at that this time premature and is likely to have a negative impact on the country’s financial deepening agenda by creating an unnecessary barrier for wananchi who are most in need of basic financial services, “Bob Collymore, the company CEO said.32 However Safaricom are not finished with their ground breaking financial offerings for Kenyans. In October 2012 they partnered with M-KOPA for a pay-as-you go solar lighting solution.33 This allows low income families credit in an affordable package to own assets that are basic and essential in their lives. Later in the year in November they also launched M-Shwari, a revolutionary banking service in conjunction with the Commercial Bank of Africa which allows customers to save

and borrow money and earn interest on money saved. Emergency loans available through mobile phones at 7.5% interest are also available making M-PESA not only still the most innovative and major player in the Kenyan mobile market but provides ordinary Kenyans with vital financial inclusion tools. It seems that mobile money is growing strongly in Kenya and Safaricom continue to dominate the market. While other operators are working hard to get in on the act it seems that Safaricom and M-PESA have a strong hold on the market and it will be difficult to penetrate this market Kenya has the world’s highest rate of person to person mobile payments but many businesses are yet to utilise the full range of solutions for mobile money. Whilst this is changing fast it is the SME’s rather than the multinationals that are adopting mobile money on the largest scale. SME’s are adopting M-PESA faster and increasing customer to business payments is the next challenge for the continued growth of mobile money in Kenya

32. http://www.theeastafrican.co.ke/news/Safaricom-raises-MPesa-tariffs/-/2558/1681810/-/view/printVersion/-/gvug2l/-/index.html 33. http://www.itwebafrica.com/telecommunications/153-kenya/230172-kenyan-solar-lighting-solutions-on-sale-via-m-pesa


The Rise of Mobile Money

27


The Philippines –

T h e P h i l i p p i n e s – ‘ Te x t i n g C a p i t a l o f t h e Wo r l d ’ E m b r a c e s M o b i l e M o n e y

‘Texting Capital of the World’ Embraces Mobile Money

28

Along with Kenya another success story in the world of mobile money is the Philippines: ‘We, at Mastercard, estimate that out of the more than 130 mobile money deployments there are roughly 50 million accounts – and that half of these 50 millions accounts come from only two countries – Kenya and the Philippines.’34 Says Mung Ki Woo, Group Executive, Mobile, MasterCard Worldwide SMART communications launched SMART money in 2001 in partnership with Banco de Oro with GCASH from Globe Telecom arriving in 2004. Globe subscribers have access to a cashless method of remittance, loan settlement, salary payments, and bill payments. They rely largely on non banking agents – such as pawn brokers and retail outlets for cash in/out transactions. The Smart service allows international and domestic money transfers, salary payment, loans repayment and bill payments. Cash in/out is done through Banco de Oro branches, ATMS and SMART centres and in rural areas at pawn shops and money changers. Both have seen consistent growth in their subscribers over the past few years. In 2001 Smart was seeing $30-45million per month in mobile

transactions and growth at 10-15% per year. Globe currently has 18,000 GCASH locations throughout the country with Smart Money users having access to 25,000 Mastercard merchants and cash withdrawals at over 9,000 bank ATMS. Key to their success is also the network of more than 1.3 million retailers throughout the country who are users of Smart Money and also function as merchants. It has been recorded that 37% of municipalities in the Philippines do not have a bank branch but 80% of the population have a mobile phone.35 The central bank recognised that a significant opportunity existed to allow telecoms operators to compete with banks in this market to promote financial inclusion and help in the drive to make remittances to family simple, cheap and safe. “The mere entry of competition has improved the cost and quality of services and that is really a big win.” – Nestor Espenilla Jr, Deputy Governor of Bangko Sentral ng Pilipinas (BSP) and Chair of the Alliance for Financial Inclusion (AFI) Steering Committee.36 Three key factors have contributed to the success of mobile money in the Philippines: •

The already high mobile usage of the population along with a demand for access to finance,

34. http://pdf.usaid.gov/pdf_docs/PNADW294.pdf 35. http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2013/02/MMU-Enabling-Regulatory-Solutions-di-Castri-2013.pdf 36. http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2013/02/MMU-Enabling-Regulatory-Solutions-di-Castri-2013.pdf


The Rise of Mobile Money

• •

domestic and international remittance flows. The Bangko Sentral ng Philinas (BSP) has enabled operators to offer e-money solutions. The actions taken by SMART and Globe, the key operators in the mobile market in the Philippines to design strong products.

