Beruflich Dokumente
Kultur Dokumente
2009 / 07
www.detecon.com
Mobile Money Transfer
Table of Contents
1 Executive Summary............................................................................................. 2
2 Introduction.......................................................................................................... 3
3 Current Status of Mobile Money Transfer / Mobile Payment .............................. 4
4 Mobile Money Transfer in the context of CR ....................................................... 6
4.1 Business Impact .......................................................................................... 7
4.2 Community Impact....................................................................................... 9
4.3 Cultural Impact .......................................................................................... 10
4.4 Innovation Impact ...................................................................................... 10
5 Conclusion: Banking the Unbanked .................................................................. 12
6 Further Reading................................................................................................. 13
7 The Authors ....................................................................................................... 14
8 The Company .................................................................................................... 15
1 Executive Summary
Mobile phones evolve more and more as an important channel for basic banking services in
developing countries, demonstrating the ongoing convergence of telecommunication and
banking. Mobile money transfer (MMT) provides a way to use a mobile handset to pay for
goods, to transfer money and to perform basic financial transactions. Especially in Africa,
with its underdeveloped banking sector, MMT services have been implemented successfully
- and the market response is enormous. The popularity of MMT services has demonstrated
the great potential of integrating mobile phones and financial services.
This demonstrates that making a profit and achieving a positive impact on society with
one and the same service can go hand in hand. This mutual benefit is the key element of
Corporate Responsibility (CR) according to Detecon’s definition. MMT is a good example
for CR, as this service serves both businesses and society as a whole. The enormous
success of Safaricom’s M-PESA in Kenya has shown this. M-PESA allows Kenyans to
transfer money via SMS. Fees for M-PESA are far below fees for conventional banking
transactions, but allow a positive business case.
MMT stabilizes rural communities by enhancing the social status of individuals and by
increasing productivity. Consequently, mobile operators contribute with MMT to the
economic development of communities and benefit from the accompanying positive brand
perception and, most importantly, also get access to previously untapped customer
segments.
2 Introduction
Mobile payment services (m-payment) enable mobile phone users to pay for any types of
goods purchased from merchants or to transfer money between financial accounts and to
perform financial transactions. This paper focuses on mobile money transfer (MMT) services,
which are a part of m-payment. MMT is the concept of sending money stored on a mobile
account to another person’s account. Users do not need to hold a bank account to subscribe
to the service. Since this SMS-based service is a cheap way to transfer money across
borders it is especially interesting for international remittances. The aim of MMT is to give
banking access to rural communities where credit cards and bank accounts are hardly
present in developing countries. The enormous popularity of the MMT services introduced in
Kenya in 2007 by Safaricom has shown the high potential of the convergence of mobile and
financial services in developing countries.
In most developing countries, mobile phone penetration is far higher than that of banking,
and the mobile phone is often the only channel for cashless payments. Because mobile
access is more or less widespread in developing countries (more than 3 billion mobile phone
users worldwide in 2007), MMT via mobile devices is on its way to become a prime
instrument for low-value payments, providing a more secure, less costly, and faster way to
handle any kind of money transaction.
This paper aims to show how innovative mobile services can create financial profits as well
as value for societies. Therefore MMT is illustrated in the context of Corporate Responsibility
(CR). The next chapter will show the status of MMT services in emerging markets by
analyzing the existing gap between mobile penetration and banking penetration in these
markets.
Europe:
North America: Low demand for mobile banking
Growing interest in mobile
solutions in European markets
payment systems
Q Europe: Failure of Simpay
Q Austria: Success of Paybox
Q UK, France: SMS and NFC based
transport solutions
Asia:
dvanced applications in East-Asia
Q Japan: Rapidly growing NFC based
payment & transport applications
Q Philippines: Mature mobile payment and
remittance services
Africa:
Many solutions in Africa
Q Nigeria, Kenya, South Africa: Mobile
Money Transfer services
Q South Africa, Kenya: Banking services
for the unbanked
Q South Africa, Zambia, Kenya: Mobile
payment services
Source: Detecon Analysis
There are important growth opportunities in m-payment in different parts of the world, but
their size differs greatly from country to country. Mobile payment is expected to grow from
US$ 3 billion in 2007 to US$ 52 in 20123, emanating preliminary from Japan. The other big
market for m-payment is in developing countries: The development of MMT. A large share of
this market will come from Africa, China-India and other South East-Asian countries.
