Applications that allow money transfers and payments over mobile phones are some of the most important in the industry today. Mobile money transfers top the list, leaving behind location-based services, search and browsing. Money transfers are already popular in a number of emerging markets, and continue to attract more users.
In developed countries, mobile payments are usually an extension of an existing payment infrastructure, but in developing countries users can combine mobile payments with mobile banking to pay bills more conveniently and to gain access to loans and other financial services that were not possible before.
The rapid adoption of new mobile technologies such as NFC and other physical mobile payment methods are beginning to offer consumers a viable alternative to cash, credit cards and debits cards, supporting increasingly mobile lifestyles.
The field of mobile payments has been steadily expanding in the Middle East, riding high on the ubiquity of the mobility wave. According to GSMA, currently there are 15 mobile money services available in the region, with around 38 million registered mobile money accounts.
There is a combination of factors fuelling the growth of mobile payments in the region. First is the sizeable amount of migrant workers.
“Migrant workers represent a large chunk of the population in Gulf, especially in the UAE and Qatar,” says Srinivas Nidungondi, Senior VP and Head of Mobile Financial Solutions, Mahindra Comviva. “Expatriates account for as high as 87 percent of the total population in Qatar, and nearly 84 percent in the UAE. These migrants make regular remittances to their families back home. By leveraging this opportunity, mobile operators in countries such as Qatar are partnering with several money transfer operators to offer mobile remittance services.”
Another factor in the growth of the mobile payment market is large unbanked populations. According to the World Bank’s most recent Global Findex, which reveals regional differences in financial inclusion globally, approximately 2.5 billion people worldwide do not have a bank account. The same report estimates that only 18 percent of the adult population in the Middle East and North Africa has formal bank accounts. In parallel, the wide majority of those unbanked already have access to a mobile phone, and clearly stand out as key enablers for financial inclusion. Many regulators recognise the role that mobile money can play and the difference such technology can make in fostering both financial inclusion and economic growth.
“Mobile money services do not just inject added convenience for those who already have bank accounts by enabling them to make transactions in a few clicks whenever, wherever,” says Christelle Toureille, Marketing Director for Banking and Telecom Solutions, Gemalto. “These services also present the unbanked with the opportunity to have a prepaid comprehensive digital wallet which introduces an array of payment services and functionalities such as bills and merchants payment, peer-to peer payments, international remittance payments as well as cash-in and cash-out, replacing ATMs in the most remote locations, thanks to a wide network of MNOs, outlets, and agent shops.”
Gilles Ubaghs, Senior Analyst, Financial Services Technology, Ovum, offers another perspective. “Interestingly, less mature payment markets such as MEA and Asia-Pacific show much higher interest in mobile payments than more mature established card markets in Europe and North America. In essence, people are less stuck in their ways and are more willing to try something new. With less established infrastructure in place, mobile services can grow very quickly to enable a wide range of financial services activity, including reaching under-banked and remote.”
The increase in the usage and adoption of mobile money services has thrown open new opportunities for telecom operators looking to find new revenue streams to offset the decline in ARPU. “Many of your clients are generating more than five percent of their revenues from service charges on mobile money transactions,” says Nidungondi.
Toureille agrees and says mobile money services are growing at a steady pace with a total of 255 mobile money services launched worldwide and now available in 46 percent of the MENA markets. “Technology such as this responds to a strong need in the market and mobile operators are well positioned to help realise these opportunities; adding mobile money solutions to their value-added services portfolio is a great opportunity for mobile operators and can help them recruit new customers, reduce churn and generate new revenue streams,” she says.
However, to succeed in mobile money services, operators must remain sensitive to the evolving nature of mobile payment opportunities and harness key success factors.
Christian Bartosch, Associate Director, BCG Middle East, says this requires a well-crafted strategy specifically tailored to the location, situations, current market environment, and applicable laws and regulations. “In most markets where operators play a significant role in mobile payments, they have actually acquired banks, provided payment services, which did not require a banking licence or participated in national partnerships as infrastructure providers.
“But with most models, operators do not have access to the actual transaction data, nor do they own the merchant or consumer relationships. In general, operators have not succeeded in building genuine mobile payment revenue streams in markets with strong financial service regulations.”
Ubaghs adds that no one has really cracked the mobile money game completely. “I would say that one of the keys many people miss is they need to focus on the overall customer experience, and not just the customer interface. That means it’s more than just creating a card on a phone, but tying that into other services, such as loyalty and rewards, ticketing and account management in a user friendly experience, which creates real value. That also means making sure you have the right partnerships in place, especially to push real-world users, and a fully functional back end.”
To make their business models sustainable, mobile operators launching mobile money services are also turning to more interoperable solutions. “In many countries, regulatory barriers and a lack of cooperation have limited mass-scale deployment and adoption. Active inter-stakeholder engagement between telcos, banks, regulators and other service providers will definitely better support mobile payment and help these solutions reach new levels. In more and more countries, regulators are acknowledging the benefits of the work done by telcos to bring financial services to the masses and address financial inclusion, and have reviewed regulations to extend financial services licensing and authorisation framework to non-bank providers,” Toureille says.