Mobile money

Emerging payments in emerging markets

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Today, smartphones give us round-the-clock access to a wealth of information and services. We can book hotels, email colleagues or reserve a table at our favourite restaurant (and even pay the bill via the handset). But what about those of us who don’t own a smartphone?  In countries such as the US and the UK, smartphone penetration currently stands at about 50%, but this drops to about 20% in emerging markets.

That’s an astonishing number of people who are using early mobile devices, but that doesn’t mean they are missing out on the latest advances in mobile payments. You may have seen my post a few days ago about Gemalto being selected as the technology provider for Transfer in Mexico, which aims to bring banking services to previously unreachable areas thanks to mobile phones. This is all possible through traditional text (SMS) messages rather than through data-hungry applications. 

As research group Forrester identified on their mobile payments blog last month, electronic money will keep on growing until it becomes the norm for us to make digital payments for every purchase. The impact this is already having in places such as Mexico and Kenya is phenomenal, letting people send money to friends and family, pay for shopping, utility bills, or even transport, without the need to travel or carry cash around potentially dangerous areas.

Kenya in particular is a world leader in mobile payments, where its M-Pesa platform has been in place for years and now has over 14 million subscribers. In fact, only last week Business Daily Africa’s George Ngigi reported on the Mobile Money Africa blog that, “Cash deposits held by mobile phone money transfer providers have grown to more than Sh176 billion (US $2.1billion), equivalent to a tenth of the Sh1.5 trillion held by commercial banks.”

 

As far as adoption goes, there are two main criteria that need to be met. Namely, that the service is secure, yet easy to use. Contrary to some beliefs, mobile transactions are actually a lot more secure than traditional methods. Your check won’t get lost in the post; your bulging pay-packet won’t get stolen on a night out and no data is left on your phone, as the above diagram shows – all transactions are secured digitally in the cloud using proven TSM technologies. The Gemalto Mobile Payment Platform (GMPP) identifies the sender, and uses a second channel – Unstructured Supplementary Service Data (USSD) – to prompt the sender for his PIN. If the PIN is correct, the user is authenticated, the GMPP processes the request and executes it.

Kenya has been making the footprints in which other nations can follow on the journey to a cashless society. Opening banking and transfer services up to all, no matter what network or device, could lead to the biggest shake-up of the financial world in living memory. You don’t need an app or the latest NFC handsets to take part in the next big global revolution. The Irish author Jonathan Swift once wrote that “a wise man should have money in his head, but not in his heart”. In the next few years we may also see the wise man with money in his phone as well.

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