1
Plastic cards are being used much less widely in Japan than in the US or UK for example.
2
For example in Tanzania, of the 21 million population over the age of 16, only 1.6 million currently have a bank
account. By contrast, more than 7.5 million people in this segment have a mobile phone or have access to mobile
services.
3
Ovum: Mobile Payment Market Forecasts, Ovum, 2008
Mobile operators have already pioneered MMT in many countries, as they own the customer
relationship and the infrastructure that can provide the needed capabilities.4 Fees for MMT
are much lower than fees for conventional remittances (which mainly need to be executed
manually by banking agents) since the clearing is done automatically by the mobile operator.
MMT services in developing countries evolve more and more as mandatory products for
mobile operators and the potential is still high: in its analysis of 157 countries regarding the
access to financial services, the World Bank shows that there are 100 countries in which
more than 55% of the adult population is unbanked, including 40 countries where more than
80% of the adults are unbanked.5
In Kenya, Safaricom's MMT service, M-PESA, has faced an enormous growth in 18 months
and is still expanding rapidly. It has clearly demonstrated the demand for easily accessible,
secure cash-payment services in emerging markets.
Some numbers show the big success of M-PESA: In June 2009 the M-PESA service has more than 4 million registered users
in Kenya, up from 2 million in March 2008, and Safaricom reported a total of more than 12 million subscribers. The majority of
customers in both, the urban and rural areas, prefer M-PESA over other money transfer services because M-PESA is offering
a substantial benefit especially in form of savings on transport and is simply cheaper than comparable services.
MMT has huge financial potential and contributes to alleviate poverty. Moreover it
encourages economic and social growth in developing countries. That’s why Detecon sees
this service as part of a Corporate Responsibility (CR) aligned product portfolio. To provide
better understanding for this context, Corporate Responsibility is described in the following.
4
Other examples for the successful introduction of MMT services are: Smart Money and GCash in the Philippines;
Wizzit in South Africa; Caixa Economica in Brazil.
5
Finance for All? Policies and Pitfalls in Expanding Access, World Bank, 2007
6
According to the World Bank, Kenya received US$1.3 billion in international remittances last year. Vodafone plans
the introduction of MMT in other developing countries like Tanzania or Ethiopia. In 2008 Vodafone started
cooperation with Roshan to roll out a similar service in Afghanistan called M-Paisa. Currently voice control is tested
to face the low literacy rate in Afghanistan.
7
Fees for conventional national and international money transfers range from 10%-25% of the transferred amount.
8
Safaricom’s market share of mobile connections in Kenya grew from 74% in September 2007 to 81% in
September 2008. This growth is supposed to be caused by M-PESA.
Companies, especially when they operate in emerging countries, need to find ways how to
demonstrate their loyalties and, at the same time, build globally integrated systems of value.
Corporate Responsibility (CR) is an approach to this challenge.
Business
Culture
criteria build an “Impact Radar”. This radar is
used to identify and develop Corporate
Responsible business in a holistic way and
thus ensures a benefit for the local
community and the company. Each criteria
of the radar assess the impact of a business
model from a certain view:
Community
Q The Business Impact
Q The Community Impact High Impact
Medium Impact
Q The Cultural Impact Low Impact
Q The Innovation Impact
Source: Detecon
The inherent linkage from society to business and economy is the model’s core. It offers an
innovative perspective for successful Corporate Responsibility practice. MMT successfully
balances all four criteria: its financial success goes hand in hand with its public and
communal engagements.
Innovation
Culture
MMT
Q MMT allows operator’s to target an Q MMT leads to positive public relation
untapped customer base through socio-economic impact
Community
Source: Detecon
“Business Impact” focuses on financial aspects. The revenue model for MMT is simple but
promising. For mobile operators, several tangible benefits of promoting mobile banking
services can be seen:
Q New revenues: Operators get revenues by taking a transactional fee similar to
credit card companies (app. 3%, depending on different factors, i.e. regulation).
