Abstract – This is the 2nd part 1st Chapter of a 5 Chapters story/book on Mobile Financial Services and security on same. 1st Part is available on this link Mobile Money Basics Part-1. This part focuses on little more on Mobile Money basics and the opportunities which come out of this service and those opportunities which got added under the Mobile Financial Services umbrella as an independent service. Mobile Money, Mobile Payments, Mobile Banking and Mobile Commerce can be termed Mobile Financial Services. The magic word known as “Pay” has gone viral in today’s time and every day we have 1 or 2 new startup’s entering the payment industry, specifically into the Mobile Payment domain. Mobile phones can be used to deliver a range of banking services. Not from Banks, I am separating banking and banks. Banking services dont need banks any more. Transaction data can be used to develop customers’ credit histories to offer other top-up services.
Introduction – Yesterday I was reading on internet Around 2 billion people don’t use formal financial services and more than 50% of adults in the poorest households are unbanked. The domain of Mobile Financial Services is quite a versatile domain and can support a variety of services, in particular, person-2-person (P2P) money transfers and now very easily crosses the borders without visa requirements (regulations or KYC) including cross border, which are of significant value for emerging economies. The acceptability of Mobile Money under Mobile Financial Services was the biggest break through. The role of the Mobile Money Agent is crucial and very critical for the success of this service. The agent selection criteria as well as agent distribution on the city/country map is also very critical. Success of the mobile money system relies 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 an era where everything will be interconnected and where a smartphone will simplify people’s lives in ways unimaginable.
Main Story – From a financial inclusion perspective, Mobile Money Services were essentially for unbanked & under privileged customers but due to unavailability of a Ministry of Innovation as well as strong control from central banks, this got lots of support & attention resulting in rapid growth for those providers who got the principles right though majority of such services failed (No offence to any, just referring to the statistics available across the globe on successful and vanished mobile money deployments). Agent distribution is not a an easy job and lots of smart work and extra time needs to put-in, plotting agents on city and rural area map strategically is very very important as we all know domestic remittance happens from cities to villages and if I as 70 year old man cant find agent to withdraw (in my village) my son’s hard earn money sent to me as gift or in my need then everything is useless. In short whole model of Mobile Money system and benefits just collapse. Below are the few pointers on this;
- In the initial days, mobile money was targeted for domestic remittance from cities to villages
- Availability of agents to withdraw cash, take cash deposit and other services to subscribers
- Building Savings Culture.
- The success of mobile money heavily depends on accessibility, availability & addressability
- The agent is the primary access channel for mobile money as the conduct agent centred 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
- “If its difficult for you/your organisation or you can’t or not planning to setup an Mobile Money Agent network with correct distribution model then its very easy to forget about Mobile Money successful business/setup”. Agent float management is also very essential but easy when it’s automated. Empowered agents are motivated agents.
- Agent selection criteria as well as agent distribution across a city/country map is also very crucial.
Well known and established big brothers in the Mobile Payments space are not bothered by these startups such that they ignore them and treat them as one small mosquito but through life experience, the biggest mistake of forgetting one small mosquito is enough to keep you awake the whole night. Methodologies or approaches basic in nature but without clear relevance to the Challenge always gets into closure mode or deep thick mud soup from where its impossible to come out. The main drivers behind the success of mobile payments is the explosive growth in the number of mobile devices and the fall in the cost of computing power, which has lowered the barriers to new entrants in this field. Money transfers, retail purchases, bill payments, welfare payments (Savings clubs in Africa created by small rural communities to support them in hour of need and other social services), savings for mobile, micro insurance, withdrawals, domestic and international (Cross Borders) remittances are now common services offered by mobile money services providers.
Mobile money has moved beyond philosophy and knowledge sharing with banks and MNO’s. Today’s innovators are aggressively targeting the intersection between areas of high frustration for customers and high profitability for occupants, allowing them to gain an optimum level by chipping away at incumbents’ most valuable products. How to increase access to financial services to drive financial inclusion vehicle through the channels they build, to also offering instructions on how to build value propositions that really persuade mass market customers to use those services. An excellent example is cross border remittances, for what banks have traditionally charged very high fees for cross-border money transfers and offered a pathetic, poor and snail speed service with transfers often taking up to three to seven days to arrive to their destination.
After 2 to 3 years from its inception mobile money started moving at lighting speed to offer and extend its service portfolio to include banking services, payment services, commerce or ecommerce services, brought online / internet banking services to mobile, solved problem of 8X5 service window and took it to 24 X 7 X 365 model where no more queuing up for bill payments such as electricity, water or any other utility, purchase of all type of tickets etc. Subscribers/customers wants value, convenience and ease in their life and if you offer those ingredients people will taste it and if they like they will continue and will be ready to pay an extra fee (Anyway this article is focused only on basic mobile money or real mobile money functions to drive financial inclusion. Add on services will be discussed in subsequent articles).
What actually is mobile money? What it has to offer? Who are the real stakeholders or targets? Who should use and get the most out of it? It is critical and absolutely necessary to understand the real value, benefits & potential of mobile money. As mentioned before mobile money was essentially designed for domestic remittances (for migrants from the village to the city to send money home in a safe and secure way) which is also known as send money to peer or peer to peer send money, cash in and cash out so lots of emotions went into this and this became an emotional money service. Family members back home feel good, smile and relax whenever they see money came in on a mobile device. Mobile penetration reached the 100% mark in most of the countries and in some its even greater than 100%. This also contributed real success as mobile phone also has an emotional touch and when it started delivering money it went all the way up on the emotional meter.
How Mobile Money improve life for the lower segment of society;
- Mobile money is mostly used for domestic remittances. Remittance transactions are usually from cities to villages. They emanate from the need for the working class to take care of their kinsmen in the rural areas. International remittances are also taking a good share of this pie.
- Mobile money thrives on accessibility of services and a wide agent network in both cities and rural areas is required.
- Savings clubs have been a recent add on to mobile money services and this has assisted club members to save up in an easy and electronic way outside the banking system.
Over the period of time, technology has been advanced to ensure user experience is seamless and easy by adding many access interfaces/channels (USSD & SMS still remains on top) some of them got reused (NFC, Mobile App, API’s etc) in mobile banking, mobile payments, mobile commerce to support ecommerce, mobile trading and the mobile device has become a part of the system which cannot be excluded anymore. Mobile phone financial services present new consumer protection challenges i.e. Large distance between providers and customers. Agents may lack clear incentives or liability for transparency, Cash in/out function by agents may open the door to fraud, Requires technology-tailored solutions to data security and privacy, redress mechanisms and pricing transparency. The next article, Part-2 will focus on the specifics of Mobile Banking.
- Including technology issues in financial education can help reduce information asymmetry
- Bringing operators under central bank supervision may also help unfamiliar customers feel more at ease
Conclusion – On sinking Titanic Some body said on upper side, if we are sinking why are we hundreds of feet above water then. That somebody can be bank in today’s time of fintech industry. Opportunities are countless; one who seizes them first gets the upper hand. Thanks to regulation and central bank support through the Ministry of Innovation. Get up, spread your wings and grab as much sky (I guess there is no more land left) as you can. These are policies from Ministries of Innovation and MNOs are the best admirer and advantage takers. Sadly for majority of the banks, this is still an unknown path and some don’t find or consider this as a preferred route. At all times Security, regulation & Compliance should be on top of fintech Manager and also he/she needs to understand blending of same in development life cycle. Mobile Money is supposed to improve life for the lower segment of society and the main objective was financial inclusion.
HashTags – #WeTransformLives, #iTransformLives, #MobilePayments
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