Mobile Money: how to unlock its full potential by capturing mobile payments

Mobile Money: how to unlock its full potential by capturing mobile payments

The Delta Perspective

Tiago Rocha de Silva - Engagement Manager
Alfredo Bandini - Consultant

Since the launch of the first mobile financial service in 2004, telcos have played a significant role in disrupting the traditional financial ecosystem. Accordingly to the GSMA, until 2016, there have been more than 270 mobile money launches worldwide and around 150 of these have been happening in Sub-Saharan Africa.

Despite the bustle around Mobile Money (MM) generated by financial regulators, private banks and in particular mobile operators, as well as the significant investments performed by these players, only a few of these deployments have reached a considerable scale. In fact, less than 15% of the referred Mobile Money deployments were counting +1 million active subscribers in 2016. Moreover, even the most successful Mobile Money cases such as M-Pesa in Kenya, MTN in Uganda, Vodacom in Tanzania and Smart Money in the Philippines, haven’t been able to go beyond modest financial transactions (e.g. withdrawals, deposits and transfers). These simple transactions, together with airtime top-up and bill payment (utilities, paid-TV…) represent around 85% of the total volume and value of the transactions in Mobile Money worldwide.

The decomposition of volume and value of Mobile Money transactions per use case demonstrates the clear focus on satisfying the simple financial necessities of customers. Surprisingly, merchant payments which have been for a long time a key priority due to their inherent potential, represented only around 5% of volume and value of transactions in 2016. In fact, it is estimated that around 30% of all financial transactions (in value) are related to merchant/retail payments, but Mobile Money players are not capturing this opportunity. The recent announcement of Safaricom about its launch of an e-commerce platform in 2018, where consumers will be able to pay with M-Pesa, is another clear effort of the Mobile Money giant to capture the e-payments potential.

But what are the challenges faced by Mobile Money players to scale up? In our experience, one of the biggest growth impediments is the limited interest/focus on developing and enriching the agent/merchant ecosystem.

Most Mobile Money operational focus is predominantly as a facilitating service, where the agents receive service commissions/fees for the deposit and withdrawal of services. Given the limited range of services within the ecosystem, agents/merchants are not keen on their pooled capital/funds being stuck in the platform, without the ability to re-use or easily cash out the float (or profit) collected when required.

To address this perennial concern, we recommend that Mobile Money operators focus their energy on developing a well-defined B2B ecosystem with the possibility to scale up and facilitate potential mobile money services in today’s digitised opportunities. Developing the comprehensive B2B payments ecosystem should gravitate towards the core and support services relevant to the stakeholders, i.e. the Super Agents, Agents and Merchants.

Building the B2B ecosystem is a key success factor for mobile payments to flourish in any Mobile Money operation and it starts by ensuring that core and support services are enabled to Super Agents, Agents and Merchants:

Completing the B2B ecosystem is the key first step to enable the growth of mobile payments adoption in emerging and developing markets. Furthermore, to ensure adoption of these services, Mobile Money operators must build a close relationship and partnership with major distributors (e.g. FMCG, Petrol station chains, Pharmaceutical or even NGOs…) who will push Mobile Money adoption further down the supply chain.