New figures recently published by Juniper Research have shown that the mobile money continues to surge forward, with the number of mobile-based transfers expected to increase by 150% over 2015 to more than 13 billion worldwide. Social media companies are leading the way in this dramatic rise. The US social payment service Venmo has reached traffic of almost $1 billion per quarter, Snapchat is working with Square and Facebook has launched a service for transfers via Facebook Messenger. The Chinese market is burgeoning too, with service providers like WeChat and Alipay experiencing over 3.3 billion peer-to-peer transactions over Chinese New Year.
One factor driving the boom in mobile money transfers, particularly in developing markets, is the ability to reach the unbanked. There are 2.5 billion people out there without bank accounts who solely rely on cash – but a billion of these have access to a mobile phone. Mobile-wallet services can provide them with a new way to safely transfer money or sign up for financial services like insurance without the need to carry cash physically or to sign-up with a traditional bank. More of Bangladesh’s 157 million people use mobile phones to transfer money than bank accounts, while in Kenya the funds flowing through mobiles are equal to about a quarter of the country’s economic activity.
As the mobile money market develops, some countries are now facing increased regulation forcing MNOs to partner with financial institutions on the services they bring to market. Some, like the CEO of Airtel Nigeria, have claimed that such regulation will curb growth and stop the market reaching its full potential, since banks are not ready or prepared to reach the untapped unbanked population. Resolving these disputes and making mobile money work is in everyone’s best interests. The benefits go far beyond the increased convenience for the users – banks can reach huge numbers of new customers and reduce their cash management costs, while MNOs can open up new revenue streams, build loyalty among their subscriber base and reduce airtime distribution.
The GSMA MMU State of the Industry Report for 2014 showed that the mobile money market is accelerating, with over 250 services now live across 89 countries and just under 300 million individual accounts. In the developing world, 16 markets now have more mobile money accounts than bank accounts, demonstrating its ability to increase financial inclusion. However the total number of mobile money accounts only represents 8% of the possible connections in the markets where such services are available, so there is considerable room for MNOs to grow the market further. To achieve this however, they must recognize that the payment infrastructures used in developed markets are not applicable to the developing world – they are too complex and expensive. Instead emerging markets need alternative infrastructure that supports an affordable payments ecosystem for the unbanked.
With a market as mature as that of mobile, it can be easy to assume that most major opportunities have been tapped – but mobile money is an example where MNOs and banks have a huge chance to add innovative new services to their existing programs that could generate significant new revenue streams.