Beyond P2P Transfers
Posted: March 17th, 2010 | viewed: (1,514) | Comments: ( 3 ) | Topic: Blog Post, Credit |
It used to be that mobile money was synonymous with domestic p2p transfers – the “killer app” that propelled Safaricom’s M-PESA to such extraordinary success. It was clear that Safaricom had tapped a rich vein of latent demand for a safe and affordable way to remit money in-country, and this kicked off a rush to bring such services to market all over the world.
Yet a number of mobile money platforms that mainly offer P2P transfers have struggled to attract users over the course of the last year. Of course, it’s difficult to isolate why this has happened-mobile money is a complex business, and lots of things can go wrong. But one possible explanation is that Kenya, with its tightly knit families and its high degree of labour mobility, is atypical in the volume of remittances that flow within its borders.
We are starting to see some evidence for this. As part of a Bill and Melinda Gates Foundation-funded project called AudienceScapes, Intermedia has recently undertaken nationally representative surveys to measure media use, ICT use and personal communication habits in Kenya and Ghana. They found that 42% of respondents in Kenya had used a money transfer service in the last year, versus just 14% in Ghana. Some of this discrepancy might be explained by the fact that M-PESA has allowed people who previously didn’t use what they would consider a formal money transfer service do so in the past year, but given the rate of penetration of M-PESA in Kenya, this effect cannot explain the entire difference. It is likely, rather, than there is simply more demand for money transfer in Kenya than Ghana.
So what does this mean? First, that operators who offer mobile money services need to be rigorous when assessing the demand for mobile money services in their market. There is no substitute for qualitative and quantitative market research-relying on anecdotal evidence, or drawing inferences from other markets, is fraught with risk. The GSMA has developed a toolkit to help operators assess the demand for mobile money services in their markets, and they can contact mmu@gsm.org to access it.
Second-and this is good news-operators have begun to explore more seriously other services that users might value on the mobile money platform. One example is bill payment. Telenor Pakistan enjoyed tremendous success bringing to market bill-payment services before offering P2P transfers. Nadeem Hussain, CEO and President of Tameer Bank (which is 51% owned by Telenor Pakistan), told a group at Consult Hyperion’s Digital Money Forum in London last week that easypaisa is on track to be processing bills by the millions by the end of the year. This is in part because for consumers in Pakistan, paying bills is a big pain point, just as sending money home was for consumers in Kenya. The option to pay a bill at a local agent is often preferred, by a wide margin, to doing so at the bank or other existing bill payment outlets: for example, Hussain reported that 40% of bills processed by easypaisa are paid outside normal business hours, which is impossible at traditional bill-payment outlets like banks.
The lesson of easypaisa (and Grameenphone’s BillPay and True Money) is not that mobile bill payment is the ‘next big thing’; rather, it’s that successful mobile money platforms are the ones that tailor their service offerings to their local market. This requires an extensive effort to understand customer needs; it also requires assessing which of the host of financial services that could potentially be offered on a mobile money platform (in addition to bill payment, operators are experimenting with international remittances, disbursements and repayments of microloans, microsavings, microcredit, insurance, and more) can be offered as part of a sustainable business model-which in turn requires a thorough understanding of substitutes that already exist in a given market.
If 2009 was the year of the proliferation of mobile money services beyond P2P transfers, we hope that 2010 will be the year that many more operators are able to align their services offerings with the needs of the low-income consumers they serve-setting the stage for more M-PESA-scale success stories in the months ahead.
Add New Comment
Comments
Banks should engage its mobile money TELCO partners that have decided to position the service extensively for only Money Transfer to start strategizing to include other services such as Bill payments, loan repayment, other collections services offered by the Bank and intra/inter customer account funds transfer. This will offer the market an opportunity to have more uses for mobile money services other than the traditional money transfer which might not be an attractive point in the market of operation. The convenience that a multi faceted mobile money service bring to consumers or account holders will offer them the opportunity to enjoy Banking beyond the traditional working hours in a week.
I will conclude by saying that there is no shadow of doubt that this will have an immense benefits for partner Banks especially in the area of deposit mobilization, customer retention and growth.
Dear Neil, Hannah and Owureku:
First my quick introduction. I am Rizwan Hafeez and working in an Express and Logistics company in Pakistan and a very keen student of the subject.
First I must thank the three of you and all others who contribute in any way to create a learning opportunity on the subject by sharing their experiences, understanding and knowledge. Bravo Friends!
I must confess that the comments mentioned above are extremely pertinent. All significant aspects to this interesting evolution have been covered.
My take here is as follows:
I have very little doubt in my mind that the next big thing happening to the economies of the world, especially the developing ones is Financial inclusion, powered by Mobile Banking.
In order for the above to happen, it is mission critical that we get the Gap Analyses right. Potentials are huge but only the right product, with right features, including convenience and pricing, will do the trick.
Once must be able to identify latent demands and then build one’s product or service based on them. If one blindly tries to replicate what has worked in other countries, economies, then this can prove to be the disaster recipe.
While so much emphysis is being laid on lending products and as also mentioned by Owureku, i have this feeling that deposit mobilization in Pakistan can prove to be a bigger success than others.
In Pakistan, any product that has the umbrella of Islamic Finance, be it Banking, lending, borrowing or Microfinance can give more impetus to an effort than anything else.
Who so ever gets things like these right can really turn the tables on so much of conventional styled products and initiatives.
Warm regards
Rizwan Hafeez
Neil,
I’m happy to see you’re drawing on the AudienceScapes data, and wanted to add a few thoughts. As you point out, we asked people in both Kenya and Ghana about their financial habits (access to various types of banking, experience with savings/borrowing/making money transfers, etc.) as well as their access to and use of mobile phones. I would invite others to look at the reports summarizing some of the findings, at http://www.audiencescapes.org/africa-research-survey-quantitative-analysis-ghana-kenya
While you are right to point out that fewer Ghanaians reported using any type of money transfer in that last year, it may be a stretch to say that this means there is lower demand for P2P transfers in Ghana than in Kenya. For example, mobile phone transfers were only just being introduced in Ghana at the same time the survey was conducted last summer, so Ghanaians’ opportunities to transfer money within the country were very different from Kenyans’. In addition, when asked about mobile money services more broadly, about half of all Ghanaian respondents said they had never heard of such transactions (while only 13 percent said they do not need to use them). Some additional observations about mobile money in both countries can be found here: http://www.audiencescapes.org/africa-research-research-briefs-survey-policy-research.
For others who are interested, the Kenya and Ghana datasets can be analyzed using our online data tool, and analysis of the communication/ICT environment in several other countries is available as well.
Hannah Bowen, InterMedia