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Introduction
Mobile Money Transfer is THE hot buzz word for 2009 in the financial
services industry. Currently, many companies are embarking on the
adoption of applications and systems to enable Mobile Money Transfer
services for their customers. With so much talk in the industry and
globally about this new technology, how come so many people around the
world are still asking “So You’re Telling Me I Can Send Money From My
Phone?”
While many factors play into this equation, this blog posting will
examine the background, origins, current state, and potential future
state of Mobile Money Transfers.
What Is A Mobile Money Transfer
A Mobile Money Transfer is the exchange of funds from one party to
another through a brokered service provider. Building on that
definition, a Mobile Money Transfer is the use of a mobile handset
device to either initiate and/or complete the transaction.
Traditionally, Money Transfers have been performed at brick and
mortar locations and kiosks. By using a mobile infrastructure, service
providers can access a new revenue stream by accessing this new service
delivery channel.
There is currently a vast Diaspora of technology based models for
the delivery of Mobile Money Transfer (MMT) solutions ranging from SMS
to native applications; however, success in enabling these services is
not simply a function of purchasing and plugging in the required
components. Establishing a MMT service that works is a balance of
technology and understanding the underlying processes to enable quick,
efficient, and secure transactions to end user ecosystem.
CONSUMERS: Migrant Workers
Some of the most common consumer (mobile subscribers), types include
expatriate (migrant) workers. An expatriate is someone who has chosen
to live in a country other than the one in which he or she legally
resides. Expatriates form the majority customer base for mobile
financial services since many of these workers have dependents in their
home countries, and need efficient methods to send funds to their
families back home.
Migrant workers and expatriates represent the largest community of
service users for MMTs; consequently, there has been an increasingly
high adoption rate in Europe and Asia from these demographics.
Having expatriated, common concerns among this group are the need to
manage finances ‘back home’, continuing to make mortgage or maintenance
payments, bill payments, on-going savings or investment commitments,
etc. More so than other groups, expatriates are likely to send money in
large amount on a very fixed schedule. MMT solutions addressing
expatriate needs, must be cognoscente of the sending patterns for this
group.
CONSUMERS: The "Under Banked"
According to the GSM Association, fewer than 1 billion out of 6.5
billion people worldwide have bank accounts. At the same time, the
penetration of mobile subscribers in emerging markets is increasing
rapidly – with 85% of the next billion subscribers expected to come
from areas such as Africa, Latin America and East Asia.
Banking for the underbanked must consider the following factors which can commonly affect adoption
- Underbanked consumers often are confused by mainstream banks and their policies.
- Physical
surroundings matter. Many people are uncomfortable in an institutional
setting and prefer a less-formal environment. Safety and
confidentiality are important.
- Respect is paramount.
Financial institutions can show respect through convenient locations
and hours, friendly employees and clear communication about charges and
other policies.
- Underbanked consumers may not be served by
traditional financial products. Banks may need to think about how to
offer check cashing, money orders and low-cost remittances, for
example.
- Underbanked consumers are interested in learning
about financial matters but may not have time for traditional classes.
Experiential learning, online courses and peer coaching might be
alternatives.
CONSUMERS: Convenience Users
This group is mostly comprised of consumers from developed nations,
with sufficient access to financial service institutions. For this
group, MMT presents an opportunity for efficiency and ease of use. This
group is from the banked population.
In addition to standard usage, the implementation of a Mobile Money
Transfer solution acts as a technological gateway into the provisioning
of other services such as mCommerce solutions. Using applications which
allow consumers to leverage account balances against the purchase of
goods allows service providers to cross sell their services to leverage
a new consumer base.
By treating a cell phone similar to a cash account, service providers
can capitalize on the consumer retention caused by the offering of a
multi-purpose service. Consumers are more likely to adopt a service if
the transactions are easy to perform, and the service can be reused.
While Convenience Users present the greatest challenge for adoption,
they have the benefit of generating high profits since its consumer
base is typically more accepting of new technologies and methods,
provided that they simplify the process.
PRODUCT MODELS: Mobile-to-Mobile Money Transfers
Mobile-to-Mobile transfers represent the ultimate adoption of Mobile
Money Transfer services. In this model, consumers would be able to send
funds from their mobile handset to their friends and family. Receivers
would be alerted through their mobile handset of an incoming funds
transfer. The transaction would be completed on the handset, and funds
would be immediately decremented from the sender’s account and credited
in the receiver’s account. Mobile-to-Mobile represents a significantly
high level of consumer adoption.
PRODUCT MODELS: Cash-to-Mobile Money Transfers
Cash-to-Mobile transfers are an emerging process which would allow
users to send funds from a computer or a brick and mortar kiosk, and be
received by a mobile subscriber. Much like Mobile-to-Mobile transfers,
receivers would be alerted through their mobile handset of an incoming
funds transfer. The transaction would be completed on the handset, and
funds would be available in the consumer’s account balance.
