Key Stakeholders: In the mobile financial services domain, there are many modules and groups like mobile money, mobile payments, agent networks, merchant networks, etc. Though there are several other reasons to limit the discussion of the post, we will keep the rest of the key stakeholders out of the discussion. I will focus on the three key stakeholders mentioned for now. This is Chapter 2, Part 3 of our blog post series on “Mobile Money Basics“.
Mobile Payments – Need of Today
Many industry experts think and say one common thing: Mobile Payments: A 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 and how to present or position the solution. Mobile Money also puts emphasis on the most important key stakeholders in the Mobile Payments Revolution. How do I position my mobile money portfolio for my consumers? What does my consumer want? How does my consumer want it? and how much and when my consumer needs it? Starting off our discussion with a question gives us clear direction on the motive of this article.
Recently, Vodafone partnered with Visa and Carta Worldwide for contactless 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 contactless 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 and 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 total payments markets, with further growth expected following the launches of varying mobile payment solutions. (For further details, refer to the last article, which was focused on this mobile payment “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 good news for all those players who are waiting for their share of this hot cake, “Mobile Payments,” under enabler as Mobile Money.
Technology is a friend or helper, not a tester or rocket science; MFS product use and accessibility need to be simple for people to make them comfortable and pull out maximum benefits, especially for the unbanked who have not seen the real MFS. A 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 transactions, with a value of USD 16.3 billion.
- Domestic remittance from cities to villages
- Availability of Agents to withdraw cash
- Building Savings Culture.
Who can be an agent and how agent distribution needs to be plotted on the city or country map are also very critical. The success of the mobile money system will really depend on a coordinated 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.
Main use cases for Mobile Money
The acceptance of mobile money under Mobile Financial Services was the biggest breakthrough. The role of the mobile money agent is crucial and very critical for the success of the service. The list below shows a few use cases for the Mobile Financial Services category.
- Airtime top-ups
- Cash in & Cash Out
- Domestic P2P
- Cross-border remittances
- Bill Payments on Mobile
- Merchant Payment On Mobile
Let’s define each of the use cases in a summarised manner below
Airtime top-ups: This is the most frequently transacted product by mobile network subscribers due to too much focus. The MNO team focuses too much on this for saving airtime distribution costs, commissions to agents, etc. Active mobile money users perform an average of 10–20 top-ups every month through mobile money. This is a big saving for MNOs in case this is an MNO-led mobile money model where MNOs 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 and Cash Out: These are the 2 ends of Mobile Money House, from where money enters and exits. Cashout is never appreciated by MFS providers; they rather encourage the subscriber to use money in all other services instead. Mobile Money is a cash management service available on mobile phones and the internet. It is mainly about facilitating money transfers for the global market. The service can also be used for reloading a few network units and for payment of utility bills and goods and services. The service is available to both mobile and non-mobile users.
Domestic P2P and MNOs have bolstered the opportunities for the mobile money or mobile payment market to flourish. Presently, Europe and North America account for the majority of the market share. Money Transfer: Chances for mobile money get successful wherever there is a need to send money home or from city or 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 services, especially in remote locations. Active mobile money users conducted an average of 1.6 P2P transfers per month (as per the GSMA).
Cross-border remittances: Recent announcements by a few MNOs in Africa that now a subscriber of one country can send money to another country’s MNO in a fraction of a minute are a breakthrough and an exceptionally great tool. Mobile money remittances are expanding, both domestically and internationally, to allow users of different networks to transact with each other more directly.
Mobile money market grew by 44.6% from 2014 to 2019. Mobile money services are popular due to mobile phone usage.
Bill Payments on Mobile: The third most commonly offered product by mobile money providers, they represent the second largest contribution to the global product mix by value. Bill payments like water, electricity, Internet, gas, school fees, even your shopping bill for food or goods and services you get for your day-to-day life, or any other bill Since its onset in 2007, mobile money has evolved from providing payment transactions through short messaging services (SMS) and direct mobile billing to the more contemporary Near Field Communication (NFC) and 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 types and methods, covers distances from a few millimeters to hundreds of kilometers, and uses 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 allow consumers to purchase goods and services directly from 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 it conducts agent-centered transactions like registrations, cash in, and cash out transactions.
- Agents trade mobile money for a commission.
- They also act as the first point of contact for subscribers, and it is prudent for a mobile money operator to invest in agent education.
The process in most of the African countries is very simple and swift. For everything else, we have an agent network that does cash-in and customer registration KYC, which is already done at the time of buying a SIM, and if any other extra information is needed, that can be collected by MNO shops and outlets. This may be a challenge in countries where regulators don’t care about KYC on SIM sales, like Indonesia (it might have changed now, but during my living tenure in 2009, 2010 and 2011, it was not there).
