Mobile Money: 10 Things You Need to Know

Mobile Money is a fast-moving space, and a lot happened in 2013. For those of you looking to catch up, here is our list of 10 things you need to know about mobile money.

1. It’s not only about Kenya: With 93% of the adult population registered for M-Pesa and 60% actively using the service (more than 11.6 million people), M-Pesa continues to impress (and deserves much of the attention it gets). However, developments in other markets prove that mobile money can be successful beyond Kenya’s borders. Our colleagues at MMU have identified nine providers with more than 1 million active customers (as of June 2013). Operators in Tanzania, Uganda, Zimbabwe, Bangladesh, Pakistan and even Somaliland are developing successful mobile money businesses.

A woman in a sari completes a Western Union money transfer
A woman in a sari completes a Western Union money transfer. Photo by Sanchin Bansal.

2. Agent liquidity and inactive customers continue to plague the industry: The majority of providers continue to battle with well-known operational issues, including agent liquidity challenges and high numbers of inactive customers. MMU’s 2012 State of the Industry report found that over 66% of registered customers were inactive.

3. Airtime and person-to-person (P2P) continue to dominate but with noteworthy regional differences: In June 2012 (the latest numbers available) 62% of customer transactions (excluding cash-in and cash-out) were airtime top-ups, 32% domestic P2P payments and 6% bill payments. However, P2P transactions account for 87% of the value of transactions. While these global numbers broadly represent what is happening in East Africa, the picture in South Asia, for example, is different, with bill payments accounting for 38% of the value of transactions, and airtime top-ups and domestic P2P transactions representing only 19% and 25% of transactions respectively.

4. Mobile money still remains largely cash-based: Surprisingly, many mobile money services actually rely on cash one way or another. For some services, like Easypaisa and others in Pakistan, cash-based or over-the-counter transactions – where people don’t cash into an e-wallet to then make a transaction via a phone menu, but instead just hand cash to the agent – have been an explicit business strategy to generate volume and to get customers to transact with agents. Easypaisa now has close to five million unique and recurring over-the-counter customers. For other services, like M-PESA, MTN Mobile Money, Tigo Cash, and Airtel Money, for example, customers cash-out at the receiving end of remittances. People who choose to hold money in their e-wallets for more than just a few days (53 percent of mobile money users in Tanzania), say they do so for emergencies and unplanned purchases, but eventually transact in cash. For a number of services, like bKash in Bangladesh, over-the-counter transactions are happening because customers simply prefer to give an agent cash and have him or her act on their behalf rather than using their own device. Mobile money’s cash addiction is troubling for both the long-term viability of these services (while profitable, M-PESA Kenya is still a lower margin business for Safaricom because of its high direct agent costs) and for greater financial inclusion. People are not using wallets more because there simply are not enough compelling uses for them.

5. Small value credit and savings are showing promising signs: While airtime purchases, bill payments and remittances are still the top uses of most mobile money services, there has always been an expectation that a range of financial products would be linked to mobile wallets. Despite various experiments and trials, no particular service has shown promise, until now. M-Shwari, a savings and credit product from Safaricom and Commercial Bank of Africa (CBA), has changed that, registering phenomenal uptake. The product enables M-PESA subscribers registered for at least six months to get a loan, anywhere from $1.15 to $235 for a 30-day term, instantly into their e-wallets. The terms of their first loan are primarily based on data analysis of their use of M-PESA, voice and data on their cell phones. M-Shwari has now reached over 5 million active users with a collective deposit amount of 26 billon Kenyan shillings and a loan balance of $5.2 billion. The product has increased the number of deposit accounts at CBA from under 35,000 to over 5 million in less than a year, making CBA the second largest bank in Kenya in terms of customer accounts after Equity Bank.

Someone uses a mobile money account on a Nokia phone
Someone uses a mobile money account on a Nokia phone. Photo by AJ Rudin.

6. Take up of freemium mobile microinsurance is also encouraging: Free life insurance cover tied to cell phone usage took off as a mobile financial product offered by Tigo in Ghana and has since been launched in a number of other markets. In fact, two-thirds of all new mobile microinsurance products follow a similar model as Tigo Family Care Insurance, where Tigo customers receive free life insurance for themselves and one family member, ranging from $104 to $520 depending on how much airtime they use in a month. The customer can stay on this free plan indefinitely provided the monthly airtime requirement is met, but can also choose to double it by paying a small fee. The product’s simplicity has had a broader impact on the understanding of insurance: according to Microensure, 94 percent of customers can explain the product.

7. Mobile data is the silent engine behind new products that might rev up in the future: New products emerging in the mobile money space are increasingly analyzing data from mobile wallet and cell phone use as the engine behind the products – this includes the previous examples of M-Shwari and Tigo. The potential of data is at a very early stage but holds a lot of promise. For example, AliFinance, which was established in 2011 to provide financing to over 16 million small and microenterprise vendors in China, has built its own credit scoring model based on online activity. Clients qualify for a credit limit based entirely on their online score. No contact is needed between borrower and lender, and all communications, contracting and payment are handled online, helping reduce costs and risk.

8. Innovative microfinance models are still emerging: While we have not seen MFIs or their customers driving the development of a successful mobile banking system, the opportunity for MFIs in markets with thriving mobile payment systems is clear. Faulu, KWFT and SMEP in Kenya are examples of deposit taking MFIs that are leveraging M-Pesa for loan repayments, savings mobilization and even loan disbursements. Beyond traditional MFIs leveraging mobile banking, questions remain in terms of whether fully cashless but still relationship-based models like Musoni will be able to scale, or whether those models that leverage technology to replace costly human interaction will be able to provide the quality of financial services that customers are after.

