Mobile Money, Mobile Payments, Agents Network and Merchant Network (Rest of Key stakeholders are out of discussion for this article) are the key stakeholders of focus of discussion. This is chapter 2 and Part-3 of my book/post series of “Mobile Money Basics”. This post was originally published on 16-April-2015 on Linkedin “MobileMoney Key Stakeholders”.
Mobile Payments – Need of Today
Many industry experts think and say one common thing, Mobile Payments – Solution looking for Problems as people keep saying different figures one of them is online and mobile payments worldwide are forecasted to top three trillion Euros in the next five years.
This article explores the different problems for which the industry has a solution at hand, how to present/position the solution – Mobile Money also puts emphasis to the most important key stake holders as Mobile Payments Revolution. How to position Mobile Money Portfolio to my consumers?, What my consumer wants?, How my consumer wants it? and How much and when my consumer needs?. Starting off our discussion with question gives us clear direction on motive of this article.
Recently Vodafone partnered with Visa, Carta Worldwide for contact-less m-payments which means Vodafone customers will soon be able to add bank cards to their Vodafone Wallet and use smartphones to pay for goods and services at contact-less terminals. Now if we repeat our question here, what work has been done to empower the merchants and Agents here and who should be the eligible Merchant & Agent for this task to support the company.
Rush hour Payments – Mobile Payments
According to the secondary market research agency yStats, mobile payment is the growth leader of the online and the total payments market, with further growth expected following the launches of varying mobile payment solutions. (For further details refer to last Article which was focused on this mobile payments “Rush Hour Mobile Payments“. An ING Group survey has discovered that throughout the UK and Europe consumers are using mobile to pay and make transfers more frequently, and cash may lose out which is already a good news for all those players who are waiting for their share of this hot cake “Mobile Payments” under enabler as Mobile Money.
Who can be an agent , how agent distribution needs to be plotted on city/country map is also very very critical. The success of the mobile money system will really rely on a co-ordinated effort by all to deliver a system that speaks to the needs of the people and where no one is excluded, because we are approaching a future where everything will be interconnected and where a smartphone will simplify people’s lives in ways unimaginable.
Technology is a friend/ helper not as tester or rocket science; MFS product use and accessibility needs to be simple for people to make them comfortable and pull out maximum benefits especially for unbanked who have not seen the real MFS. Study from google shows that globally, mobile money users transacted a total of USD 7.5 billion through 479.5 million transactions in the month of December 2014. If cash-ins and cash-outs are included, mobile money users perform 717.2 million number transactions, with value of USD 16.3 billion.
- Domestic remittance from cities to villages
- Availability of Agents to withdraw cash
- Building Savings Culture.
Main use cases for Mobile Money
Acceptability of Mobile Money under Mobile Financial Services was the biggest break through. Role of Mobile Money Agent is crucial and very critical for success of service. List below are the few use cases for Mobile Financial Services category.
- Airtime top-ups
- Cash in & Cash Out
- Domestic P2P
- Cross-border remittances
- Bill Payments on Mobile
- Merchant Payment On Mobile
Lets define each of the use case in a summarised manner below
Airtime top-ups & Mobile Money are the most frequently transacted product by far, with active mobile money users performing an average 4 top-ups every month through mobile money. This is a big saving for MNO in case this is MNO led Mobile Money Model where MNO rule the MMS business. Mobile Money will also operate through authorized merchants who will facilitate the service on behalf of the partner banks.
Cash in & Cash Out: These are 2 ends of Mobile Money House from where money enters and exit key and essentials elements, Cashout is never appreciated by MFS provider, they rather encourage subscriber to use money in all other services instead Cashout. Mobile Money is a cash management service available on the mobile phone/internet. It is mainly about facilitating money transfer for the global market. The service can also be used for reloading of few network units and for payment, of utility bills, goods & services. The service is available to both mobile and non mobile users.
