The Mobile Money Opportunity In Emerging Markets

With all the hype around Google Wallet, many people think mobile money will be driven by the U.S. But the biggest growth – and the greatest amount of innovation – is coming from the developing world, in places like Pakistan, India and Bangladesh.

Over half of the world’s population lives without reliable banking institutions, relying instead on cash stuffed under the mattress and the use of informal couriers. In India alone there is an opportunity to add at least 300 million people to the banking system.

Today there are 100 million mobile money users, by 2012 that number is set to double to 200 million and, if pundits are right, there may be 900 million by 2015.

Banks have been ceding the emerging market to the carriers, squandering an opportunity to serve a vast swathe of customers who are otherwise out of reach. But that is starting to change, as banks realize the potential of mobile money.

MCB Bank, which pioneered the space in Pakistan, attracted close to 100,000 users clocking $27 million in payments during the first year, says Qasif Shahid, head of remote banking and business development at MCB Bank.

As customers became active on the mobile channel it redefined their relationship with their bank account, he says. The true potential of “mobilizing” customers is not just about generating fee income or transactional revenue but engaging customers at higher levels with their transacting accounts and making money through increases in their average monthly balances, says Shahid. “Mobile payments are to bank accounts what Blackberry handsets are to emails.”

MCB has since announced that it is teaming with Nokia to bring mobile banking to a wider audience in Pakistan.

Indian banks are not standing by idly. ICICI Bank has formed a joint venture with Vodafone Essar to offer a bouquet of financial products such as savings accounts, pre-paid instruments and credit products through a mobile phone-based platform. ICICI bank plans to leverage the distribution strength of Vodafone, which manages around 1.5 million retail points which can be used to acquire customers.

The State Bank of India and Bharti Airtel have announced a joint venture to offer customers mobile money transfer, mobile payments and cash-in, cash-out remittances across India.  Airtel will hold 49%, while SBI will hold a 51% stake in the venture. The partners are investing an equal amount in the business. They’re targeting 3-4 million customers in the first year.

The State Bank of India has also tied up with Western Union to offer cross-border money transfers to SBI account holders on their mobile phones.

Yes Bank has partnered with Nokia and Obopay to launch Mobile Money Service, which enables transfer of money to individuals, payment of utility bills and recharge of prepaid SIM cards (top-ups). The SMS-based service is being delivered by the Obopay platform over handsets. And Union Bankhas partnered with Nokia and Obopay to launch financial services through mobile phones for users and businesses.

National Payment Corporation of India (NPCI)  is helping to stimulate the market in India witha new service that is set to revolutionize the retail money payment sector. Through the service, consumers can transfer money from their accounts to any other account in the country using their mobile devices. It is being billed as the world’s first national instant, real-time, 24×7 fund transfer facility in the retail payment sector.

Further, NPCI’s interbank mobile payment system (IMPS) will be the first in the world to allow such transactions between individuals to be routed in tandem through the bank and the mobile services provider. There is a cap of 50,000 rupees per day on mobile transactions, according to RBI guidelines.

NPCI has proposed 10 paise as the switching fee for mobile money transfers using the Inter Bank Mobile Payment Service (IMPS) from April 1. The company had planned to charge 25 paise for each successful transaction from the remitting bank for the next financial year. The reduction in the fee is expected to provide momentum and impetus to mobile-based financial transactions, according to a press release issued by the corporation.  In fact, for the current financial year, the fee has been waived to promote the product. While this charge will be applicable to the sending bank, banks have the freedom to charge their respective customers according to their own policies.

Nokia is also helping to stimulate the market by offering banks the ability to extend their reach by providing registration and cash-in and cash-out services. There are a total of 80,000 bank branches in India – however, Nokia alone has 200,000 retail outlets in the country. Union Bank of India, for example, which has 4,000 outlets, could extend its reach five-fold through the use of only 10% of Nokia's retail locations.

Nokia is expanding its mobile money activities into Pakistan, through its partnership with Pakistan’s MCB.  Fundamo, which sells mobile financial platform technology and was recently acquired by Visa, is taking part in that project. 

Fundamo is also involved in a project launched last month in Dhaka, Bangladesh by bKash, a joint venture between BRAC Bank and US-based Money in Motion. This project aims to provide mobile financial services to the 83% of the population living on less than $2 a day.

In Bangladesh only 9% of the population is banked but 44% own a mobile phone.

This target audience may be a far cry from the kind of customers being targeted by Google Wallet in the U.S. However, the  potential for mobile banking in developing nations is huge and the market is moving fast, representing a large growth opportunity for players that get in quickly.



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