The mobile telephone has enabled many African countries to skip the fixed line stage in telecommunications development. Nowadays the African mobile money transfer (MMT) market for Person-to-Person (P2P) payments is more advanced than its equivalent in the developed world because of the sheer numbers of low income, unbanked and migrant workers and their need to use MMT regularly, combined with the straightforward approach of SMS (Short message Service, text messaging) / USSD (Unstructured Supplementary Services Data offering real time connection) targeted initially at a migrant, unbanked and less well off population. The developed world will catch up with Africa, but it will be years before the more complex mix of smart phones, communication technology (e.g. near field communication) and Person-to-retail applications has a significant effect on the wider African payment markets, outside of the most developed cities in Africa. As of now, mobile money continues to promise significant benefits for African citizens, business, and government in areas of: financial inclusion for the unbanked, poor families and females; improved transparency; and reduced friction for micro-businesses and development initiatives. Mobile money is indeed Africa’s own success story. The strategic insight gained from analyzing this piece of African phenomenon identifies four core principles if Africa is to maintain its current growth trajectory:
-Strategies benefiting consumers, businesses, and economies
-The requirements for success for different players in the industry
-The growth opportunities in MMT and P2P (Person-to-Person) payments, not to mention the rigorous analysis of trends
-Critical success factors in the altering landscape to aid Operators, Financial Organizations, and Regulators position themselves for success
The insight drawn from understanding and applying these four principles assists in stress testing the business case, spot prospective markets, and identify successful strategic partnerships.
So, it begs the question, what is making the African market grow at the jaw-dropping rate, well, three things good folk of the world:
-A high proportion of internal (some external) migrants sending remittances
-A high-proportion of unbanked or under-banked customers
-A high number in mobile ownership, which is often the effect of poor landline provision (there are very few personal or rather landline connections in Kenya, most of them restricted to the well-to-do and commercial entities)
It is important to note that regulators and governments have a direct bearing on the probability of the continued benefits for the African populace, business and the economy. There needs to be a balance in terms of control, too much could and would stifle growth, too little, could lead to abuse and negatively consequential events. For instance, regulators need to gradually tighten control at each stage of market maturity, being careful not to overtighten.
Africa looks built to proceed moving from being weakly banked and partially unstable to strongly banked and stable and all players will benefit from, and contribute to, economic development and benefit from a steady move away from cash. The African mobile money transfer market is beginning to mature in each nation and regulators are also beginning to promote tough competition between mobile network operators. In this, we see the following scenario pops up:
•Mobile money transfer remains an essential addition to normal mobile services where indirect returns are shown to be substantial. In most African markets, a comprehensive approach to mobile money is critical and without it significant losses of customers can be expected.
•The competition for international remittances continues to pick up as transactions go through shared, operator independent hubs, alongside mobile money transfer (MMT) payments, ESPECIALLY with the coming of Bitpesa in Kenya, a remittance company that links Mobile Money Wallets (MMW) with crypto-currencies, specifically bitcoin as an alternative, fast, cheap, and easy to use remittance system, I myself having used it and finding it highly useful and convenient. We observe that the potential merging of the previously separate markets for MMMT and international remittances has a bigger impact on the African market than technological advances in mobile money made in the developed world (e.g. smart phones and Person-to-retail).
•Mobile network operators will secure sustainable competitive advantage by using mobile money transfer (MMT) as a critical part of their value-add to customers and by focusing on working with financial partners to use data arising from MMT to improve customer acquisition, retention and development.
•Multi-country mobile network operators face 3 options:
1.playing a portfolio game to take significant shares;
2. not launching if there is a lack of portfolio or insufficient returns;
3. forging relationships with banks that want to own some or all of the mobile payment operation.
•Pure mobile network operator payment companies probably move away from selling additional financial products because for most customers (the unbanked or under banked) this is not a priority or they simply cannot afford them.
•Mobile Network Operators (MNOs) seriously contemplate selling existing operations to the Banks to focus on the great challenge of rolling out 3rd, 4th and nth generation capabilities and content as regulators increasingly insist on solutions that are independent of MNO (Safaricom has the financial muscle, I don’t know about the strategic capabilities, but seemingly, to follow a different strategy, possibly fueled by its very sizeable market share, but will see, the plot thicken).
•Banks take their normal strong position, helped by mobile network operators and other financial organizations and platform providers to develop strong remote access, not just via mobile money transfer but also through mobile banking, facilitated by improved network capacity and reliability.
Mobile Money Transfer helps catapult many companies in Africa into a marketing frenzy zone where, especially in the early days, it is possible to gain the most number of users, to do so (Safaricom has benefited a lot from this first-mover advantage, two strategies often emerge in the marketing frenzy):
•Acting quickly and effectively by forming strategic partnerships before the situation becomes very competitive.
