10 Things You Need to Know about Mobile Money Services

The gaining popularity of mobile money services is not surprising, especially because of the convenience it brings to the table. We have covered various aspects of mobile money services before. So, we thought we would cover 10 important facts that you need to know about it. While there are various facts that are important, here’s our list of top 10 for you:

Developing nations leading the way

Well, yeah, surprising but true. Developing nations are leading the way in adoption of mobile money services across the globe. The country which is at the forefront is Kenya. Kenya has 93% adult population who uses mobile money services out of whom 60% use the serviwallce actively. Countries that have shown immense promise are Tanzania, Zimbabwe, Uganda, Pakistan, Bangladesh, and Somalia.

Agent liquidity and inactive customers are the major problems

One of the main problems faced by players in the industry is common operational issues like agent liquidity challenges and managing inactive customers. In many cases, customers register but fail to start off transaction proves. In fact, it has been estimated that as much as 66% of registered customers for mobile money services are still inactive. Naturally, this leads to a huge amount of opportunity loss in terms of revenue for service providers.

Usage pattern varies from one geography to another

Airtime top-ups and person to person payments remain the dominant transaction trends in East Africa. However, in South Asia, bill payments remain the dominant transaction method followed by airtime top ups and domestic person to person payments.

Largely cash based

While the popular belief is that because mobile money services are electronic media, transactions should be through digital payment modes, but it is not. It largely remains over the counter cash transaction. It is a surprising fact, but it’s true. In many countries, customers simply hand over the cash to an agent who fills up the mobile money wallet. In fact, some service providers like Easypaisa in Pakistan, conduct extensive promotional campaigns to encourage customers to transact with agents. The reasons for this are many. For example, the Bangladesh-based service provider bKash found out that customers prefer to hand over cash to agents because they feel comfortable handing over cash to a person than conducting an electronic transaction. However, this dependency on agents is increasing the cost of operations for service providers in terms of maintenance of agents, agent commissions, etc.

Promising future of small value credits and savings

Today, bill payments, remittances, and airtime purchases remain the dominant transactions with regards to mobile money services. However, slowly and steadily, a number of financial products are being linked to mobile wallets. The biggest success story of this phenomenon has been recorded by M-Shwari, a product launched by Safaricom and Commercial Bank of Africa. Through this product, mobile wallet subscribers who are registered with a particular mobile wallet like m-pesa for a minimum period of 6 months can get a loan of value $1.15 to $235 for a 30 day period. The scheme has gained tremendous population and has earned the global service provider m-pesa 5 million active users with a total deposit amount of $5.2 billion. The scheme has also been extremely beneficial for Commercial Bank of Africa, which recorded a rise of deposit accounts from $35000 to $5 million in a span of only one year. This rise has helped Commercial Bank of Africa to be the second largest bank in Kenya.

Free life insurance coverage is gaining popularity

The service provider Tigo in Ghana first launched the free insurance coverage tied up with cell phones. It gained tremendous popularity and has been launched in various other markets across the globe. This remains one of the most popular attractions till date.  These insurance products are simple in nature and are usually linked to the wallet usage – a win-win for both customers and service providers.

Mobile data is the silent revenue generator

The data available from mobile wallet usage are used for a variety of purposes by various organizations across the world. The best example in this context is of AliFinance, a financing company in China, providing funding to more than 16 million small and micro enterprise in China has developed its own credit rating model based on mobile wallet usage activity. The credit rating obtained through online activity is used to determine the financial eligibility of a person. And that’s the only data used, there is no contact between borrower and lender, all transaction happens online.

The continuous emergence of innovative microfinance modeling

There is tremendous scope for MFIs and other financial service providers to tap the mobile wallet market. The scope is increasing every day. The best example of efficient usage of this scope has been found in Kenya. Financial service providers like Faulu, KWFT and SMEP have leveraged m-pesa for various functionalities like load repayment, savings mobilization, loan disbursement, etc. Companies in every geography are innovating and bringing in newer products on the table every day. Most of these innovations are done either to make the best use of technology or to save the cost of human interaction. The innovation space is definitely something to watch out for.

Financial inclusion

Financial inclusion still remains a major factor affecting the popularity of mobile wallets. The United Nations has extended their support for mobile wallets simply due to this fact. With the recent demonetization drive of India, mobile wallets are going to gain immense popularity, especially in remote areas where access to banks still remains a problem.

The role of FATF

The Financial Action Task Force has been and will always play a pivotal role in ensuring mobile money services play a fair game in the industry. This intergovernmental body has been developing and promoting policies to prevent money laundering and terrorist financing across the globe. They have issued guidance documents governing prepaid cards, internet-based payment services, mobile payments, etc. The guidance affects all geographies where mobile money services are in force. The guidance helps national regulators in the dual task of controlling the mobile financial services industries and promote financial inclusion in their own countries.

These are facts that one should know about mobile money services. We have covered various aspects of mobile money services in various articles on this website only for you. We hope they will help you gain knowledge about this service, which is expected to rise more in popularity in the coming days.