Mobile phones have evolved from being a toy in the hands of wealthy people to becoming a tool of economic empowerment for the world’s under-served citizens. More than 4 billion handsets are in use worldwide, three-quarters of them are being used in emerging and developing markets. In Africa, for example, four in ten people have a mobile phone. It is also a fact that two billion people worldwide are unbanked, mainly in developing countries, and that more than a billion unbanked people have mobile phones.
Currently, many unbanked, low-income people transfer money using informal networks that have high transaction costs and are prone to theft and fraud. Telco operators are starting to turn their attention to these branchless banking customers to counter their slowing subscriber growth rates, rapidly declining ARPU and shrinking profits by offering mobile money services.
Mobile money enables customers to transfer money using their smartphones as quickly as they can send a text message, offering a more secure and affordable solution for the unbanked and underbanked population across the developing world while providing a diversification opportunity for operators
Extending mobile money to customers in developing and emerging countries, particularly in Africa and Asia, provides people in these countries with a number of benefits. Mobile phones provide a faster, cheaper and safer way to transfer money than the use of informal networks, such as handing an envelope over to a bus driver who will deliver the money or slow, costly transfers via banks or post offices. Mobile money also eliminates the need for people in the rural areas to travel great distances to the nearest bank or post office, giving them time to focus on more productive things.
At the same time, increased usage of mobile money translates into improved ARPU and greater revenues for telcos. A well-known and established mobile money service in Kenya has become an outlet for a wide range of consumer and business services and is already seeing a rise in average revenue per user.
The direct revenues from mobile money services nicely complement a telcos voice and data revenues. Mobile money is an adjacent service that fits neatly into a telcos established business network. It can be operated using some of the same core competencies such as managing mobile recharges, and it leverages unique incentives that telcos have and the banking organizations lack.
Mobile money presents a shining opportunity to start a second wave of mobile-led, cross-sell opportunities for operators. Telcos that seize this opportunity, specifically targeting low-income, unbanked segments of the population, stand to generate both direct top line revenues as well as indirect benefits for their business.