Interoperability key to success for mobile money

MELBOURNE, AUSTRALIA: Ovum forecasts there will be between 925 million and 1.54 billion registered mobile money users in emerging markets in 2015.

The significant gap between our pessimistic and optimistic scenarios is due to the uncertainties surrounding regulation and the pace and effectiveness of service provider execution. Ovum expects an optimistic uptake in Asia as the level of banking penetration is stronger and the resultant demand from the unbanked population is a key factor to its success.

Angel Dobardziev, Principal Analyst, said, “The strongest driver for mobile money services in emerging markets remains the demand from the unbanked and under-banked population for access to safe and secure financial services.”

Table 1 indicates that in most Asian markets the number of mobile connections per 100 people is greater than the number of commercial bank accounts, which is an effective measurement for banking penetration.

Table 1: Banking and mobile penetration KPIs -- selected emerging marketsSource: Ovum.

“Given this data, there is no surprise that most successful mobile money services have been in Philippines and Thailand”, Angel adds. For example, TrueMove has 6 million mobile wallets. True Move focuses on bill payments and airtime transfers, rather than on money transfers, which has been the preferred deployment method among a number of other operators. In mid-2010, Filipino operators Smart and Globe had 3 million and 1.2 million mobile wallets respectively through their Smart Money and GCash offerings. However, growth in both these services has stagnated in the last few years, despite strong mobile subscriber growth and low banking penetration.

The most striking market development strategy which operators are advised to action is Interoperability. Dobardziev said, “Currently most mobile money initiatives offer little or no interoperability with other services. Ovum expects that addressing this issue will become the critical factor in the development of mobile money services”
Operators also believe that interoperability is crucial in the medium to long term, but consider that differentiation and exclusivity are more important in the short term.

Ovum believes that interoperability is critical now, and that it is in operators’ best interests to implement it as soon as possible. Enabling interoperability will dramatically increase the number of mobile banking transactions as transaction volume in any network is proportional to and driven by the number of interconnections possible between subscribers, a theory known as “Metcalfe’s Law”.

Service providers must start planning their interoperability strategies now, in order to reap the benefits in the medium term. We think that operators’ “little to gain, much to lose” arguments against interoperability are short-sighted, and risk suffocating the development of the mobile money market.