Lost: Where’s the m-money innovation?


By Alix Murphy, senior mobile analyst at WorldRemit

A light is slowly dawning across the financial services sector. At Money 2020 in October 2015, two unlikely countries were in the limelight as examples of best practice in digital payments and inclusive finance. Bangladesh, where 22% of the population – or one in five people – uses a mobile phone to make payments and send money to other people, and India, where mobile payments are quickly scaling off the back of a universal biometric identity system.

As Europeans and North Americans eagerly watch Apple Pay slowly make its debut across Europe, the rest of the world has been quietly getting on with using their basic (non-smartphone) phones to pay for everything from utility or medical bills to online shopping, and for direct peer to peer payments.

Emerging markets innovation

Mobile money; you may have heard the term associated with Kenya, where Safaricom’s M-PESA service, launched in 2007, now handles over a million transactions a day. Mobile money is a simple digital account linked to a mobile phone number which can be used to store and send money, without requiring a bank account.

Today, more than 260 mobile money services just like M-PESA operate in over 90 countries across the developing world [GSMA]. By the end of 2014, there were 103 million active users of mobile money globally, up from 60 million just one year earlier, according to the GSMA. Mobile money accounts outnumber bank accounts in at least 16 countries.

In emerging economies, the lack of banking and payments infrastructure has bred an environment of enormous innovation to meet the financial needs of ordinary people. In the case of mobile money, it was telcos like Safaricom who stepped in to provide a basic payments facility for their unbanked customers, offering them the ability to conduct digital transactions, which otherwise could only have been made in cash.

Slower European uptake

In Europe, we have been slow to recognise the same type of opportunity among our own financially underserved segments [LendProtect Index], preferring instead to offer financial products that are nothing but incremental improvements upon existing models.

According to the World Bank’s latest global financial inclusion data, only 39% of citizens in the European Union saved money an account at a financial institution in 2014, and fewer than half paid a utility bill from a financial account.

Making payments ‘cashless’ isn’t just about pretty apps and marginally faster settlement speeds, it’s about offering meaningful services that customers need as part of their daily lives.

In Ghana, where 13% of the population now uses mobile money, unbanked customers of MTN can apply for and pay back small personal loans directly from their mobile money account with mjara Loans. In Sri Lanka, the elderly can receive pensions onto their Dialog eZCash mobile money account, a move which could potentially save the government millions in cash disbursement costs. In Tanzania, Tigo became the first mobile money provider to disburse quarterly interest payments (earning between 5% to 12%) to all of its Tigo Pesa customers, a type of dividend on customer funds.

Today, a growing electronic payments ecosystem of businesses – both large and small – is operating on the rails of the mobile money platform. It’s this type of life changing innovation that empowers entire economies, with the mobile phone taking centre stage.

It shouldn’t be surprising, then, that these countries are also home to the first cross-border mobile payment initiatives, challenging traditional incumbents by providing instantaneous money transfers at a fraction of the cost. They’re also among the first to recognise the tremendous opportunity that remittances – the money sent home by people living and working abroad – present for delivering real digital innovation. Globally, the world’s 230 million migrants send around $600 billion annually in remittances, the majority of which today is still sent in cash at high-street agents [The World Bank].

Recognising the opportunity

For once, European companies are recognising this same opportunity. Companies like WorldRemit are now connecting with mobile money services through sophisticated APIs, enabling the seamless movement of money from one country to another, directly into mobile money accounts. We’re witnessing another shift of the ecosystem as international diaspora are now able to send money to their friends and family back home in the same way they send texts and instant messages.

Undoubtedly, this is a case of the developed world learning from its peers in emerging economies. The mobile money industry will continue to be a dynamic and transformational sector, and as long as there is real need there will be more groundbreaking innovation.

WorldRemit is an online money transfer service that lets people send money from 50 countries to more than 110 destinations.


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