Q New customers: Operators can target a completely untapped customer base
(unbanked, prepaid, immigrants).
Q Cost savings: MMT reduces costs significantly through lower subscriber
acquisition costs and lower retention costs as a result of reduced churn,
particularly within the prepaid segment.
Q Increased network usage: MMT increases the usage of mobile networks with
data and SMS traffic.
The international remittances worldwide sent by migrant workers represent the main source
of funds for many developing countries. Ovum forecasts a volume of approximately US$ 58
billion transferred by MMT to families in developing countries in 2012.96 Even if only a small
fee for the money transfers is charged, these numbers show the high potential of money
transfer services.
9
Ovum: Mobile Payment Market Forecasts, Ovum, 2008
In US $ billion
58
1
3
1
4
North America
19 Latin America
32 Western Europe
1
2 Eastern Europe
9 10
China-India
17
4 7 Asia-Pacific
Besides new revenue streams, mobile operators benefit from a sustainable business model.
This sustainability mainly results from:
Q Churn reduction through a stronger customer relationship 107
Q Customer insights (i.e. tracing of the money transfers)
Q Improved brand image
Q Customer registration for mobile usage (mainly postpaid)
Furthermore, operators have the opportunity to earn interest as well as using the money as
working capital. The return on investment (ROI) of MMT is much quicker compared with
other services, especially those that require heavy investments in network infrastructure,
which take longer to materialize. Given that most operators already have well-established
prepaid infrastructures, there are only small investments necessary to use this infrastructure
for a new MMT application.
10
In Kenya, for example, Safaricom slashed its churn rate by about 10 percentage points in the 12 months
following the launch of M-PESA (Pyramid Research, 2009). The theory is that consumers are less likely to change
operators if their current service provider offers financial services because of the perceived difficulties in transferring
account information etc.
This is particularly significant in rural areas, where traders would have needed to travel to
urban areas to check for demand and negotiate on price. This business is now conducted on
the mobile. Traders are able to ensure demand exists for their products, before setting out
on a journey. This has changed life significantly for both communities and individuals. MMT
services are now expected to have similar impacts. MMT has the chance to revolutionize the
economic development of many developing countries as it empowers rural people and
families socially, politically and economically by providing access to banking:
Q The flow of funds from migrant workers back to their families in their home
country is an important source of income in developing economies.
Q Remittances to conventional bank accounts can be expensive relative to the
often low incomes of migrant workers and to the rather small amounts sent.
Q Especially poor people need affordable financial services to increase
household incomes, build assets and become less vulnerable to crisis. 129
Q MMT provides an easy and safe way to transfer and save money which is
another high benefit for rural communities.
11
By 2010, GSMA projects that 90% of the world will be covered by mobile networks and mobile communication
will deliver data, internet and voice services to more than 5 billion people by 2015 – double the number connected
today.
12
The World Bank estimates that reducing remittance commission charges by 2-5% could increase the flow of
formal remittances by 50-70%, considerably boosting local economies.
Q GDP growth: MMT increases the economic welfare through job creation and
taxation revenue from mobile operators as well as from new entrepreneurs
facilitated by MMT. Basically MMT services could be about to make Africa a
very much more liquid economy.
In summary, MMT is not just another service: It helps people to help themselves. It enables
new lifestyles and better infrastructure. It enables people to get (better) jobs which leads to a
better reputation for families and individuals and consequently increases self-esteem.
Furthermore MMT services enhance productivity. The widely known case of micro-crediting
offered by the Grameen bank has proven that the support for microfinance programs helps
to unleash entrepreneurial talents which are critical to economic development in poorer
countries. Consequently, it has a strong impact on communities and individuals.
“Cultural Impact” focuses on the impact of a business model on culture. With regard to the
operator there are two perspectives: On the one hand there is an impact on the internal
culture of an operator, and an external impact on the culture of the operator on the other.