If I may say so politely, setting up an agent network is crucial for the success of mobile money. It’s also important to automate float management for ease of provisioning. Motivated agents are those who are given power and authority.
Based on my own experience in Africa so far, if you really want to get the solid gold eggs of success, an agent-centric approach and using other incentives that promote buy-in to the MFS business are important. A few points to note below as agents as leaders of this area and their leadership drive and decision-making on too many things
- Agents qualification criteria are 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 the profitability of agents as well as their accessibility to subscribers.
- Agents who are new to the industry and business need low entry costs, technology and promotional training, and support when needed. When they do, they will be well positioned to drive ecosystem growth and capture market share.
- A clear roadmap and business plan/case to attain maximum return and profitability Agents need a viable, sustainable, customized to the individual agent, profitable, and transparent commission structure.
- The capacity of the venture to return a reasonable profit by ensuring competitive intensity is determined by the number of directly competing agents within a 1-kilometer radius.
- Leveling agents on their investment and business spirit, like Level-0 opens 1 kiosk; Level-1 agents will have to open 2 agent shops, one in town and one in rural areas where the density of agents is low; L-2 agents will open 3, etc.
- Knowledgeable agents with experience show a greater increase in demand when there are competing agents nearby, so choosing who is eligible to be my agent is a very crucial process. They are entrepreneurial-minded and inspired by new business ventures.
- Respect and social credibility of agents open the door to community privileges, as successful agents are individuals who are well respected in the community, considered trustworthy, have regular customers, and have the ability to promote their own businesses. It also enables forming close personal relationships with customers and other agents.
- Simple transaction execution: Unbanked people are uncomfortable using technology. In many cases, agents must help 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
Prerequisites need to be considered for merchant appointment and setup, and there are a few points to note below as merchants are the 2nd key stakeholder and part of the top-level leader’s team, thus their leadership drive and their ability to decide too many things.
- Who can be a merchant or should be can differ from market to market and on specific mobile money service providers, and they are the key success factors to driving mobile payments.
- Merchant agreements, terms, and conditions need to be local to a city and, at times, local to the area and environment. Also, volume and value of business also matter, for instance, for micro-merchants, i.e., food and vegetable sellers or street vendors. These corner tuck shops 80% of sales of the day come from less than 10-dollar transactions. So that’s what we call “local market conditions (differentiated merchant agreements).
- Mobile money service providers have to take a wide range of approaches (based on the conditions mentioned just before) to roll out merchant networks for their mobile payment strategy in their markets.
- Copying from one market and pasting it on to another never works; for example, what works in Indonesia will never work in Kenya, or vice versa.
- In Africa (for example, Kenya or Tanzania), where card payments or card penetration or bank penetration is almost zero, most merchants have merchant lines that are separate from their regular lines, and merchant codes are associated with them to accept payments. The interfaces they use again depend on volume and business types.
- POS, MPOS, smart phones, Internet-connected computers, low-value mobile handsets meant only for payment, or even touch-and-pay NFC machines are a few examples of merchant infrastructure to accept payments in the mobile money industry.
- Merchants need the free flow of their money, which has gone into the Mobile Money service. Provider wallets should come to them in almost real-time (again taking consideration of volume and value size) so that they can gain trust and visibility for their funds and merchants can pay their own suppliers in the same way or in real-time.
- Subscriber wallet funding is also very important. Mobile Money Service Providers need to ensure subscribers have all easy and very affordable ways to fund their wallet for spending on merchant networks for their daily expenses. Most MMS providers are now tapping their salary accounts on their wallets, and P2P is very strong with the help of the Golden Egg or Agent Network.
- Setting up a merchant network requires time, investment, efforts, and a very well-planned process that has to be strategic and should go hand in hand with the mobile money service provider’s business model, investment plan, and business focus strategy. Accept the fact that it’s neither easy nor cheap effort, or should I say complex and difficult, and tie it up with mobile money service providers’ market reputation, trust score, and experience.
- Merchant Network has to be an educated or at least reputed entity, just like the agent and network size of Merchant should always be based on the size of Agent Network, and availability of goods that consumers are looking for should always be an essential element like liquidity for Agent Network.
Conclusion – In order to excel in the realm of mobile money, it is crucial to prioritize and balance both the standard of service as well as the volume of transactions conducted. Having a skilled and dedicated team specifically trained in the acquisition, support, and training of merchants holds immense importance. A suitable candidate with a retail and solid business expertise must lead this team. It is regrettable (when considering banks), but mobile money providers have a greater comprehension of their rivals and gain superior knowledge for advancing their business, whereas banks remain limited in their outdated approach.
This is encyclopedic information. That too for free