Are You Getting Your Share? Revenue Protection in Mobile Money

Mobile money has had bad press lately for fraud-related cases. Most of the reported cases were either the result of internal employees misusing the system to cause operator losses or fraudsters trying to scam unsuspecting users. There is another angle that rarely gets any press—when users or agents abuse the platform and use it in rogue ways that it was never intended.

Across East Africa, most mobile money transactions are primarily between registered users. Registered users get free cash-in (convert cash into mobile money, steps 1), pay fees to make transfers to other registered users (step 2) and registered recipients pay fees to cash-out (convert mobile money into cash, step 3). Most transactions are single loop (from sender to receiver and then converted into cash) and the operator automatically deducts and shares fees with agents as summarized in the standard scenario.

Agents are critical for success of any mobile money platform, but they may also offer its weakest link. Let us consider a few examples. Agents may charge additional fees to customers, they may bypass the platform for withdrawals, they may perform over the counter transfers for customers to other agents if they have ability for P2P amongst agents or they may split transactions to take advantage of the pricing model. I am sure others can easily add to this list.
Direct Deposit
Direct deposits: Customers can abuse the mobile money platform by making direct deposits or remote cash-ins as some refer to them. In this case instead of the usual loop (cash-in > transfer > cash-out), a user provides the recipient number at the agent, enabling them to cash-in directly into the recipient’s wallet and avoiding paying a transfer fee (skip step 2 and have agent perform step 3).As you notice in the summary table, the operator’s income drops while the agent is unaffected because they still share revenue with the operator. Altering the transaction cash-in transaction flow to require a customer PIN, similar to the cash-out flow can help, but does not necessarily make it impossible to perform direct deposits.

Double dipping using Cash: Agent asks customer to pay cash-out fee (for step 3) then performs normal platform cash-out process. Here the customer is made to pay the cash-out fee twice, first by the system and second by the rogue agent. While this improves rogue agents’ commissions, it does not affect the operator’s income. This can be addressed by creating better customer awareness on how fees are charged.

Double dipping using Fees: Agent asks customer to transfer mobile money plus a cash-out fee to agent mobile, agent then offers cash in return bypassing normal platform cash-out process. Here the customer pays transfer fee twice, first to move mobile money to recipient and second to move mobile money to agent. This results in higher customer fees and increases commissions for rogue agents. The operator may gain on lower transaction tiers from the double transfer fee, but lose out on the higher tier transactions because they tend to offer bigger commissions (as proportion of transferred amount) to agents. This can also be addressed by creating better customer awareness.
Such rogue use of the mobile money platform can harm operator revenue, customer trust and the overall health of the mobile money ecosystem in the long run.
All of this points to a fundamental shortcoming—mobile money platforms have been conceived as simple channels to transfer e-value between mobile phone users. As we start to create sophisticated financial products on top of mobile money because of its inherent potential to serve the majority that are currently unbanked, we do need to revisit the foundations to ensure that mobile money platforms provide the same level of security and fiduciary controls that banked customers now take for granted.
As a mobile money provider, how are you protecting your revenue and reputation?


07 September 2012 Submitted by Anonymous (not verified)

Customer sensitisation is key to avoiding double dipping using cash and many agents in rural areas as well as city suburbs do fleece ignorant customers. I have always had arguments with such agents who only succumb when I pull out my MTN Id.
As other means to curb this are being put in place there is a greater need for educating customers through all available channels. Otherwise the writers have made a good eye opening piece.

03 October 2012 Submitted by Lee-Anne (not verified)

Hello Anonymous MTN ID holder.

Yes, I agree!!! Customers need to know their rights (and be able to enforce them) to keep these agents honest. Honest behaviour may not get you the money today but it will get you the return business in the long run that means the long term gain. The agents need to think like sustainable businesses and not just as monopolies. Smart agents (and there are quite a few) will set up agencies in areas that are underserved or where the agents are overcharging and easily steal all the customers as no loyalty has been built. Mobile Money is here to stay in Uganda - get to the top by doing the right thing!!


07 September 2012 Submitted by Anonymous (not verified)

Ali and Anne-lee,

Your posting is great! The deviations you mention do happen in Kenya mostly resulting from familiarity between agents and their customers( as opposed to intentional fraud or abuse of system). It happens so innocently since employees of agents are mostly not sophisticated to understand who earns what and when in the whole mobile money business. Their employers just give them instructions in form of do’s and don’ts. What they know is that their employers earn commissions at the end of the month. The rest is left to them and their customers.