Domestic P2P -MNO has bolstered the opportunities for the mobile money or mobile money/payment market to flourish. Presently, Europe and North America accounted for the majority of the market share. Money Transfer: Chances for mobile money gets successful where ever there is need of sending money home or from city/town to village as this is the largest contributor to the global product mix in terms of value processed. The demand for mobile money is steadily gaining momentum in the global market as a response to the rapid development of the telecommunications sector and the need for anytime banking sectors, especially in remote locations.Active mobile money users conducted an average of 1.6 P2P transfers in each month (as per GSMA).
Cross-border remittances – Recent announcements by few MNO in Africa where now subscriber of one country can send money to another country MNO in fraction of minutes is the break through and exceptionally greater tool. Mobile money remittances are expanding, both domestically and internationally, to allow users of different networks to transact with each other more directly.
The mobile money market has competently established itself as one of the fastest growing markets globally and still exhibits growth of 44.6% between 2014 and 2019. With mobile phone usage becoming a consistent communication and content access medium, mobile money services are becoming highly popular among the people.
Bill Payments on Mobile – The third most commonly offered product by mobile money providers and represent the second largest contribution to the global product mix by value. Bill payments like water, electricity, Internet, Gas, School Fee, even your shopping bill for food or goods & services you get for your day to day life or any other bill. From its onset, in the year 2007 mobile money has evolved from providing payment transactions though Short Messaging Services (SMS) and Direct Mobile Billing to the more contemporary Near Field Communication (NFC)/ Smart Card transactions.
Merchant Payment On Mobile – Volumes grew the fastest in 2014 (58.5%), and experienced the highest global increase in value transacted (78.6%). While globally merchant payments represent less than 5% of all value processed, there is strong potential to increase merchant payment activity, as only 25.4% of registered merchants actually accepted a mobile money payment (GSMA Data).
It covers many type, methods and covers distances from few millimeters to hundreds of kilometers and means like, Remote Payments i.e. when the retailer is remote to you and you purchase goods via SMS text message or mobile website with your mobile device. Proximity Payments which are based on contactless near field communications (NFC) and allows consumers to purchase goods and service directly at the point-of-sale using their mobile phone.
Agent Network – Role & Importance
- The success of mobile money heavily depends on accessibility
- The agent is the primary access channel for mobile money as the conduct agent centered transaction like registrations, cash in and cash out transactions
- Agents trade mobile money for a commission
- They also act as the first contact for subscribers and it is prudent for a mobile money operator to invest in agent education.
The process in most of African countries is very simple and swift for everything we have Agent network who does Cash In and customer registration KYC is already done at time of buying SIM and if any other extra info is needed that can be collected by MNO shops and outlets. This may be a challenge in countries where regulator don’t care about KYC on SIM selling like Indonesia ( it might have changed now but during my living tenure 2009,2010 & 2011 it was not there).
Without any rudeness please allow me to say “If you can’t setup Agent network, forget about Mobile Money”. Agent float management is also very essential but easy provided when it’s automated. Empowered agents are motivated agents
Based on my own experience in Africa so far, if you really wants to get solid gold eggs of success agent-centric approach and using other incentives that promote buy-in to the MFS business is important. Few Points to note as below as Agents as leaders of thus area and their leadership drive and decide too many things
- Agents qualification criterion is defined by the operator after considering the requirements of the regulator
- Individuals and companies can qualify to be agents and they have to meet the required KYC requirements
- The operators’ agent officers are responsible for recruiting and managing relations with the agents.
- The density of agents has to be predefined by the operator to maintain profitability of agents as well as accessibility to subscribers
- Agents who are new to industry and business needs low entry costs, technology and promotional training, and support when needed. When they get so, they will be well positioned to drive ecosystem growth and capture market share
- Clear Roadmap & Business Plan/case to attain maximum return & profitability agents needs a viable, sustainable, customised to individual agent, profitable and transparent commission structure.
