Mobile money: World's poor nations hold great potential

Mobile money transfer products have become the latest offering that mobile companies are banking on to enhance growth. The amazing growth and success of M-Pesa (M is for mobile, Pesa is Swahili for money) mobile money transfer service launched by Safaricom, East Africa's biggest mobile operator, has underlined the potential for mobile money services. This has sparked excitement over the transformative potential of mobile banking for unbanked populations around the world.

According to a report by a research company, Ovum, activity in mobile payment services (and more broadly mobile money services) is accelerating in many emerging markets. It anticipates that mobile money services have the potential to become a mass- market service by 2014. According to the report, one of the key factors influencing market uptake of mobile money services is the relatively low penetration of financial services compared to that of mobile services. Currently, more than one billion people in the developing world have access to a mobile phone, but lack a bank account. This creates a huge potential market for mobile money services.

GSM Association, a global association for the mobile communications industry, estimates that mobile-money in emerging markets could bring in $7.9 billion of sales for telecom operators by 2012. Also, about 364 million handset owners without bank accounts are expected to sign up for mobile money services by the same period, it says.

Lured by the success of M-Pesa, many international players have entered into this market to offer similar services. For instance, Zain, a Kuwaiti firm, launched a service called Zap in Kenya and Tanzania in February 2009. MTN, Africa's biggest mobile phone company, has launched its mobile money operation in South Africa and Uganda, while carrying out trials in Cameroon, Ghana, Ivory Coast and Nigeria. France Telecom's Orange has a partnership with French Bank BNP Paribas and is planning to launch Orange Money for Senegal,Mali and Egypt in 2010. Currently, the company is piloting the service in Ivory Coast.

However, much of the industry's success would depend on how well it addresses various market barriers, and nurtures user demand with clear, simple and attractive propositions. Commenting on the issue, the Ovum report says, “This means not losing sight of the fact that telecoms and banking have very different volume, size, margin and error tolerances on their core transactions. As the two worlds draw closer with mobile banking, this will mean a different mindset and approach to service provision, reliability and security.”