The four mobile payment models
A reliable mobile network is a critical component of a mobile payment service, as customers have much less patience for transmission problems when they impact financial transactions. Therefore, access to a reliable network, either an organization’s own or a partner’s is critical, particularly as reliability among mobile networks in emerging markets can vary considerably. A reliable mobile network is a critical component of a mobile payment service, as customers have much less patience for transmission problems when they impact financial transactions.
There are four potential mobile payment models:
1. Operator-Centric Model: The mobile operator acts independently to deploy mobile payment service. The operator could provide an independent mobile wallet from the user mobile account (airtime). A large deployment of the Operator-Centric Model is severely challenged by the lack of connection to existing payment networks.
2. Bank-Centric Model: A bank deploys mobile payment applications or devices to customers and ensures merchants have the required point-of-sale (POS) acceptance capability. Mobile network operator are used as a simple carrier, they bring their experience to provide Quality of service (QOS) assurance.
3. Collaboration Model: This model involves collaboration among banks, mobile operators and a trusted third party.
4. Peer-to-Peer Model: The mobile payment service provider acts independently from financial institutions and mobile network operators to provide mobile payment.
Extending mobile money to developing countries, particularly in Africa and Asia, had a huge impact. It is a faster, cheaper and safer way to transfer money than the alternatives, such as slow, costly transfers via banks and post offices, or handing an envelope of cash to a bus driver. The incomes of Kenyan households using mobile money have increased by 5–30% since they started mobile banking, according to a recent study. Mobile money presents a shining opportunity to start a second wave of mobile-led development across the poor world.
Mobile money services are being deployed rapidly across emerging markets as a key tool to further the goal of financial inclusion.
Financial inclusion, the development of novel methods to enable individuals at the base of the pyramid to access formal financial services and become part of the formal financial system, is considered a key pre-requisite for lifting these populations out of poverty and for driving economic growth. The most successful mobile money deployments were Telesom ZAAD in Somaliland, Dialog eZ Cash in Sri Lanka, Econet EcoCash in Zimbabwe, SMART Communications SMART Money in the Philippines, and Globe Telecom GCASH in the Philippines.
By far the most successful example of mobile money is Vodafone / Safaricom’s M-Pesa, launched in 2007 by Safaricom of Kenya. Kenya’s success story has demonstrated mobile money’s potential, and its benefits are starting to be more widely appreciated. More enlightened regulators are no longer insisting that these services meet the rigid rules for formal banking.
However, the success of mobile money services more broadly has been limited — in its 2012 Mobile Money Adoption Survey of mobile money services in emerging markets targeting the unbanked, GSMA identified only 14 “sprinters,” or those services which were scaling rapidly, out of the 150 total such services. Even replicating successful services in additional geographies has proven challenging, including efforts by Vodafone to take the M-Pesa model to other countries in which it operates, such as South Africa.
Mobile money services can take time to scale up, and since revenues typically track transaction volumes, direct revenues can take time to occur. Therefore, organizations which can benefit from indirect revenues (e.g. reduced churn for MNOs) can more easily support such operations while the market is being developed.
Physical access to customers is an important aspect of building a mobile money service, and building this infrastructure from scratch, in advance of uncertain revenues, can be a very risky and expensive proposition. Thus, entities which already have retail points and / or existing distribution agents in the target markets can more easily, and with less risk, deploy such a service. Although ultimately, as described earlier, most mobile money services will need to develop an agent network, the management of such an agent network can be greatly facilitated by having company owned stores in close probity.
