Consultant, IBM Center for Applied Insights
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IBM Center for Applied Insights (CAI) has recently started a new program on building fact-based, market-centric thought leadership assets on various facets of mobile money.
As I dig deeper to understand the current state and evolving trends of this segment, some facts are worth noticing: Consultative Group to Assist the Poor. (CGAP) estimates that around 3.5 billion people worldwide currently lack access to formal financial services. It estimates that there will be 1.7 billion unbanked customers with mobile phones by 2012. There are more than 165 pilots in the mobile money segment in emerging economies being run by a diverse group of organizations.
However, very few mobile money deployments have been able to achieve scale and gain significant customer base. Some deployments which have been able to achieve significant scale include M-Pesa in Kenya, GCASH and Smart Money in Philippines, Vodacom in Tanzania, and MTN Uganda.
Hence, there is definitely a huge potential to achieve scale in this segment, especially in the emerging markets, and firms are investing hard to address this market. However, many of them are still struggling to fully tap into this opportunity. Cracking the code for high customer adoption and usage, in quantity and continuity, appears to be an Achilles’ heel for the Mobile Network Operators (MNOs), financial institutions, and other organizations trying to venture into this segment.
So, what insights can we learn from those who have succeeded in this segment? I researched to determine some common factors which seem to have made some deployments more successful than others. It seems that there are two broad factors which can prove to be very critical for an organization while trying to launch and subsequently scale: the actual product and an effective agent network. Today, we’ll take a look at the impact of the product.
Product – Building a strong, robust and compelling product offering (and later a product portfolio) is a very important factor which is sometimes overlooked as many companies try to emulate successful offerings and solutions from other deployments.
Some of the key points to keep in mind are:
Company’s vision and long term strategy
– Most of the successful companies have a well-defined long term vision and strategy with respect to offering mobile money services. For instance, a company can aspire to be the leading low cost provider for person-to-person transfer services or it can aspire to be a leading service provider in the retail payments segment. A clear vision also helps senior management develop a long term commitment to the service. This often takes substantial initial funding towards mobile money deployments and at least three to five
years to become profitable.
Specific needs of the market – A clear and articulated value proposition, in terms of addressing the ‘market specific’ needs for mobile money, goes a long way towards ensuring success of the deployment. There is no ‘One size fits all’ business model or offering which can cater to different markets in the emerging or the developed economies. For example, M-Pesa has gained its popularity and scale by uniquely positioning the product to address the remittance need of the Kenyan population; its value proposition being: “send money home.” WIZZIT in South Africa focuses on “live life anywhere” by addressing the mobile banking needs of their consumers. Other avenues can be business-to-business payments, bill pay, salary payments, and so on. In the planning phase, a thorough market research can help develop a deep understanding of consumer’s pain points in the specific market which can be addressed effectively by the mobile money deployment.
– The bulk of potential consumers in the emerging markets are from the informal economy, people who are unbanked and use other formal and informal means such as post offices, banks, or personal networks for money transfer. This target segment is mostly unaware of the potential for and features of newly launched mobile money offerings. They also have security apprehensions associated with mobile money transfers and lack of initial technology understanding. For example, some of my colleagues were initially worried about security of their payments while using newly launched mobile payments services by BharatiAirtel
. Hence, a concerted and targeted marketing campaign goes a long way in addressing the apprehensions of the target segment.
–This target customer base from the informal segment in emerging economies wants the service to be Fast (Instant transfer of money over long distance and without any queues), Inexpensive (in comparison to costlier credit/debit cards or informal payment methods), Safe (Holding value and making payments that is safer than holding and transacting cash) and Accessible (able to cash out, make purchases, and receive money in remote areas). For example, as per a white paper by IBM
, cost of sending 1000 Ksh ($13.06) through M-Pesa is $0.38 which is cheaper than any other service available in Kenya such as PostaPay and Bus Company.
Right Partnerships – Research suggests that making the right partnerships at the right time helps a) align the business and its new/existing products with the overall vision on an ongoing basis, b) continuously learn and address the needs, challenges and new demands of the market and c) expand and reach scale. The partnerships can be with technology partners, banks and financial institutions, MNOs, agent networks, retail chains and other corporate organizations.
For example, Bank Bradesco and the Post Office in Brazil have partnered to create Banco Brazil. The partnership has been able to effectively attract rural populations boosting the business of both companies. Another interesting partnership is in Japan, a developed economy. Sony partnered with DoCoMo, a MNO, to form a joint venture – FeliCa Networks. They produced both the mobile phone chip and card reader which enable them to manage downloads and applications for consumers and merchants and gain a strong foothold in the mobile payment market.
There is a lot to be learned and written on the effective management of agent networks. The agent network is the effective face of the company for consumers. I can try to explore this factor in more detail in one of my subsequent posts. Look forward to your comments and observations.