Mobile Money – The Next Frontier

Mobile money is on an exponential growth curve in Africa, due to the growth in mobile phone penetration of GSM SIM based phone networks, and is considered the next frontier in financial inclusion for the unbanked, and easing the costs of transactions on the continent.

The primary success of M-Pesa by Safaricom in Kenya is driving adoption, but now that the teething challenges are being understood and models for dealing with them are becoming more prevelant, maturity challenges are now becoming more prominent and are causing many to wonder whether the promise is being achieved.

Starting primarily as a money transfer solution by telecoms it has proven to be a lucrative alternate revenue stream for the telcos who are being pressed due to increased competition in voice (now a commodity), lower charges in international calls from Voice over IP (VOIP) alternatives, higher capital costs for infrastructure to support a burst in mobile data growth, and lower phone usage due to social networks like Facebook/Twitter/Google+.

The next step is to grow into a mobile commerce payment solution, for merchants, organizations and businesses in order to compete against established players like banks and other financial institutions, debit and credit cards, online payment systems like Paypal/CheckOut/Google Wallet, NFC based mobile payments. Overcoming this frontier means delivering a more streamlined user experience to the consumer which is key to adoption.

Below are 10 features and approaches that I think mobile payment solution providers need to do in order to become relevant in the mobile payment space:

1. Merchant originated payment requests – current mobile money systems are setup so that the payee sends money to another number, which leads to errors if the entered number is incorrect (which is a major customer headache). Having merchant originated payment requests, almost like the withdrawal requests from agents, can reduce the errors in the transfer since the customer only has to approve the transaction.
2. Delayed payment outside the current session – the money transfer can only be completed in a single session, however if the payment request can be made and stored on the customer’s phone (like an invoice), and the payment made at a later date can provide an efficient invoicing/payment for community delivered services like utilities, education, etc
3. Payment request forwarding – allow the payment request to be forwarded to and fulfilled by another number
4. Telco Number Independence – where number portability is not available, the ability to use mobile numbers from competing telcos, which means one service can grow out and reach all customers
5. Transaction Payment plans – other than per transaction, allows a larger volume of transactions to be done at a lower cost
6. Easy creation of merchant accounts to increase the ubiquity of usage
7. 3rd Party system integration points – since a lot of the mobile money systems are tightly integrated with telecom systems this raises the costs and slows the pace of integration with other businesses like banks
8. API for system integration – providing APIs through which 3rd party providers can integrate with the mobile money systems via the web and Internet to support online transactions
9. Standards – there is no standard for the mobile money services therefore any integrator needs to interface differently to each system. These standards can extend to using contacts in mobile phones
10. Support for alternate delivery channels such as mobile phone, web and desktop apps to increase ubiquity

What are your thoughts?

This post was originally published on Stephen's personal blog. Read Stephen’s recent interview on UGO News to learn more about mobile money usage in Uganda.