Recently, my friend and colleague, Brad Jones, wrote a great article entitled “My Five Mobile Money Predictions for 2013.” I have included excerpts from this excellent article with a few of my own thoughts and predictions.
Here are Brad’s five predictions for 2013:
- Pakistan and Bangladesh will become the new stars of mobile money.
- Agent-initiated over the counter transactions will be recognised as the ‘killer app’ in mobile money.
- Mobile money interoperability will become a reality in some markets.
- Google will launch mobile money in more emerging markets.
- There will be further platform consolidation in mobile money, potentially leaving only three to four big players.
I agree with Brad and do hope that in 2013, we will start to hear more of other successes in mobile money other than M-Pesa. I have also been to too many conferences over the past five years where M-Pesa was often the center of attention. I too agree that a lot of credit goes to M-Pesa and the team that made it happen in Kenya but the industry does need different models to hold up as success stories. Brad goes on to add that there is “a huge growth market for mobile money emerging in Bangladesh, with many banks taking advantage of the regulations to launch agent-banking services. A CGAP blog post and Bangladesh central bank report from July last year were both cautious on the success of mobile financial services at this early stage”, however, as Brad added “some of the first movers are experiencing extraordinary growth in customer numbers, and more importantly transaction volume.”
I have also recently heard some impressive figures especially from bKash and Dutch-Bangla Bank. I look forward to visiting these two banks next week as well as attending and speaking at the 2nd Indian Ocean / South Asia Mobile Payments & Banking Summit 2013. I will let you know more about my thoughts after returning from Bangladesh.
I also acknowledge that Pakistan’s mobile money sector is doing exceptionally well. As Brad noted, “in the last quarter of 2012 there were over 31 million transactions and US$1.5 billion in payment volume across the entire branchless banking system.” He noted that “a lot of this volume is coming from Easy Paisa given their position in the market (around US$1.2 billion payment volume in 2012 with 60 million transactions)…” I fully agree with Brad, that 2013 could be the year that mobile money really begins to take off in 2013. This is another market I expect to be visiting in the next few months especially as there is a growing interest to see how mobile money and mobile payments can better support agricultural value chains.
I would also add another market that at least appears to be poised for potential takeoff in 2013 and that is Nigeria. I know what a lot of people are thinking, but the market is seeing quite a rapid increase with 16 banks now holding recently issued mobile money licenses. Out of the 16 licensed mobile money operators, I understand that GTBank (in strategic partnership with MTN and Fortis), United Bank of Africa (UBA), FirstBank Plc, Stanbic IBTC, EcoBank Plc, Pagatech and E-transact have already commenced operations. This will definitely be an interesting market to watch in 2013 and will be my second stop after Bangladesh. Apart from meeting several of the players and exploring a new mobile money pilot, I also plan to participate and speak in the MobileMoney Expo, which will be held in Lagos, Nigeria in early February. This will definitely be another mobile money market to watch in 2013.
On Brad’s second prediction, I am also in 100% agreement. As Brad notes “Over the counter transactions are becoming the ‘killer app’ for mobile money. Much of the growth for Easy Paisa has come from agent-assisted transactions for bill payments and cash transfers, with over 160,000 transactions every day and around 4 million unique customers per month. Essentially a customer of the service does not need to be registered or have a mobile phone, but can complete a transaction with the agent initiating the transaction on his or her own mobile phone. Of course, KYC and AML processes need to be in place to ensure the transaction complies with regulation, however the process removes the friction of having to register as a customer, and provides the agent with immediate revenue and transaction volume. WING in Cambodia has seen spectacular growth in the last 12 months since the introduction of an over the counter cash transfer product that essentially allows the service to operate as a domestic Western Union system (take a look at their great TV commercial here). The benefit of the over the counter service is that it helps to create a highly trained and incentivized agent network. The challenge is eventually moving customers onto individual accounts, although it is far preferable to be doing this with an existing revenue base.” In the Philippines, both Globe GCASH and Smart Money have offered similar services for several years. In fact Globe’s GCASH Remit service was one of the main ways that the Philippine Government used over the past two years to transfer over 100 million dollars in conditional cash transfers to recipients that did not even own mobile phones.
Both Michael Joyce and I somewhat disagree with Brad on his third prediction that “Interoperability will become a reality in some markets.” As Michael correctly pointed out, while mobile money interoperability may be a good long-term goal, in the short to medium term, Brad’s “over the counter transactions” are probably a more realistic solution (prediction) to this often talked about issue. I do believe in one or two markets, we may begin to see a player like MasterCard providing linkages to two mobile money issuers in the same market which may provide a potential “switch” between the two issuers without either one have to directly interconnect their services. I also look forward to the launch of mVisa in Rwanda where customers are expected to be able to transact using shared agent networks of mobile money providers. At the end of 2013, we will see how this third prediction turns out and it should be interesting to watch what happens across different markets.
Brad is also predicting that Google could be a major market player by the end of 2013. I do agree that Google’s new service (which Brad previously blogged about in his article launch of Beba in Kenya) does, in principle, remove the friction of two major stumbling blocks namely “the contactless acceptance infrastructure, or lack thereof, and secondly, the lack of mobile phones with contactless capability.” Brad goes on to note that “Google leap-frogged these two issues by firstly picking an industry that caused problems for customers. Over-charging and theft in the public transport industry meant that customers of and company owners of buses were both motivated for change. Google issued the bus drivers mobile phones with contactless readers and issued customers cheap plastic contactless cards that they can top up at agents. By all accounts the service is well received, and Google have plans to expand into Asia and other parts of Africa pending regulatory approvals.” While I am cautiously optimistic of this prediction, I do expect it to take a bit longer than the next 12 months and see this more as medium term prediction as long as Google remains committed to this pilot and effort long enough to see it really gain traction in several markets.
I do fully agree with Brad’s last prediction about the further consolidation of the platform market for mobile money. As Brad correctly points out, “There will be further consolidation in the platform market for mobile money. Over the course of the last few years we have seen Visa acquire Fundamo, SAP acquire Sybase, and most recently Tech Mahindra acquiring 51% of Comviva. Visa and MasterCard have developed outsourced services similar to debit and prepaid processors for mobile money. The platform industry is shifting away from license and maintenance revenue, to transaction-based models with centrally managed platforms that host a number of entities. As the industry shifts, it will become harder for smaller companies that are less well capitalized to continue to invest in development of their technology, and to fund the cash flow needed to support their business with the absence of large license fees. Whilst there will always be some clients who prefer to host their own technology, in 2013 we will see the continuation of a shift from license models which will cause some smaller providers to look for some sort of exit, either through merger or acquisition.”
I would like to add one more prediction as well for 2013. With the launch of the Better Than Cash Alliance by players such as Citi, Visa, USAID, the Bill & Melinda Gates Foundation, Omidyar Network, Ford Foundation, and the UNCDF along with a host of governments, private sector partners, development agencies, and NGOs, we could see a very different push toward advancing mobile money in the developing world. How this supports and advances the mobile money sector in general will be interesting to watch over the coming year. A lot will depend on the continued strong vocal support and active participation of the founding members of this alliance as well as the commitment of those who have joined this effort. I am optimistic that several governments will become significant advocates for the shift away from cash and check payments to electronic and mobile money enabled payments and transfers in 2013 and this will open up tremendous opportunities for mobile money providers who take advantage of this new push.
So as promised Brad, here are my observations about your predictions and a couple of my own for 2013. I look forward to keeping in touch and seeing how these predictions pan out over the coming year. It will be good to study the new players that arise in this field as well as some of the smaller players that will probably exit in 2013.