In recent years, mobile money has attracted sustained attention in ways that few other mobile services have. And for good reason: from East Africa to Pakistan, the Philippines and elsewhere, mobile money services are growing and diversifying into fields such as savings and insurance. Kenya-based M-PESA remains the global leader, and the benefits from increased market efficiency, consumer risk-sharing and third party utilizations are significant. But mobile money can no longer be considered an isolated phenomenon, and as it matures, a variety of new challenges and benefits will influence its developmental potential.
Although it is notoriously difficult to make predictions about such a fast-moving and wide-ranging industry, in the new edition of Information & Communication for Development 2012, we highlight some emerging issues in mobile money that will likely become relevant in the upcoming years.
In many ways, mobile money has relied upon fairly simple technology, thus helping to ease the challenges to adoption. But technology is accelerating, and at least three trends are visibly relevant to mobile money. Already, some countries have smartphones available for less than US$100, and their diffusion – especially through second-hand markets – will mean some consumers have options outside the SMS and USSD channels.
Two additional technologies – near field communication (NFC) and biometrics – are more questionable. NFC, which allows a phone to communicate with, say, a cash register through merely waving them together, has long been promised as a revolution in mobile money; however, the need to install new infrastructure to interact with NFC-enabled phones means this may be slower to grow. Similarly, although biometric identification technologies are growing in use around the world, their expense, limited reliability and privacy implications may limit their expected application to mobile money.
Maximizing the Promise of Mobile Money
The success of M-PESA is a story of both innovative private sector investment, as well as early stage commitment – through financing and appropriate oversight – of public sector actors. This public-private interaction could be a model for pro-poor innovation, and ongoing work will continue this.
One area of emerging discussion is related to competition and interoperability. Unlike suggestions from some media coverage of the report, the World Bank does not have a position on competition in Kenya’s mobile money market, but the report does note that regulators around the globe are exploring what type of regulation is appropriate to ensure competition. In some cases, such as Nigeria, interoperability has been mandated to avoid a single provider dominating; in others – including Kenya – regulators are justifiably hesitant to stymie the market’s development through premature rules. As the report says, “The appropriate form of regulation is still emerging and will depend on context.” Supporting competitive market can take many forms – including through price regulation – but ultimately the goal is about ensuring that the benefits of mobile money reach as many people as possible in a sustainable manner.
A final area of interest in the coming years for mobile money will be fostering continued innovations that will allow services to reach the developmental goals of supporters, including meaningful inclusion in financial markets. In many cases, mobile money offerings have seen limited take-up and utilization because there is a gap between what is offered and what users need and desire. For example, many mobile money services are focused on moving money over distance (that is, peer-to-peer transfers), but customers also want – and would benefit greatly – from the ability to affordably and reliably move money over time (that is, savings, insurance and credit). This type of meaningful innovation will require creativity and an understanding of consumer needs.
The above topics are only three potential issues for the future of mobile money – what do you think will be driving the industry in the coming years?