Penetration of mobile phones has risen from 3% in 2000 to 68% in 2012 and the country has a wide ranging and extremely reliable mobile network– a factor that is key to consumer confidence in mobile money success. Often referred to as the texting capital of the world Filipinos have quickly adopted mobile money as an everyday part of their life, especially as only 26% of Filipinos have access to formal financial services.37 The Philippines has a unique combination of a semi informal financial system with the extraordinarily large use of pawn shops for financial help, combined with a high percentage of overseas and urban-rural remittance flows create a unique environment for the rise of mobile money. Globe, and Smart, to a lesser extent have utilised the pawnshop reliance to their advantage by creating an alliance with them for a far reaching cash in/out network. Filipinos travel throughout the world for employment with the Middle East a major destination for overseas worker. 8 million38 Filipinos working overseas remit about $18 billion to family members each year. External remittances alone make up 10% of GDP and internal remittances sent by individuals working in urban areas to family members in the provinces are an important part of daily life in the Philippines. In 2004 Smart launched SMART Padala which allows overseas workers remit directly to SMARTY account holders. By 2006 this service had a

monthly average of 1.5million users sending over $15million.39 These overseas remittances have vastly increased the popularity of mobile money in the Philippines and has created a more convenient and cheaper option to the likes of Western Union. As is the case with many developing countries the rapid urbanisation of the population of the Philippine population has increased the need for family remittances over longer distances. As in the case with Kenya – the rise of mobile money has transformed the way in which the poorer population send money to their extended families. The actions taken by the Banko Snetral ng Pilipinas, Globe and Smart have gone a long way to creating a conducive environment for the growth of mobile money by allowing non banking agents to perform cash in/ out operations. Pawnbrokers, rural banks, money changers and airtime sellers have been bought into the fold and enabled far reaching access to rural areas which would otherwise have been impossible in such a short time scale. Finally, the cases of M-PESA in Kenya and SMART in the Philippines clearly shows that mobile money launched in environments with one or two telecoms operators controlling the market creates a perfect platform for the rapid spread of mobile money services. As for the future for mobile money in the Philippines - at present one of the major differences between M-PEAS in Kenya and the system in the Philippines is the use of other non-bank agents as mentioned above. Currently these agents are not able to register new users as the agents in Kenya are able – relaxation of this regulation would massively and very quickly increase the number of registered users, particularly in rural areas. For the sake of increased social inclusion amongst the most isolated and excluded this is the one change that is required

37. http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/EXTPRRS/EXTFINFORALL/0,,menuPK:4099731~pagePK:64168092~piPK:64168088~theSitePK:4099598,00.html 38. http://www.cfo billion to .gov.ph/JZM%20speech%204th%20GFNC%20hawaii.pdf 39. http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2012/06/Philippines-Case-Study-v-X21-21.pdf

29


India –

I n d i a – T h e C h a l l e n g e s Fa c i n g a B a n k L e d A p p r o a c h

The Challenges Facing a Bank Led Approach

he rise in mobile money users has finally reached India and the future looks promising for the vast numbers of Indians that are excluded from the formal money sector. Estimates believe that only 30,000 of the 600,000 villages in India have bank branches and that nearly two thirds, or 700m Indians, are unbanked. In India the opportunity for mobile money is clear enough. More than half the country’s 1.2bn population have no bank account, but it is the world’s second- largest mobile phone market, with more than 900m subscribers. If only a small fraction of these customers take up the use of mobile money, India could easily become the world’s mobile money leader.40 Unusually it is not only the major mobile operators that are taking the lead here dispelling perhaps the myth that only those with the highest mobile subscribers can make a go of making mobile money work, as has happened in Kenya and the Philippines. A number of operators have tried, some failing (Nokia) to attract enough customers and the take up of mobile money has not seen the growth that it has in Kenya and the Philippines.