Internal culture: The operator’s internal cultural impact results mainly from a better
identification of the staff with the company. This identification increases significantly when
employees believe in the products and strategy of their employer. Employees feel pride in
their participation of providing more than just another service. It leads to an improved
corporate spirit with positive effects like lower staff churn, better recruiting potential and
higher productivity.
External culture: The operator’s external cultural impact is driven through the change of its
image which improves considerably. This is due to different facts:
Q Positive public relations: Once a service like MMT is established the operator
can build social capital by communicating the positive impacts of the service on
society.
Q Commitment: Operators show their commitment to the problems of local
markets which people (customers and non-customers) recognize in the long
run.
Whilst it is easier to measure the economic and tangible benefits, a clear methodology to
measure the social and intangible benefits has to be developed as a prerequisite to achieve
biggest impact.
“Innovation Impact” describes to which extent the focus of a business is more on the
development of innovation and knowledge creation than on short-term profits. With regard to
MMT two things can be pointed out:
With MMT, mobile operators use their existing resources, talent management and expertise
to address a problem and build an innovative business model which benefits both society
and the company’s competitiveness.
MMT builds the basis for further innovations: By finding the right MMT business model
operators set the basis for further mobile services especially designed for the poor. Once a
subscriber base for MMT services is established, the extension of MMT services promises
additional high potential: looking to the future, pension payments and the payment of
standard services such as water and electricity charges could also be made by MMT.
Furthermore, many other business models are thinkable, i.e. a credit card offered by the
operator.
With MMT, operators have identified a particular societal issue which they are best equipped
to help resolve and from which they can gain great business opportunities. This example
illustrates Detecon’s definition of CR: CR is most effective when a company adds a social
dimension to its core value proposition, making social impact integral to the overall strategy.
The closer a business model is linked to a certain social issue the greater is the chance to
leverage the company’s capabilities in order to make a valuable contribution to society. 10
Q Definition: Q Definition:
Link to core business, Southern World: Ability for employee,
ability to improve The communal case management, organization
operations, potential to to transform, adaptation of
extend business model Q Philosophy: new CR thought in daily
Community, Humanism, Contribution to society, operations
Q Geographies: Business supports regional integration
UK, US, Australia Q Geographies:
Q Geographies: India, China, Asia-Pac
Africa, Southern Europe, Native Populations
13
Lessem, R.; Palsule, S.: Managing in Four Worlds - From Competition to Co-Creation, Wiley-Blackwell, 1997.
6 Further Reading
Q Lessem, R.; Palsule, S.: Managing in Four Worlds - From Competition to Co-
Creation, Wiley-Blackwell, 1997.
Q Moussavian, R.; Mertens, M.: Corporate Responsibility - Business enabler in
emerging markets, Detecon, 2008.
http://www.detecon.com/de/publikationen/studien/studien.html?unique_id=29836
7 The Authors
Arne Linnemüller has studied business administration at the University of Lüneburg and the
University of KwaZulu-Natal (South Africa). At Deutsche Telekom he gathered experience on
strategic questions in the international telecommunications market. He now works in
Detecon’s Information Technology practice. He focuses on strategic analyses of ICT markets
and the evaluation of innovative, web-based and mobile business models.
Arne.Linnemueller@detecon.com
Florian Haubold is Consultant within Detecon. He has studied Politics, History and
Geography at the Rheinische Friedrich-Wilhelms-Universität Bonn and the University of
Seville, Spain. He has 3 years of telecommunication industry experience and is working in
Detecon’s Strategy & Marketing practice. His core competencies are corporate strategy
development, product innovation and corporate responsibility.
Florian.Haubold@detecon.com
8 The Company
Detecon International GmbH
Detecon offers both horizontal services that are oriented towards all industries and can entail
architecture, marketing or purchasing strategies, for example, as well as vertical consulting
services that presuppose extensive industry knowledge. Detecon's particular strength in the
ICT industry is documented by numerous domestic and international projects for
telecommunications providers, mobile operators and regulatory authorities that focused on
the development of networks and markets, evaluation of technologies and standards or
support during the merger and acquisition process.