PRODUCT MODELS: Mobile-to-Cash Money Transfers
In a Mobile-to-Cash transfer, funds are sent from a mobile handset
using the handset application. The receiver would be alerted via
handset of an incoming funds transfer; however, funds would have to be
picked up from a brick and mortar kiosk. Much like the aforementioned
Cash-to-Mobile Money Transfer presented above, the Mobile-to-Cash Money
Transfer relies on the receiving party`s ability to have easier access
to a brick and mortar kiosk.
Potential Industry Obstacles: Developed Markets
Since the Mobile marketplace is a newer concept for North Americans,
adoption will prove undoubtedly slow. There are a number of reasons for
this reduced rate of adoption, including the following:
- North Americans have banking services that offer convenient,
well established services using existing brick and mortar and landline
infrastructures
- Another common obstacle is the regulatory
environment. Since MMT solutions deal with global and regional
financial regulations, it is important that service providers adhere to
the regulations of all parties to ensure appropriate usage.
Summary
While the entrance into this space will be slow and gradual adoption,
the end state will be a combination of brick and mortar establishments
and the use of mobile money transfer technologies. The intent is to
have Mobile Money Transfer services which complement and enhance the
current service offering available at brick and mortar kiosks.
By pairing local service offerings such as bill payment, mCommerce, or
simple banking functions with mobile remittance solutions, telecom
operators can provide end-to-end services to the local consumer base.
By using a mobile money transfer intermediary, the infrastructure is already available for inter-party fund transfer.
While the capabilities and depth of the offering will vary based on the
overall status of the nation, the service provider must cater the
service to the demographic. It is important to differentiate between
the local needs of a developed vs. under-developed demographic as well
as whether the target market is banked vs. un-banked.
Financial institutions’ interest in MMT lies in their desire to
develop additional banking channels that compliment online banking and
‘brick and mortar’ branches; consequently, this allows them to increase
the volume and average revenue of transactions.
Additionally, mobile remittance offers financial service providers a
lucrative way to tap into the vast “un-banked” populations largely
found in Central America, South America, Africa, India, Middle East and
a large part of Asia. The under-banked population represents a win-win
situation for FSPs. By transitioning them towards services for Money
Remittance, consumers will have an introduction to banking vehicles, as
well as gain and understanding of banking processes.
It is through awareness that banks in these geographies will gain
consumer confidence. Once the appropriate business model is in place
for Mobile Money Transfer and a substantial global business case is
proven, other value added services and consumer channels can be
developed for mass consumer provisioning, such as:
- Prepaid airtime top-up
- Prepaid shopping cards
- Person-To-Person Transactions
- Ticketing
- Mobile Banking
- Coupon Issuance
- Micro-Credit Transactions
- Proximity Transactions
- Transaction Portal
Mobile Bill Presentment and Payment applications allow service
offerings to grow beyond money remittance. Bill presentment services
would allow subscribers to receive notifications for bills. Once the
subscriber has received notification for a bill, they can then use the
application to pay the bill.
Jumping into this industry without a full understanding of the
processes and drivers will cause a ripple effect which will create
services which are useless and ineffective for consumers. Developing
consumer friendly applications requires an understanding of the varied
user types for Mobile Money Transfer solutions. Each distinct group has
different fundamental drivers which determine user behaviour and
functional requirements.
With so many geographic and demographic considerations for the
proliferation of MMT, it is important to understand that there cannot
be a singular unilateral solution. Successful implementation of Mobile
Money Transfer solutions rely on a fundamental understanding of the
local consumer base. In the current market, MMT Solution providers are
generally focused on one of the three major solution models; however,
it won’t be long before established players begin crossing the
boundaries and becoming full-service providers of both the Local and
the International Remittance Models.
Achieving global interactivity of service offerings should not be the
goal of any implementation. Understanding the use cases and drivers in
different geographies is necessary to craft useful services for the
world’s various financial markets.
About DonRiver:
DonRiver is an IT management consulting
and software development company with presence in North America,
Australia, Europe, and Asia. DonRiver’s mission is to be a leading
provider of software development solutions using a blended on-shore and
off-shore delivery model to deliver the highest value for our clients.
DonRiver specializes in serving clients that are Telecommunications
Service Providers, Software Application Companies, Management
Consulting & Systems Integrators, Shipping & Logistics
providers, and Financial Services Companies. Our people are experts in
delivering Mobile Applications, Mobile Commerce & Mobile Financial
Services Solutions, System Integration Solutions, Service Delivery
Platforms, and Next Generation Network OSS & BSS Solutions.
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