30

In India as with most developing countries the migration of people to the cities for work has increased the need for remittances within the coun-

try. Mobile money provides the means to send money to relatives back home quickly and safely. As in the Philippines, India also has a high number of international migrant workers working particularly in the Middle East which creates another important market. Nearly 69% of the Indian population are unbanked, mostly because current banking channels are not accessible to the very poor or rural population. Mobile banking in India has the capacity to increase financial inclusion to these people. Whilst 69% are unbanked India is the second largest telecommunications market and has more than 650 millions mobile phone customers.41 Forecasts have predicted that there would be over 100 million 3G broadband subscribers by 2015, and whilst these have traditionally been urban growth by 2015 25% of subscribers are thought to be rural users.42 A cautious, bank led, regulatory framework is causing concern and has led to problems with the launch of many services. The Reserve Bank of India, the central bank, has classed mobile money as a banking activity rather than a mobile operators one and has applied strict rules. All operators trying to enter the market must partner with a bank and all customers must in effect have a bank account which makes the service more complicated than the basic Kenyan model. Whilst allowing for more on-selling of savings accounts etc this is making the take up much slower. Lengthy identity checks put off, or even ex-

40. http://www.economist.com/blogs/schumpeter/2013/01/mobile-money 41. http://www.coai.com/statistics.php 42. http://www.pwc.in/en_IN/in/assets/pdfs/publications-2010/mobile_broadband_outlook_2015.pdf 43. http://www.thenational.ae/thenationalconversation/industry-insights/technology/mobile-money-on-slow-road-in-india#full.


The Rise of Mobile Money

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I n d i a – T h e C h a l l e n g e s Fa c i n g a B a n k L e d A p p r o a c h

32

clude many of the population who may benefit most from the system. This combined with some cultural differences between Indians and Filipinos has led to mobile money being slower to take hold in India. Nokia pulled out of the mobile money market in 2012 after 2 years in the market. Nokia were able to sign up 1.2m customers but failed to reach enough customers.43 Indians still rely on traditional payments of cash and cheques and are much more conservative than, say Filipinos with their money matters. Also Filipinos are mobile ‘savvy’ – the texting capital of the world – and have embraced mobile money quickly, Indians are much less ‘mobile minded’ and have been slow to take up the electronic transactions, particularly in the rural areas. However, it now seems that a number of operators have started to make inroads to the mobile money market. BEAM has signed up 14m customers and do 1 million transactions per month and have in some ways overcome the major obstacle to mobile money in other countries – the fact that most mobile money services are restricted to one network. The operators in the Philippines have already said that there must be cross network cooperation in order for mobile money to expand much further. Only countries that have one very dominant operator – such as M-PESA with Safaricom can overcome this without cooperation. BEAM are an example of the Third Party mobile money model, and one of only a few that have been successful worldwide. They work on a cross mobile operator platform allowing users on any network to interact. More recently, Beam Money, mobile payment system has announced the launch of iPhone app named Beam Wallet. This facility will enable iPhone users to use Beam Money facilities on the go. Beam Wallet is a totally safe and secure application as data is not stored on the mobile. “With an increasing section of Indians becoming tech-savvy and acquir-

44. http://www.dqindia.com/dataquest/news/155511/beam-money-introduces-beam-wallet-app-iphone 45. http://www.marketwatch.com/story/visa-launches-mobile-managed-service-2013-02-13

ing smartphones, it is vital for us to make our services available at different points of use with the underlying thought of bringing convenience and delight to our customers. In view of our constant endeavour to innovate services; we have launched Beam Wallet for iPhone users. We intend to offer convenience and ease of transacting anytime, anywhere with anyone irrespective of their device,” said Anand Shrivastav, CMD, Beam.44 This year, Aircel, India’s fifth largest and fastest growing GSM mobile service provider and country wide India operator, will be partnering with local banks to offer money services to mobile subscribers.