•Considering absorbing customer relationship management skills from a blend of partners to ensure the most developed learning as well as relevant approaches to the local African market.
International remittances represent substantial opportunities for all players including the government (increasing tax and improving security), because the market is large and the majority of payments are made via informal channels with incumbents offering poor service.
•International remittances and mobile money transfer can go through the same technology platforms and it is likely that the markets will merge (Bitpesa is already doing it using the Internet as a hub or platform). This means factors such as strategic partnerships and understanding customer needs are highly vital to successfully capturing share.
•Capture share by aligning the approach to international remittances with the need for senders and receivers to make their choices easily. Future customers are likely to want to choose channel according to amount, who is sending / who is receiving, and location, something that such companies would be wise to contemplate.
Data analytics become a source of serious competitive advantage when there is intense competition in the market. The regulators are understandably interested in this potential new era for data, because the market is highly innovative and early entrants may seek to exploit network effects to control the landscape. Organizations looking to gain from new data should:
•Acquire ground early on by using the ever-increasing richness of data (tracked information by location) alongside deeper Customer Relationship Management (CRM) relationships with customers.
•Generate data about the unbanked and under banked via mobile money transfer, international remittances, CRM techniques, and by strengthening social financial circles, using the resulting data to find good customers to win and keep, and to identify bad customers.
•Understand the data is set to become richer still as developments in Person-to-Retail and technology such as NFC (Near Field Communication, the technology that lets you share files with another smartphone, et cetera) eventually impact, therefore it makes sense to get a grip on data now.
To succeed game of capturing share and ensuring maximum benefit to consumers and business, others inclusive, successful strategic partnership is quite essential. Financial Organizations (FO) and Mobile Network Operators (MNO) stand to gain by working together in various fronts, which are:
•Data-FOs partnering with MNOs should be using new combined data geared to optimize opportunities for each partner.
•Create efficient channels-to make operational profits, MNOs should be focusing on efficient channels for carrying mobile money and cross-selling additional telephony services to different segments of users of mobile.
•Agents- the partnership will help in negating, navigating around and avoiding key investment costs, how you ask, well, MNOs should be leveraging FOs investment in agent development operators where they stand to gain from working together.
•Market share- money transfer and card acquiring operators partnering with mobile network operators should focus on developing hubs or platforms that deliver a lower cost, more financially inclusive and non-network exclusive service to all citizens, including internal and external migrants.
Looking to the Future
So, what is the future of Mobile Money Transfer in Africa, it is the “hub” or the platform, preferred by customers, agents, regulators, and international payment organizations. A few innovative mobile network operators (MNOs) and regulators are making the concept of the payment hub work and it is spreading throughout Africa, slowly, competitively and more inclusively with partnerships more common between MNOs and Banks (Safaricom has done quite successfully, Lipan a M-Pesa, M-Shawri), not just for defensive reasons but also to share costs. The effects of this are:
•interoperability emerges from hubs, making international transfers much easier, reducing set-up costs for new operators and also creating interoperability between networks in the same country, benefiting consumers and economic development.
•interoperability does not necessarily benefit network operators, but in our view regulators will eventually insist on this and operators should plan accordingly.
Mobile Network Operators should focus on:
Providing network and pure telecommunications services ensuring smooth transition through third/fourth generation services. Develop joint data and analysis with financial partners in developing products, services and propositions to assist joint customer acquisition, retention and development leaving. Financial organizations need to invest in building or sustaining an agent network where possible, or at least sharing costs more equally.
Financial Organizations (FOs) should focus on:
Dealing with unbanked / under-banked, weighing cost benefits, incorporating Mobile Money Transfer (MMT), leaning into distribution channel, product, pricing and communication strategies, separate and joint processes of customer acquisition, retention and development and ensuring data is of the right quality and available for analysis.
Telecommunication regulators should focus on:
Ensuring MNOs manage MMT as a content service, delivering data cost-effectively with the help of partners. Ensure MNOs deliver cost-effective provision of network services moving from third / fourth generation and, crucially, broadband empowering rural entrepreneurs and workers and stimulating economic development.
Money Transfer and Card Acquiring Operators should focus on:
Developing and providing hubs or platforms, as appropriate partnering with MNOs to ensure more cost-effective domestic and international money transfer operations.
Financial and Telecommunication regulators should focus on:
Ensuring partnerships between MNOs and Financial Organizations (FOs) are not exclusive thereby effecting that MNOs and FOs provide platforms that allow payments to be made between any citizens in their countries making remittance payments cost-effective from other countries, fulfilling the objective of full financial inclusion by finding the right level of control to balance risk / benefit at each stage of market maturity.
However you see it, the future of Mobile Money Transfer in Africa is rather auspicious, the horizon speaks of great things to come as technology makes its leaps and bounds in Africa, and in the globe as well. Keep tuned!