LONDON, UK: A new report from global consulting and advisory firm Ovum, reveals activity in mobile payment services (and more broadly mobile money services) is accelerating in many emerging markets.
The report titled, “Mobile money in emerging markets”, finds the market is still in its infancy, yet it has the potential to become a mass-market service, penetrating one-third of all mobile users in emerging markets in five years’ time.
However, much will hinge on how well the industry addresses various market barriers, and its ability to nurture user demand with clear, simple and attractive propositions.
The mobile money market has accelerated in the last two years in emerging markets, mostly in more mature markets. “The success of Vodafone’s Kenya subsidiary Safaricom with its mobile money service M-Pesa has underlined the potential for mobile money services,” says Angel Dobardziev, Emerging Markets practice leader and co-author of the report.
Yet, despite more than 100 launches of mobile money services by both service providers and banks globally the marketremains in a fragile state with few well-established services.
Whilst there is a range of alternative scenarios, Ovum predicts that the most likely scenario will be a market where service penetration reaches between 30 percent and 40 percent of the emerging market’s mobile users in 2014.
Where the industry resolves the market barriers more quickly than envisaged, an optimistic scenario is possible where strong user demand propels mobile money services to penetrate between 60 percent and 70 percent of the mobile users in the emerging market by 2014.
One of the key factors influencing market uptake of mobile money services is the relatively low penetration of access to financial services compared to higher (and fast-growing) penetration of mobile services.
Service providers along with banks will need to target unbanked and connected customers as they are the key demand driver for the market today, says the report. “Recruitment, training, incentivising and support of networks of mobile money agents will be key to service providers’ mobile money strategies, particularly when it comes to targeting unbanked customers”, says Dobardziev.
“Without access to an extensive distribution network for the users to deposit and withdraw cash as they make use of the service, users will be prevented from making the most of the service.”
In order to ensure early user disappointments do not extinguish the market, services providers must get the basics of the service right. “This means not losing sight of the fact that telecoms and banking have very different volume, size, margin and error tolerances on their core transactions.
As the two worlds draw closer with mobile banking, this will mean a different mindset and approach to service provision, reliability and security,” Dobardziev concludes.
Showing posts with label mobile money. Show all posts
Showing posts with label mobile money. Show all posts
Wednesday, July 29, 2009
Wednesday, July 15, 2009
Seven steps to make successful mobile money offerings in emerging markets
MUMBAI, INDIA: Mobile money services have huge potential in markets where mobile penetration vastly outpaces the number of people with bank accounts, according to Gartner Inc.
However, service providers, including banks and mobile operators will need to invest substantial efforts in building an "ecosystem" to make the service work within the local regulatory and business environment.
Mobile money refers to mobile banking and payment services and includes functions such as balance and history enquiries, money transfer, bill payment and prepaid top-up.
“Following the popularity of mobile money services in countries such as the Philippines, where 80 percent of the population has mobile access but only 20 percent have bank accounts, we are seeing rising interest from both mobile operators and financial institutions in offering the service in emerging markets,” said Sandy Shen, research director at Gartner.
Gartner has identified seven crucial steps to enable providers to make successful mobile money offerings in emerging markets. These offerings include:
Step 1 — Talk to the Regulator
Regulators must be involved from an early stage to gain their support, especially in markets where mobile money offerings have not been established. Present regulations are centered on banks and may potentially destroy the business case for mobile money, so service providers need to talk to regulators to educate them and gain their support.
Step 2 — Define the Business Model
In general, there are four business models:
Led by the Bank — Banks in this case take most of the responsibility and treat mobile operations as a "bit pipe" that provides mobile access. Banks take care of service development, marketing and promotion, distribution, agent and merchant acquisition, regulatory compliance and technical support. This approach is more likely to be used in developed markets where banks extend the service to existing customers.
Bank-Operator Joint Efforts — Banks and mobile operators establish a partnership or joint venture with each party taking a fair share of responsibilities. Gartner believes that this business model is the most effective as each party performs tasks they are good at with their expertise complementing each other to meet business and regulatory requirements.
Led by the Operator — Operators in this case assume all responsibility, including float accountability and gain the highest returns of all business models, but it also assumes the highest risks.
In essence, the operator provides stored value accounts to the customer and keeps the float with its own bank account. This model relies a lot on regulation because not many countries allow the operator to perform a deposit-taking role. Therefore, this model is likely to be used in only a few markets.
Led by a Third Party — This is usually led by a solution provider that offers the service across operators. Third parties can work with a bank to comply with regulatory requirements and with operators to gain network access, but it assumes most of the responsibility, such as marketing and distribution.
Step 3 — Select a Vendor
Due to the nascent nature of mobile money services, startup companies are sprouting up to chase opportunities in various segments of the market. Gartner recommends vendors with an end-to-end robust solution that is market proven and those with successful deployments of scale. A vendor should also have a solid understanding of the local regulatory and business environment and a proven track record.