The Rise of Mobile Money

“Aircel prides itself in offering its subscribers the most innovative mobile applications that meet the unique needs of consumers in India,” said Geoff King, Head of Mobile Banking, Aircel. “We applaud the pioneers in Africa, Asia and the Middle East who have launched closed-loop mobile financial services and reached so many consumers so quickly,” said Bill Gajda, Head of Global Mobile Products for Visa Inc. 45 M-PESA joined the Indian market in 2012 for Vodafone customers, Indians second largest mobile operator. M-PESA has been signing up agents in villages and advertising heavily. Mr Jaganathan from Vodafone/M-PESA says, 46. http://www.ft.com/cms/s/0/a09c0f68-4a9a-11e2-9650-00144feab49a.html#axzz2NtC17Blx

“My personal opinion is that 200m300m [mobile money] users will be created in this industry over the next three years.”46 India’s Project Aadhaar, which is aiming to provide a universal ID system for all citizens, including iris scans, ten fingerprints, and a picture of each face – has been explicitly linked to financial inclusion expansion will allow many more to register with mobile money services in the rural areas where many have no formal means of identification

33


Can mobile money really tackle corruption in Afghanistan?

Can mobile money really tackle corruption in Afghanistan?

fghanistan is on the leading edge of the mobile money phenomenon spreading through the developing work at a rapid rate. In a country of 30 million where 70% of the population is illiterate and fewer than 5% of the population have a bank account mobile money is finding a market hungry for change. Today there are 18 million active mobile phone subscriptions in a country of only 28 million. This explosion has created a network which now bridges the rural-urban gap and has made Afghans more connected than ever. M-Paisa was first introduced to Afghanistan in 2009 and trialled with the Afghan police for salary transfer. The results were immediate resulting in costs being reduced by 10% by payments not being made to corrupt middlemen. Policemen thought they had received a 30% salary increase as middlemen were no longer able to skim cash from legitimate salaries.47

34

M-Pasia is operated by M-PESA/Vodafone who have successfully transformed the Kenyan mobile banking system, in collaboration with Roshan, 47. http://www.afghanvoice.org.uk/avfm/news.php?news=1184 48. http://www.ammoa.org/

Afghanistan’s biggest mobile operator. Now the service has 1.2 million subscribers in the country.48 40% of Afghans own a mobile phone so it is predicted that Afghanistan will become one of the mobile money success stories of the world. The service’s functionality has also grown beyond direct-payroll deposits in the public sector to include mobile person-to-person transfers, point-of-sale merchant payments and microfinance loan agreements and repayments. Western Union signed an agreement with Roshan last year to enable international money transfers to be sent directly to M-Paisa mobile subscribers in Afghanistan. M-Paisa has followed the African model of using a network of agents for cash in/out transactions, avoiding the need for bank accounts and bypassing the massively corrupt banking system. Afghanistan has been a forerunner of the financial inclusion for the unbanked allowing mobile money to be used for microfinance. NGO’s such as USAID have worked hard with the operators to use the mobile money system as an extremely effective tool to increase financial inclusion of the


The Rise of Mobile Money

poor, whilst reducing corruption. USAID have been instrumental in assisting the mobile money operators to establish a service that will enable this financial inclusion and to promote economic growth, giving grants of $2.1 million to M-Pasia, MTN and Etisalat: “Increasing access to safe, sound financial services for the under-served majority in Afghanistan and building transparency in the financial system is fundamental to economic growth,” said Dr. Shah, of USAID in 201149 Amirzai Sangin, Afghanistan’s Minister of Communications and Information Technology, said, “The growth of the telecommunications sector in Afghanistan over the past nine years has been phenomenal. Afghans who have access to mobile phones and no bank branch in their vicinity will greatly benefit from this service.” USAID is working with operators on networks that allow utility bill payments and micro finance initiative such as micro insurance and loans. USAID are working with the private sector in providing consumer education to Afghans who are historically wary of formal banking. They have even been working with the Associa-