9. Financial inclusion is not a zero sum game: The success of M-Pesa in Kenya does not appear to have taken opportunities away from other financial service providers. In fact, since M-Pesa launched in 2007 the number of bank accounts in the country has increased from 4 million to almost 20 million, which is not as far off the number of registered mobile money users (over 24 million) as one might have thought. Since the first FinAccess report in 2006, one year before M-Pesa launched, the percentage of adults using a bank account in the country has increased from 13% to 29%. By partnering with over 140 financial institutions, M-Pesa has revolutionized the ability of banks to scale up fast.

10. Mobile money got a huge boost from an influential global standard setter. Earlier in 2013, the Financial Action Task Force (FATF), the inter-governmental body developing and promoting policies to combat money laundering and terrorist financing, issued its first-ever guidance document for prepaid cards, mobile payments and internet based payment services. The guidance lays out a risk-based approach: it creates regulations that are commensurate with the risks posed for money laundering and terrorist financing. The guidance affects almost all the major mobile money markets from Kenya to Pakistan where those types of risks are real and closely watched. Those risks become more significant as mobile money grows. The good news is that the guidance goes a long way to provide the space for national regulators to regulate mobile financial services with the goal to promote financial inclusion.

So that’s our top 10 list for 2013. Let us know what we missed, and what you think will be the focus of 2014.

Sub-topics: Payments


02 January 2014 Submitted by Sumit (not verified)

Ecosystem building is still the keyword in successful mobile money service. Big Data may be helpful in designing targeted, consumer segment specific offerings. Combining learning from M-Pesa and ISIS, it is clear that in mobile money, one size doesn't fit all.

02 January 2014 Submitted by Anthony Perkins (not verified)

You missed Wing (Cambodia) completely - US$1bn sent via OTC/P2P alone in 2013 in a country with an addressable market of just 8m, I'd say that was worth a mention of a successful mobile money implementation. Airtime, bill payments, payroll, retail payments, POS/NFC, online payments, loan collections, B2B, G2P payments, etc. - plus it still connected to multiple operators, almost unique in that respect.

07 January 2014 Submitted by Chris Williams (not verified)

The additional area which I would suggest is worth addressing is international P2P, where the size of transactions is probably larger than the domestic market. Settling funds to stored value cards or mobile money accounts is an important development, particularly where governments and aid agencies make use of the same settlement process for benefits, wages and financial inclusion support.
RTpay and partners in various countries are addressing this, with a commitment to manage this at zero cost to the remitter and the recipient, if they stay electronic, or 4.5% if a cash conversion is required. This is geared to stop the massive over-charging of the unbanked migrants, who can be paying 15% or more out of their hard-earned money.

08 January 2014 Submitted by Krishnan Narasimhan (not verified)

Under Innovative microfinance models there is a good partnership between SPBD Microfinance (Fiji) and Vodafone M-Paisa where customers of the MFI repay their loans using the mobile wallet. Interestingly several M-Paisa agents are MFI customers having received the start up capital as well as ongoing working capital as loans, providing an interesting win-win deal.

09 January 2014 Submitted by Kabir (not verified)

Did someone say top 20 list?

Thank you for all the comments.

Anthony, our goal was not identify every mobile money deployment but highlight that there are successful deployments outside M-Pesa which you do as well with your comments and details on WING.

Chris, we agree that international remittances is another interesting bit to highlight about mobile money in emerging markets. We could keep going with the list...
...#11 Models emerging in international remittances in mobile money -- see here:…
...#12 Private-sector friendly pathways to interconnection emerging...
...#13 what else?

22 January 2014 Submitted by Camilla Nestor (not verified)

Michel and Kabir, great post -- I think you've really captured it. In terms of looking at trends/opportunities for 2014, I'd like to share a top one from the Grameen Foundation perspective. Research by Grameen and others is revealing enormous low-hanging opportunities to better design mobile financial solutions for the poor, ranging from easy user interface fixes around things like font size, content, number of steps to complete a given transaction, to more challenging issues like addressing limited literacy and numeracy. User-centered design can also address the usage challenge you call out above by ensuring that the products on offer meet the financial needs, behaviors, and capabilities of the end user.

Interestingly, we're also seeing clear gender differences from a usability perspective in some markets. We want to ensure in our shift to mobile solutions that we don't inadvertently leave behind certain important segments who either don’t have access to mobile, or don’t know how to use it effectively.

24 February 2014 Submitted by Mali (not verified)

Good one,Thanks.
As said echo system building will remain the challenge, avoiding the cash out will be the cornerstone for success and of course culture and user experience should be taken in any implementation

16 May 2014 Submitted by Selorm (not verified)

Great comments. I guess merchant and retail services could be a major area for some of the advanced markets, and like some of the other comments, International Remittances could be a key area for some markets such as Ghana and Nigeria.

15 November 2015 Submitted by Rehema Nyamanvu (not verified)

More needed , the security issues didn't mention over there for people who still using traditional methods of keeping data.
Which way these people can use to avoid risk on mobile money service.

21 March 2016 Submitted by kingbarric (not verified)

Great analysis,
Fortis Mobile Money is one of the biggest Mobile Money Operator in nigeria, serving over a million nigerians to carry out daily transactions ranging from fund transfer, bill payment and airtime topup etc.
In 2017 is set to be the leading mobile money operator in nigeria with over 20 million users across the nation.

04 September 2016 Submitted by Charlie johns (not verified)

Thanks, but The challenge we have in Uganda is a law concerning direct deposits where agents are suffering on behalf of their disoganised operators. Mtn Uganda is has completely failed to innovate a system that can limit a distant transaction

Add new comment