Step 4 — Set up the Agent Network
Agents play an essential role in "cash-in" and "cash-out," one of the most valuable elements of the mobile money service. Service providers must chose their agents with care, ensuring that they consult regulation as to which businesses can assumes agent roles, as well as the process of approving and registering the agent. Agents should be trusted by both the customer and service provider, frequently visited by the customer, and readily equipped.
Step 5 — Recruit Service Partners
Service partners are third parties that accept mobile payments offered by the service providers and examples include retail shops, chains, utilities, Internet/broadband providers, transportation companies, governments, schools and charities. By connecting the service partners to mobile money services, the service offers more value and makes it more attractive to the end user, creating stronger loyalty.
Step 6 — Manage Risks
Risk management is key to the success if the service, both for consumer protection and regulatory compliance. It should cover technology risks, operational risks — such as misuse of PINs and theft of handsets — and compliance risks.
Step 7 — Market the Service
For major cities, marketing is not that different to other services and should include above-the-line-advertising, billboards, campaigns and events. The challenge is to market to rural and remote regions where the majority of the target market resides and where there is a lack of marketing channels.
Word of mouth is the best way to advertise in this case and one way is to recruit a community leader, such as a priest or doctor that can impact the wider community. Agents are also an ideal channel to market the service, particularly those in a local store where they are in a natural position to introduce new services.
However, service providers, including banks and mobile operators will need to invest substantial efforts in building an "ecosystem" to make the service work within the local regulatory and business environment.
Mobile money refers to mobile banking and payment services and includes functions such as balance and history enquiries, money transfer, bill payment and prepaid top-up.
“Following the popularity of mobile money services in countries such as the Philippines, where 80 percent of the population has mobile access but only 20 percent have bank accounts, we are seeing rising interest from both mobile operators and financial institutions in offering the service in emerging markets,” said Sandy Shen, research director at Gartner.
Gartner has identified seven crucial steps to enable providers to make successful mobile money offerings in emerging markets. These offerings include:
Step 1 — Talk to the Regulator
Regulators must be involved from an early stage to gain their support, especially in markets where mobile money offerings have not been established. Present regulations are centered on banks and may potentially destroy the business case for mobile money, so service providers need to talk to regulators to educate them and gain their support.
Step 2 — Define the Business Model
In general, there are four business models:
Led by the Bank — Banks in this case take most of the responsibility and treat mobile operations as a "bit pipe" that provides mobile access. Banks take care of service development, marketing and promotion, distribution, agent and merchant acquisition, regulatory compliance and technical support. This approach is more likely to be used in developed markets where banks extend the service to existing customers.
Bank-Operator Joint Efforts — Banks and mobile operators establish a partnership or joint venture with each party taking a fair share of responsibilities. Gartner believes that this business model is the most effective as each party performs tasks they are good at with their expertise complementing each other to meet business and regulatory requirements.
Led by the Operator — Operators in this case assume all responsibility, including float accountability and gain the highest returns of all business models, but it also assumes the highest risks.
In essence, the operator provides stored value accounts to the customer and keeps the float with its own bank account. This model relies a lot on regulation because not many countries allow the operator to perform a deposit-taking role. Therefore, this model is likely to be used in only a few markets.
Led by a Third Party — This is usually led by a solution provider that offers the service across operators. Third parties can work with a bank to comply with regulatory requirements and with operators to gain network access, but it assumes most of the responsibility, such as marketing and distribution.
Step 3 — Select a Vendor
Due to the nascent nature of mobile money services, startup companies are sprouting up to chase opportunities in various segments of the market. Gartner recommends vendors with an end-to-end robust solution that is market proven and those with successful deployments of scale. A vendor should also have a solid understanding of the local regulatory and business environment and a proven track record.
Step 4 — Set up the Agent Network
Agents play an essential role in "cash-in" and "cash-out," one of the most valuable elements of the mobile money service. Service providers must chose their agents with care, ensuring that they consult regulation as to which businesses can assumes agent roles, as well as the process of approving and registering the agent. Agents should be trusted by both the customer and service provider, frequently visited by the customer, and readily equipped.
Step 5 — Recruit Service Partners
Service partners are third parties that accept mobile payments offered by the service providers and examples include retail shops, chains, utilities, Internet/broadband providers, transportation companies, governments, schools and charities. By connecting the service partners to mobile money services, the service offers more value and makes it more attractive to the end user, creating stronger loyalty.
Step 6 — Manage Risks
Risk management is key to the success if the service, both for consumer protection and regulatory compliance. It should cover technology risks, operational risks — such as misuse of PINs and theft of handsets — and compliance risks.
Step 7 — Market the Service
For major cities, marketing is not that different to other services and should include above-the-line-advertising, billboards, campaigns and events. The challenge is to market to rural and remote regions where the majority of the target market resides and where there is a lack of marketing channels.
Word of mouth is the best way to advertise in this case and one way is to recruit a community leader, such as a priest or doctor that can impact the wider community. Agents are also an ideal channel to market the service, particularly those in a local store where they are in a natural position to introduce new services.
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