tion of Mobile Money Operators of Afghanistan to harness the creativity of Afghanistan’s brightest youth to develop mobile money applications to address problems faced daily by Afghans. More than 5,000 students across the country submitted ideas for how mobile money could be used by the Government to provide basic services to more Afghans.50 M-Paisa has three major competitors in Afgan Wireless, Etisalet and MTN. Launcehed in 2011, Etisalat’s service has recently been awarded the ’Achievement in Social Inclusions 2012’ award at the Connected World Forum conference in December 2012. The award is presented to organizations that have made the greatest difference to their community through social inclusion. Etisalats mHawal mobile money service gives the unbanked population of Afghanistan access to a banking system. Already, Etisalat have enabled electricity bill payment and national utility bill payment and have 50,000 registered users with the goal to reach 300,000 by first quarter of 2013. Afghanistan is a clear example of how mobile money can be used by government and NGO’s to dramatically change the lives of a remote population.51

49. http://afghanistan.usaid.gov/en/USAID/Article/2337/USAID_Administrator_Recognizes_Progress_and_Encourages_the_Expansion_of_Mobile_Money_in_Afghanistan 50. http://transition.usaid.gov/press/frontlines/fl_sep12/FL_sep12_AFGHANISTAN.html 51. http://www.ameinfo.com/etisalat-afghanistan-recognized-mobile-money-award-321773

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M T N – L e a d i n g t h e Wa y in the Rest of Africa

MTN – Leading the Way in the Rest of Africa

TN Mobile money is a mobile payment service which operates across several African countries including Uganda, Ghana, Cameroon, Cote S’Ivorie, Rwanda, and Benin. The company works in conjunction with other organisations, banks and technology companies. MTN is now the second fastest growing telecom service provider in the world. The service was first launched in 2010 in Cameroon and it has gone from strength to strength since then. Six of the eight services that are growing the fastest in the mobile money sphere are in East Africa and after Kenya, Tanzania and Uganda. Rwanda is the new growth story. There are two providers in Rwanda, Tigo Cash and MTN Mobilemoney. MTN was launched in 2010. Two years after its launch MTN has 415,000 registered customers, 6% of MTN’s mobile base.52

36

Rwanda’s mobile phone penetration rate seems to be improving greatly, as 55 per cent of the population now has an access to the devices - in December 2012, the mobile phone subscrip-

tion was at 53.1 per cent, an indication that the penetration has increased by 1.9 per cent within one month. Latest statistics from Rwanda Utility Regulation Authority (Rura)53 indicate that out of a population of 10.5 million, a total of 5, 902, 630 Rwandans now have access to a mobile phone. MTN have continued to roll out services for the population of Rwanda, last year introducing MTNMMO which allows senders from outside Rwanda to transfer money from debit card or bank transfer through the internet to a mobile phone in Rwanda. “We will continue to add new services to MTN Mobile Money, and grow our agent network, now standing at over 700 agents across Rwanda,”Albert Kinuma, of MTN stated.54 Rural Rwandans are quickly realising that it is easier to access their money through one of these outlets rather than take a long trip to a bank. Mobile money in Rwanda now allows people to instantly make payments for utility bills, school fees. This direct competition has prompted the banks to form partnerships with the mobile operators to offer more services.

52. http://www.gsma.com/mobilefordevelopment/mtn-mobilemoney-in-rwanda-a-new-mobile-money-success-story 53. http://www.rura.gov.rw/ 54. http://www.newtimes.co.rw/news/views/article_print.php?15010&a=54295&icon=Print


The Rise of Mobile Money

Bank of Kigali has partnered with both MTN and Tigo to provide mobile money services. “Banks are beginning to realise that delivery of financial services through mobile telephony is where the real innovation and development is taking place in the retail market,” said David Kezio-Musoke, the MTN head of public relations.55 Uganda is proving to be a huge and very lucrative market for MTN in Africa. The mobile money business has taken hold in Uganda also as much as it has in Kenya, Uganda has a rapidly urbanised and migrant population. Money remittances within Uganda from urban to rural populations and from overseas migrant workers in UK, Kenya and Tanzania have led to a sustained growth in users. Data from the Bank of Uganda indicate that the number of mobile money transactions had reached 84.7million in 2011, MTN mobile money recorded over 25 million transactions during December 2012 in Uganda another 150,000 subscribers were added in January 2013.56 Figures released in March 2013 show that in Uganda 78% subscribers are registered for mobile money with more than 2 million transactions each month. (group results MTN), in Ivory Coast the business reported MTN Mobile Money ‘up strongly.’ 57 MTN haves competition from Airtel Uganda, 55. http://allafrica.com/stories/201301150053.html?page=2 56. http://www.telecompaper.com/news/mtn-uganda-fy-revenues-up-166--929490 57. http://mobilemoneyafrica.com/details.php?post_id=1106 58. http://mobilemoneyafrica.com/details.php?post_id=1063 59. http://www.bdlive.co.za/business/technology/2013/03/12/mobile-operators-to-show-robust-growth

