Mobile Payments

 

Hard-earned success  ««

Reinventing money  ««  ««

THEME

Mobile payments will rul rule e Success did not come easily for Paolo Baltao. He is the president of GXchange,, a subsidiary of Globe Telecom in the Philippines, which launched GCASH Xchange in 󰀲󰀰󰀰󰀴. Although it is hailed as one of the very few success cases within mobile money,, Baltao explains why mobile money is not an automatic gold mine. money T EXT

Nicholas Smith

 the world are still getting used to the idea of mobile money. Anybody who thinks that mobile money means only person-to-person transfer of funds is gravely mistaken. Mobile money has numerous applications including payroll, web payment, government disbursement, airtime purchase and gaming, to name just a few examples. And that is before we even get into the business-to-business business- to-business potential: think how much easier it would be for companies to make supplier payments through a mobile-money platform. I sincerely believe that mobile money can be retail, wholesale or a backend service as much as a transfer offering.”

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R

IGHT NOW, PEOPLE ALL OVER

How should operators play their hand? “Mobile money is not a technology that can be used by just one entity in isolation. That is possible, but it is certainly not the most straightforward path to choose. Instead, mobile money should be something that creates bridges between different players. Operators and banks can work together in a way that the market has never seen before. And even though these partnerships have the potential to be highly profitable for both parties, they are also necessary from a purely pragmatic perspective. “The fact is that both banks and operators need each other right now. Operators today do not have the money-management expertise that banks possess, and banks lack the transport infrastructure and efficiencies of an operator. Let us consider SMS as an example. One person sends a message and another receives it – this is prac-

tically a transaction. At Globe, we process well over  million SMS messages every day day.. How many banks can handle more than  million transactions a day? Banks can learn a great Paolo deal from operators about efficiencies Baltao and how to handle high transaction  volumes, and this is the cornerstone o off our value proposition to them. Things can change quickly, but at the moment I do not see the landscape in terms of operators versus banks but rather operators plus banks.” Apart from GCASH in the Philippines and MPESA in Kenya, there have been few success stories so far. Why?

“The potential market for mobile money in China and India is enormous, as a s they are the most populated countries in the world, and that is where some of the biggest success stories will ultimately emerge. Even today, though, there are still no operators in China offering mobile money to any significant extent, and in India, the regulators continue to be cautious. “However,, the number of current success sto“However ries may be even smaller than people think. For most people, M-PESA can be considered successful, but there are some questions that may emerge if you take a closer look. How were the customers acquired? Were Were they given an incentive incentive to register with M-PESA? Do the agents continue continue to see the spike in registrations or have they tapered off? If registrations have tapered off, why? It should be noted that there were no

Two forms of liquidity ▶  M-PESA

is a mobile payments system based on lowvalue accounts held by a mobile operator and accessible from subscribers’ mobile phones through a SIMcard-resident application. The conversion of cash into electronic value (and vice versa) is performed at a network of retail stores which are paid for by exchanging these two forms of liquidity on behalf of customers. All transactions are authorized and recorded in real time using secure text messages. M-PESA was developed by Vodafone and first deployed by its affiliate, Safaricom, in Kenya, where the uptake has been very high since the launch in April , surpassing  million customers by January .

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  Reinventing money »»  Hard-earned   Hard-earned success   »»  Reinventing

THEME

▶   Our experience demonstrates that, although the number of success stories may be limited so far, the mobilemoney value proposition is real if you are ready to work hard.

Mobile money transfer service launches 50

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Source: Juniper Research

Proper banking ▶ M-KESHO is a set of

three fi-

nancial services available to customers of Safaricom’s MPESA in Kenya. The first is a savings account that facilitates the transfer of money to and from a customer’s M-PESA account and an account held at Equity Bank via mobile handsets. As is the case with M-PESA accounts, there are no fees for opening M-KESHO accounts, no minimum balances and no monthly charges. But unlike M-PESA accounts, M-KESHO accounts pay interest and there are no limits on account balances . In addi ti on, M-KESHO offers emergency credit and insurance facilities.

30 • EBR #3 2011

 rregulations egulations in place when the service was launched. The fact that tthe he subscriber growth has slowed since the central bank in Kenya introduced a proper regulatory framework should give some pause for thought. Moreover, the remittance infrastructure in Kenya was limited to banks and bus drivers. I think it is legitimate legitimate to ask how much of M-PESA’s success was due to circumstance and how much was due to its business model. “In this context, we have every reason to be proud of what we have achieved with GCASH. We are thriving in a market that is not only highly regulated, but already has a mature and entrenched remittance infrastructure. On the other hand, success did not come easily. In the early days, we made the mistake of assuming that, because Globe Telecom is a major operator with a large subscriber base, people would automatically gravitate toward our services . It took a great deal of perseverance and fine-tuning before we established a truly valuable proposition. This is a process that every operator needs nee ds to go through. For each market, they need to define exactly what kind of value they will bring – it’s the same as creating any other product or service and it can take time to get it right. But our experience demonstrates that, although the number of success stories may be limited so far f ar,, the mobile-money value proposition is real if you are ready to work hard. So the skeptics who call mobile money a bubble waiting to burst are wrong – but that doesn’t make the cheerleaders who say the industry is an automatic gold mine right, either.”  What are the killer applications or functionalities that will drive uptake of mobile-money ser vices? “It is real-time mobile payment, without a doubt. However, mobile-money service providers still need to address a number of concerns. How do they acquire the customers? c ustomers? How do they put a mobile wallet in their hands? How do you then get the customers to put cash in these wallets – and actually use it? Until they can satisfactorily answer each of these questions, mobile payments will have to wait – and so will the true mass market for mobile money services. services.”” How do you see the mobile-money market evolvevolv ing in the coming years? “I believe that mobile payment will come to dominate the mobile-money market. I have eve-

ry confidence that the industry will find ways to respond to the questions that I referred to. We already know that just about everybody in developed markets – and an increasing number of usus ers in developing markets, too – takes their mobile phones everywhere they go. Personally, I might leave my wallet at home now and again, but I never forget my phone. Our devices have become part of our lives in a totally different way than our cash and credit cards, and taking taki ng advantage of that will be the key to making mobile money happen on a global scale. Right now the vast majority of mobile-money users are using the ser vice with SMS, but applications will change this for the better. A phone has so many advantages over a traditional wallet. It is a more interactive device, and can offer promotions, discounts and so on to make using mobile money a much richer experience than it i t is for most of us today. Once people start to actually enjoy themselves when they use mobile-money services, then the sky really is the limit. How can credit cards compete with that? Plastic, after all, is just plastic. plastic.”” ●

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