To start with, it is a rule that customers must present their national identification cards to get service. But if you use an agent twice or thrice, you are no longer asked for the ID-because you are known. This means that the familiar customer may as well use the intended transferee telephone number. These deviations happen every day and as frequently as the familiiarity between agents staff and customers grows.

In your last paragraph, you have talked about the need for caution not to clog the money transfer platform with sophisticated financial products too early as that might pose a risk to consumers, especially the poor. Since I started participating in this financial inclusion debate recently, I held the same view and stubbornly so. I have relaxed a bit due to the knowledge I have acquired overtime reading postings of experts like yourselves. I give a lot of credit to Ignacio Mas whose postings have been very educative to me. I consider him as a top of the range thinker and innovator in this field and in this debate. My new thoughts are that the mobile transfer platform will be wasted if only used as a money transfer platform( as opposed to a receptacle of value or a money management and planning tool as Ignacio Mas would say). It will be a super highway only used by a few passenger vehicles as opposed to a high traffic highway that has passenger as well as cargo vehicles cruising at high speeds and frequency to different and multiple destinations.

When we talk of financial products through mobile platforms, they sound like heaps of polythene papers dumped into the mobile money pipe and likely to clog and block it. We conjure pictures of these “heavy metal” type of financial products that will be toxic by the time they reach the other end where the poor are naively and illiterately waiting to be victimly poisoned by them. We need to demystify and simplify financial products so that we don’t perceive and heap them into one category that needs a long stick to poke with.

We at Kenya Financial Education Centre( are developing a financial literacy product to run within the mobile platform, specifically through Mpesa. Asking a consumer to “SPEND SOME, SAVE SOME” as a message appearing at the bottom of an Mpesa balance enquiry report is delivering a financial literacy message at the point of consumption. Nothing complicated or sophisticated with such. Isnt’ this a financial literacy product? If a consumer while receiving an Mpesa deposit message reads an added message that goes ” YOUR COW DIES, INSURANCE BUYS YOU ANOTHER. CALL CIC INSURANCE ON XXXXXXX NUMBER. That message is simple.It will be upon the consumer to take initiative to call the insurance company to get more information. It is marketing, you will say. But it is making available an important product needed by the poor through an effective channel as part of financial inclusion effort.

If all the companies that have financial products for the poor can use the platform to inform all their potential customers of what they have available to increase inclusion, that is using the platform innovatively and usefully.

The day that I was able to demystify the word financial products, it became easier for me to think innovatively. In Kenya, with a possible collaboration of the prominent mobile service provider, it would be possible to reach over 10 million users of Mpesa with financial literacy messages in a single day. And these messages would be diverse addressing financial literacy themes and delivered at the point of consumption, what CFI refers to as Intercept point!

Ignacio Mas idea totally corroborates this thought as he proposes that everybody with a phone should be able to use as many financial products as possible if their phones are equipped with user friendly interfaces and the mobile platform is populated with many user friendly financial products offered by as many providers as possible. The consumer has discretion of what to choose and what to ignore as irrelevant as long as the value propositions are presented in simple language. In any case, once consumers learn about a product, through the same phone, at the comfort of their homes they can call the providers, asking them to call them back to explain their products. The cost shifts to the financial service provider. Most important is the ability to reach financial products information to as many peeople as possible.

03 October 2012 Submitted by Lee-Anne (not verified)

Hello Kenya Financial Literacy Centre. Thanks so much for the reply and sorry for taking so long to respond.

Firstly, I think there may have been a misunderstanding of my last paragraph here. We here at Grameen Foundation are pushing strongly for more sophisticated and targeted products to be built on Mobile Money. One of the struggles that mobile money systems have are that they do not have the fiduciary controls that pure financial systems have (such as core banking systems or ATM's). The development of more sophisticated products to serve the poor need the checks and balances built in that allows the move from payments only services to real financial services. In addition to the system we need to help the Mobile Money agents and customers understand the reasons for 'following the rules' in relation to financial services. As a banked person I understand why (even if I am friends with the teller that I see everyday) that I have to not share my PIN and I need to sign to do transactions (ie not just by email).

However I strongly support the process or operations of Mobile Money being realistic to what can be done in developing countries eg reduction in KYC required, less security managed by restricting transaction limits.

To get Mobile Money rollouts to the point where they are viewed as sustainable entities and not just hygiene factors for Telco's we need to help them on the path to implement controls to retain revenue and increase the capacity of the system to actually meet the needs to financial services.


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