By Vinay Solanki
Remittance (Person to Person and Person to Bank transfers) and prepaid mobile recharges were assumed by me to be the top products by transaction volume used by Africans. However, little did I know that mobile money is not just a product but a way of life, when you can buy from vegetables to plane tickets, pay bills, pay merchants and do international remittances all from the mobile wallet platform!
Flash Back (History)
Mobile money was launched by SafariCom when it realized that people use talk-time as barter for payments. Me2You service was used to repay debt in the form of talk-time. Safari and Vodafone realized the potential value of this trade and joined hands to form VodaCom and launched M-Pesa. It became an instant hit as using mobile wallets provided a cheaper alternative compared to using a full-fledged bank account. Penetration of banks in Africa is low and maintaining a bank account is expensive. Unlike India, even checking your balance is charged and the minimum balance criteria makes it unattractive for daily wage earners and low income group. Safety is also a concern as mugging is common in Africa and people feel safer to carry less cash.
Mobile money penetration and success was enhanced with the increase of mobile phone usage, reduction in calling rates and reduction in handset prices. Availability of second hand phones enabled a fast and a deep penetration of mobile money in Kenya and other countries in the African continent.
Gradually moving from the basic P2P (Person to Person), P2B (Person to Bank) and talk time topups, operators and service providers started building a large merchant network such as multi brand retail stores (NakuMatt), car service provider, construction contractors and so on to expand the usage of mobile money. Basic idea they followed is to on-board the entire ecosystem to increase the speed of adoption. For example: if I want the labour class to use mobile money, I should on-board contractors, labor organizations, unions and suppliers.
Looping in the Government to disburse salaries through the mobile wallet was a smart move to increase the penetration.Civil servants of the entire country receive their money through the mobile wallet. Cable TV providers accept payment through mobile wallet and in Kenya you can even book a plane ticket using your mobile wallet.
A lot of innovations are witnessed in this area, where service providers have enabled cross border or international money transfer to compete with MoneyGram and Western Union, which are expensive routes of cross border remittances. This mobile wallet based transfer holds the strength to revolutionize the remittance industry. Service providers are tying up with the Visa and MasterCards of the world where the customer’s wallet is linked to these cards and she can swipe her card as a complement.
NFC (Near Field Communication) enabled cards have also been launched recently, which are linked to mobile wallet and can be tapped to the receiver to pay quickly by just entering a PIN. Time will determine whether this can be a successful medium as few merchants may wish to upgrade to NFC based payment collection options and create a differentiation for them.
GSW (Group Saving Wallets) in the region where not everyone can afford to own a mobile or are educated well enough to carry out cash-out and cash-in transactions is an attractive proposition.Very much like cooperative banks in India, where there are signatories who are responsible for carrying out transactions on the communities’ behalf.
Micro loans to the bottom of the pyramid are fast catching up, whereby some companies who wish to offer loans are tying up with operators to leverage their distribution network through mobile wallets. These companies are building customer credit scores using their GSM usage data, social media footprint, mobile money history and little other information. A huge potential for such services exist in India through mobile wallet or payment bank routes. Loan values as low as $1 are offered in Africa with interest rate ranging from 11% a month to 17% a week. Mobile payments, wallets and transactions can possibly replace every other form of payment and become a way of life for business transactions!