- Capacity of the venture to return reasonable profit by ensuring competitive intensity by the number of directly competing agents within a 1km of radius.
- Levelling agents on their investment and business spirit , like Level-0 , opens 1 kiosk, Level-1 Agent will have to open 2 agent shop one in town and 1 in rural area where density of agents is low , L-2 will open 3 etc.
- Knowledgeable agents with experience show greater increase in demand when there are competing agents nearby, so choosing who is eligible to be my agent is very crucial process and are entrepreneurial minded and inspired by new business ventures.
- Respect & Social credibility of agent opens the door to community privileges as successful agents are individuals who are well respected in the community, considered trustworthy and have regular customers as well as having ability to promote their own business. It also enables forming close personal relationships with customers and other agents.
- Simple transaction execution: Unbanked people are uncomfortable about using technology. In many cases, agents must help to complete the transactions. The MFS that agents support must be reliable and easy to use with a system that is safe, secure, reliable, accessible and definitely affordable.
Merchant Network – Role, Importance & Strategy
Prerequisite needs to be considered for Merchant appointment and setup and Few Points to note as below as Merchants are 2nd Key Stakeholder and part of top level leaders team thus area and their leadership drive and decide too many things.
- Who can be Merchant or should be can differ market to market & on specific of Mobile Money Service provider and they are the key success factor to drive Mobile Payments.
- Merchant agreements, terms and conditions needs to very very local and some time local to the area and environment as well as type of volume and value of business for an instance micro merchant (Food & Vegetable seller or street vendors/ corner tuck shop owners where their 80% sales for the day comes from less then 10 dollar transaction that’s what we call as local market conditions (Differentiated merchant agreements).
- Mobile Money Service providers have to take a wide range of approaches (based on conditions mentioned just before) to roll out merchant network for their mobile payment strategy in their markets.
- Copy from one market and pasting on to the other never works for example what works in Indonesia will never work in Kenya or vise a versa.
- In Africa (Example as Kenya or Tanzania), where card payments or card penetration / bank penetration is almost in ZERO, most merchants has merchant lines which separate from their regular line and merchant codes are associated with it to accept payments and interfaces they use again depends on volume and business types.
- POS, MPOS, Smart Phone, Internet connected computers, low value mobile hand set meant only or even touch and pay NFC machine are the few example of merchant infra to accept payments in Mobile Money industry.
- Merchant needs free flow of their money which has gone into Mobile Money service Provider wallet should come to them on almost real time (Again taking consideration of volume, & value size) so that get trust and visibility for their funds and Merchants able to pay to their own supplier in same way or in real time.
- Subscriber wallet funding is also very important, Mobile Money Service Provider needs to ensure subscriber has all easy and very affordable ways to fund their wallet for spending on merchant network for their daily expenses and most of the MMS provider now tapping salary account on wallet and P2P is very strong with help of golden egg or Agent Network.
- Setting up Merchant Network, needs time, investment, efforts and very well planned though process which has to be strategic and should go hand in hand with Mobile Money Service providers business model, investment plan and business focus strategy. Accept the fact its neither easy nor cheap effort or should say complex & difficult and tie up with what Mobile Money Service Providers market reputation and trust score & experience.
- Merchant Network has to be educated or at least reputed entity same like agent and network size of Merchant should always device the size of Agent Network, availability of good what consumer looking for always be there as an essential element like liquidity for Agent network.
Conclusion – As both quality and quantity matters to be successful same way dedicated team with special training to acquire merchants, support merchants and train them is very important and this team should be headed by a qualified person from retail and strong business skill background. Mobile money service providers unfortunately (When comparing with banks) understand the competitors better and gain more insights to better position their business and banks still in old school. There is a separate section on competitive landscape, including mergers and acquisitions, and venture capital funding. Besides this, there are company profiles of the ten major players in this market. Market internals are provided that can help to be ahead of the competitors.
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