This blog post is the second of two parts on Lesson #2: Using Mobile Money to Promote Financial Inclusion: Strategic Partnerships are Key and is part of a series covering the 10 Lessons Learned about Using Mobile Money to Promote Financial Inclusion.
As I mentioned in the first part of this article, the utility and usefulness of mobile money services to promote financial inclusion is on the multiple use cases that go beyond mere person-to-person (P2P) transfers. This includes building partnerships and strategic alliances with a number of public and private sector partners. In this second article, I will focus on the role of payment networks and businesses that provide or sell products and services to low-income households and small businesses.
The Role of Payment Networks
Linking mobile money accounts to payment networks was first launched in 2000 in the Philippines with Smart Money which issued a linked MasterCard debit card to its mobile money platform. However, recently, there has been a renewed interest in the role of integrating mobile money platforms with international payment networks. MasterCard and Visa have been investing quite substantially in integrating with mobile money platforms in multiple markets and American Express has recently launched a linked Virtual Card with GCASH in the Philippines.
Several years ago, there were many who argued that mobile money transfer systems could side-step the traditional payment operators altogether in the developing world but this is not happening. While ultimately we could see mobile phones becoming fully enabled mPOS machines and there being less of a need for ATMs, I do still see the need and opportunity for linking mobile money with existing ATM and plastic card POS networks, at least for the foreseeable future. The reality is that interoperability and interconnectivity are the new buzz words for the mobile money industry. In several markets, we are now seeing the significant potential for mobile money operators linking to these networks and thereby providing their subscribers with even more functionality and ubiquity that traditional payment and ATM networks can provide.
I remember the early days when mobile money operators here in the Philippines tried to get major department stores and restaurants like McDonald’s to accept mobile money payments via a mobile phone. The same challenges faced here are being repeated in other places like supermarkets in Nigeria. However, it is now quite clear that many of these challenges can be addressed when a mobile money wallet is linked to a debit card. As mobile money operators that have provided linked debit/ATM cards have discovered, even low-income clients can and will use a debit/ATM card and like the ability to pay or withdraw funds using a card. Many clients that I have talked with in rural areas liked having a linked ATM/debit card. They often mentioned that having a debit/ATM card was a “status symbol” as well.
I have often heard mobile money operators being fearful of traditional payment networks taking away their business or complaining of the higher fee structure. However, most mobile money operators which have integrated with payment networks have realized that linking a traditional payment card to a mobile money wallet can only add additional transactions and will not take away from their current mobile money-enabled G2P, B2C, B2B, P2P transactions. In addition, since most businesses that accept debit cards via a traditional POS are already accustomed to the fees charged by payment networks and banks, the linked mobile money debit card only provides that much greater functionality to the mobile money subscriber and more sales for businesses where clients would have needed to carry cash in the past. The same argument goes for linking mobile money platforms to ATM networks either via a card, or in places like Bangladesh, Nigeria, or Indonesia, to a cardless mobile phone-based ATM withdrawal service. This is especially useful in markets where there are extensive ATMs in place that can provide additional cash-out points.
Role of Businesses
Businesses that provide goods and services to the base of the economic pyramid are the next essential group to partner with to facilitate the acceptance and use of mobile money payments. This includes suppliers such as fast moving consumer good (FMCG) distributors, farm input outlets, businesses that buy or provide remote purchase facilities for small businesses or individuals, transportation operators, and utility companies.
When I started introducing mobile money to clients in places like the Philippines, their biggest pain point was making payments to suppliers, utility companies and/or collecting remote payments from their sales team or customers. FMCG distributors are also beginning to realize the cost savings that come along with mobile payments in some markets. There are some interesting recent examples that I have come across of distributors that are now making use of mobile money services including BPI BanKO’s tie-up with several FMCG distributors in the Philippines and Stanbic Bank’s tie up with 7-Up in Nigeria. Both have partnered with FMCG distributors to provide collection services via mobile money but BPI BanKO has gone a step further by providing financing directly to small retailers for their FMCG purchases. Similarly, for farmers, purchasing products such as farm inputs, feeds, seeds, and fertilizer can also be facilitated via mobile money. Efforts are now underway in places such as Kenya and Nigeria to build on efforts to promote the use of mobile money to reduce the costs associated with cash payments for agricultural inputs.
Paying for transportation is something that most people do every day. I have often seen circumstances in the developing world, especially around holidays, when people arrive at a bus terminal or port to take a ferry only to find out that all tickets are sold out. Many people would definitely benefit from being able to order and/or pay for a ticket on a bus, train, or ferry in advance to ensure they have a seat. Using mobile money to facilitate transportation services can result in fairly substantial and real value added use cases for low-income clients in many markets. To offer this type of service, however, mobile money operators need to ensure that they provide a good online web-based system to help these businesses monitor the sales of tickets.
We are also beginning to see an expanded potential and use of mobile money-enabled NFC cards for mass transit systems. Even in smaller markets such as Fiji, Vodafone is rolling out the e-ticketing system for the bus companies that is powered by Vodafone’s M-PAiSA. My friends and colleagues in Fiji have all remarked that they now all need to get e-ticket cards which will be empowered by M-PAiSA so this could both potentially help a lot more people as well as provide a better use case for mobile money.