Warid Uganda, Uganda Telecom and Orange Uganda. These five operators, by 2010 had signed more that 15.4 million subscribers – more than half the adult population of Uganda! 58 Most recently MTN has started expanding it’s partnerships in Ghana with Mobile Financial Service Africa offering its KwikAdvance credit service. It allows mobile phones currently on MTN networks to access up to 40% of their salary before the end of the month. In Uganda it has partnered with Fenix International to launch the ReadySet battery charging system with the objective of improving the productivity of MTN’s mobile money agents and broad retail base by providing sustainable power. “More entrepreneurs operating small businesses are emerging through use of the ReadySet system,” says Mr Kershaw, MTN’s executive for investor relations.59 With a 190 million subscribers in 22 countries, including Afghanistan, Nigeria, South Africa and Zambia MTN has a massive platform to roll out mobile money. Most recently MTN Zambia has recorded increased transactions. With 400 mobile money agents across the country, they have 500,000 registered users in Zambia while Cameroon is also showing strong progress

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Tigo –

Tigo – Making a Real Difference for Migrant Workers from Central America

Making a Real Difference for Migrant Workers from Central America

obile penetration across Central America stands at 90% whilst only 35% of the population have access to bank accounts. Mobile money has been slower to take hold in Latin America, with the exception of Haiti which has seen massive investment ($10m) from USAID and the Bill and Linda Gates Foundation.60 Tigo Millicom is a telecoms company operating in 13 countries across Latin American and Africa, offering mobile money services in 7 of these – Tanzania, Ghana and Rwanda, Honduras, Guatemala , el Salvador, and Paraguay. Mobile money has been slower to take hold in Latin America, with the exception of Haiti which has seen massive investment ($10m) from USAID and the Bill and Linda Gates Foundation. Tigo Money launched in Guatemala and Honduras in February 2011. At that time Juan Carlos Arriga, Head of Mobile Financial Services for Tigo in Guatamala commented:

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“I believe domestic, but most importantly, international remittances will play a major role in the roll out of mobile money in the region. The World Bank estimates that around 6 to 7 % of Guatemalans reside abroad, mainly in the US . Guatemala received about $4.1 billion in remittances in 2010 — about 9.8 % of its total gross domestic product. Guatemala’s dependence on 60. http://www.gatesfoundation.org/ 61. http://www.gsma.com/mobilefordevelopment/tigo-money-launches-in-central-america

remittances highlights some latent demand which we want to address with Tigo Money in the long run.”61 By June 2012 Tigo announced that it had increased the number of Tigo Money agencies in Guatemala from 1400 to 2000 in order to reach the most remote population. Whilst started a as a remittance service Tigo money has now expanded its operations to include microcredit solutions. Agents are operating out of a number of outlets such as convenience stores, drug stores and petrol stations across the country. Tigo are now planning to increase the number of agents to 3000 by the end of 2013. From September 2012 Tigo money expanded further to allow international remittances direct to their mobiles. Charges for international remittances fell from 15-25% to just 6%. However, Tigo and other mobile money providers are facing much more complicated regulatory restraints compared with the mobile operators in Africa. Policies for transferring money from the US is over complicated by variations between States. Although it has taken some time for the mobile money system to overcome the strict regulatory restrictions imposed in the region the latest figures show that not only is the network expanding but Tigo and others are working hard towards reducing cost for, in particular, international remittances for populations that desperately need help


The Rise of Mobile Money

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Mobile money interactive