For a service to reach scale one needs to create a healthy ecosystem in which all the key stakeholders can thrive. While it is vitally important that consumers get services at the right price, we should not lose sight of the requirements across the entire ecosystem.
While mobile money ecosystems have grown and reached scale in many African countries, the model has proved hard to replicate outside of Africa. Indeed, for a while it was hard to get the model to work beyond M-Pesa in Kenya. This month I took stock on the services we monitor on the Shift Thought knowledge base, and I depict below some of the key services now available in Africa.
As of today the GSMA registers over 242 deployments, with over 13 deployments having more than a million active accounts.
In “Can Mobile Money be 'Free'?” the last of an excellent series of posts of business models for mobile money, CGAP authors Kabir Kumar and Toru Mino discuss whether and how mobile money can be “free”. They argue that “free” could lead to greater profits as offering everyday transactions could drive adoption. Indirect benefits of mobile money – cost savings on airtime or retained ARPU from churn reduction — become significant drivers of profitability only at greater levels of adoption.
Unfortunately as every mobile operator in a country offers their own service, the argument regarding churn (customers changing operator) tends to lose it’s charm. We get a different perspective from GSMA in their “Insights into mobile money agent networks” . That report quotes a manager of a successful mobile money service :
“If I could have done just one thing differently,
I would have gone to market with higher tariffs”
As substantial amounts move through mobile money platforms, another key stakeholder, the government, starts to be concerned about what providers charge. In Uganda with an estimated 5 million active mobile money users, people opting for bank accounts continues to drop. The Uganda Revenue Authority (URA) continues it’s campaign to get more mobile money agents to register and pay tax (See: Mobile money agents set to enter tax net).
As more of the money flows through the new systems, the expectation of taxes from these systems begins to move higher on the agenda. Indeed there have been cases in the recent past where governments have intervened as price wars reached a crescendo, in one case actually forbidding a provider from pricing that involved scrapping certain fees.
In my view it is critical that such timely interventions do take place to help to maintain the balance in these ecosystems. This week a survey by MicroSave and The Helix Institute of Digital Finance reports that Kenyan agents are finding it hard to survive, with 17% not profitable, and close to half anticipating to exit the business, in this, the largest mobile money market in the world today.
If prices are to remain low enough to keep the services accessible, yet high enough to sustain agents and keep the systems secure and scalable, we at Shift Thought see only one real way forward. That is to introduce shared processes, services and infrastructure, certainly within the countries but also across countries. We see other such models developing in markets we’ve recently studied, and visualise rich possibilities from interoperability. We therefore welcome the GSMA Interoperability initiative in which over 9 high profile telecoms companies already participate. The signing of the first interoperability agreement between Tigo, Airtel and Zantel in Tanzania this month opens the possibility of further co-operation, that we hope will help to create equations that add up for every major stakeholder, as only then can these systems thrive and grow.
Come join us on the new Digital Money Group on Linked In where we regularly share the latest Shift Thought research. We welcome all our readers to post interesting discussions, to make payments “come alive” for all of us.