Mobile Money is taking off. Buoyed by the launch of NFC payments from the likes of Apple and Google in developed markets and the lowering cost of smartphones in growth markets, it offers convenience, financial inclusion and incredible reach.
Yet the technology is typically fragmented and necessarily has varying levels of government regulation to protect consumers.
Here, Adel Shahin, Research Manager MEF member and mobile money provider, Novatti discusses the 10 key trends that are shaping mobile money.
Mobile money generally refers to financial services provided by Mobile Network Operators (MNOs) when a consumer loads their mobile wallet or device with money to pay for goods and services directly. Telecommunication companies are in an ideal position to leverage their existing user base and infrastructure to provide mobile money services, and improve financial inclusion.
10 trends around the industry that will heavily impact mobile money growth in 2015 and for many years to come.
We’re all interested in having things more convenient and connected. A recent MEF report found that 32% of consumers felt that mobile money was “convenient” in their everyday life and preferred to use their mobile phones wherever possible. There is a never-ending trend for us to find the most convenient way to do something, and we’re happy to fork out a premium fee in exchange for it.
- Mobile phone availability
Global mobile phone penetration is higher than it has ever been. Having everyone connected to a mobile phone is becoming more crucial than ever. According to the GSMA, there were over 3.6 billion unique mobile subscribers last year, with over 329 million in Sub-Saharan Africa alone. There is also a significant trend in developing countries to shift from feature phones to smartphones. We believe unique mobile subscribers will continue to increase at 5% until every adult owns or has access to a mobile phone.
- Smartphone affordability
The cost of a smartphone is dropping every day. Google and Microsoft have each released a smartphone device for under US$100 that targets developing regions, and MTN is also distributing a similar low-cost smartphone. Although these phones have limited capability, they provide a major opportunity to enhance digital inclusion. This wide spread of smartphones is influencing how we do business in all regions on the world. Smartphones enable consumer access to the Internet, as well providing new ways of connectivity (Bluetooth, infrared and NFC chips) that are utilised with mobile money.
- NFC acceptance
Payments enabled by near-field communication are quickly expanding around the world. However, the ability to pay with contactless cards or phones will require substantial new infrastructure in both developing and developed regions. The long-term investment will enable innovative mobile money services to surface and capitalise on the new network.
Another trend to watch for from particular smartphones is the ability to multi-task. Having multiple windows or screens open at the same time is a proven way to nurture spontaneous spending. A consumer can check their e-wallet balance through a mobile money application while browsing shopping websites or applications simultaneously.
- Central banks regulation & licensing
Government central banks around the globe are enforcing and passing stricter regulations for mobile money licensing. In effect, they are creating a barrier to entering the industry, however, in the long term, this will provide consumers with a level of trust to registered entities. Registered entities will also meet a set of public regulatory frameworks and earn credibility before offering their services to the masses.
- Growing interest in mobile money interoperability
The ability for telecoms and banks to interoperate will enable consumers to transact with other consumers on different mobile money and banking systems. This will lead to a network effect and drive tremendous interest in mobile money. Major not-for-profit foundations such as the World Bank and Gates Foundation also agree that mobile money interoperability is the key for financial inclusion.
- Social media adoption and impact
Facebook has been one of the first social media service to drive mobile money to date, however, WeChat (free messaging and voice calling mobile application) is experimenting with exclusive supplier offers and in-app purchases to enhance the user’s experience. WeChat provides their 550 million active users with a digital wallet that can be used to pay for products either offered by WeChat or accepted at certain merchants. Facebook’s approach is slightly different, in that in various countries they have partnered with banks directly to provide an authentication layer that allows payments between friends. Social media service providers are always exploring new innovations and they won’t take long to actively pursue the emerging mobile money industry.
- Globalised currencies
PIN-based vouchers such as Flexepin and crypto currencies are providing an alternative to existing geographically limited currencies. The growth in popularity of crypto currencies could lead to a truly globalised currency, in which all transactions will be digital and cheaply accessible. Mobile money can be utilised to service these pseudo-currencies in a similar manner that fiat currencies are currently handled, including as a method of affordable and instant remittance internationally.
- Growth in mobile money operators
This last one isn’t exactly a trend, but an observation over the last few years. From 2011 to 2014, the number of mobile money service providers grew from 116 to 255. These service providers offer varied solutions and services and specialise in different geographical regions. The number of providers is expected to continue growing rapidly to meet the demand for new mobile money users.
We need to keep a very close eye on mobile money as it will change how we’ve always done things. In Kenya, the number of mobile money users has already exceeded the number of adults. We believe this will be the case for the rest of the developing world, followed by the developed nations. The number of unique mobile money users will continue to climb and eventually reach the billions of unique mobile phone holders.
We are on the forefront of the digital age, and mobile money is just the start of growing methodologies that are currently disrupting the finance industry. Mobile money enables financial inclusion. People will be able to pay for improved health or insurances directly from their mobile phones. Kids will be able to attend schools because their parents could pay for the services digitally. The number of mobile money services and innovations are numerous and will continually increase.
We fervently believe that mobile money financial infrastructure will uplift whole economies and their populations.
This post originally appeared on the Novatti Blog and is re-used here with kind permission.