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What’s Next for Mobile Money?

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.

Mobile money is changing the financial landscape around the world. What's next? (Credit: Flickr Creative Commons, Gates Foundation)

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.

Technological Trends
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.

Product Innovation
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?
 

Comments

Kenya has the world's highest rate of P2P (person-2-person) mobile payments familiarity and highest usage level but many businesses are yet to leverage the full range of solutions available for mobile payments. That is changing faster. SMEs in Kenya are adopting mobile payments especially at the point of sale (POS). SMEs will drive mobile money in Kenya for the next 10 years. Financial institutions are leveraging mobile money but they are slow. SMEs are adopting M-PESA faster and they are more innovative than the big financial institutions. C-2-B (customer-to-business) payments is the next frontier for mobile money (M-PESA) in Kenya.

Submitted by Eric Kotonya on
Seems like Kenyan's have not fully understood the impact of the mobile money leadership she commands. If they did they'd look beyond banking the unbanked and remittance convenience offered by MPesa and other mobile money services. The real success will be in innovating mobile money services for the future. Two mobile-money derived products and services could soon drive next generation mobile services in Kenya: MOBILE COMMERCE: Local techies have developed online shopping cart plugins and web-app extensions that automate receipt of mobile payments. This brings simplification and integration to enterprise systems. Leading the way are kopokopo.com, dukapress.com and pesapal.com. MOBILE FINANCE: Peer to peer mobile lending is now possible in Kenya, even more so after Safaricom proved the concept with “Okoa Jahazi” pre-pay airtime-on-loan product which integrates real-time credit worthiness checking for instant micro-loan approval and dispensing. Nairobi's mobile-money bank Musoni.eu is well positioned to scale this commercially.

Submitted by Anonymous on
Great post - very interesting. I find it quite interesting to see what business model will prove it’s right - is it the telcos who can push mobile money or is it, like they're trying in Nigeria, the banks? The Central Bank of Nigeria has given 11 banks licenses to operate with mobile money. Perhaps that’s too many players on one market - despite the fact that there are more than 90 million mobile phones in Nigeria.

Submitted by John on
Have you guys seen this blog post on a supposed M-Pesa innovator? http://www.humanipo.com/blog/2291/The-Curious-Case-of-Nyagaka-Anyona-Ouko-the-Mobile-Money-Transfer-innovator-Part-I

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