The New Times (Kigali)

15 January 2013

Rwanda: Banks Spend Sleepless Nights As Mobile Money Service Eats Into Their Market

Stanley Katoto, a resident of Kabeza in Kigali, insists that his transport be sent via his mobile money account than depositing it on his bank account, arguing it would be easier to access it.

"It is easy for me to go to a mobile money agent and withdraw it than going to the bank, where I will take a lot of time in the long lines," Katoto said.

Katoto, who is in his 50s, like other people with mobile phones in Rwanda, is finding it easier to transact business through the mobile money platform provided for by telecom operators MTN and Tigo than using the bank.

This, according to financial experts, is putting banks on the edge as the competition between them and telecoms grows. Although some banks operate mobile banking service, they cannot reach the remote rural areas easily due to the high costs involved.

"When someone has a phone and is registered on the mobile money service, it is obvious that they would always opt for that. There is no doubt that, because of the convenience it offers, more people are opting to use it to do business than the banks. Besides, it is easier for a person on the platform to convince another to join compared to those who would be willing to open bank accounts," Davis Mukiza, a consultant told Business Times.

Mukiza said with growing demand for quick payments and the flexibility it offers, mobile money becomes the best option to serve the unbanked population, which indeed has the money.

"The money is in rural areas. The corporate sector that the banking sector has been focusing on is cash stressed," he adds.

With the current innovations in mobile money services that can now offer instant payment of bills for water, electricity bills, school fees, and motorcycle fares, banks have to be innovative to keep up with the new competition.

"It is up to the banks to find a way of working around these innovations because what consumers want is cost effective and time saving financial services," Job Opar, a consumer protection consultant told Business Times.

Indeed Jiovani Higiro, a intern statistician finds it more flexible to pay his transport fares or water and electricity bills using Tigo Cash.

"I don't worry about running out of cash or failing to buy cash power (electricity) at night when all selling points are closed. I use my Tigo Cash," he said.

This, according to experts, has prompted banks to form partnerships with telecom companies. For example, Bank of Kigali partnered with MTN and Tigo, to provide mobile money and Tigo cash respectively to their clients late last year, an indicator that the mobile money service is becoming a good business to venture into.

"Banks are beginning to realise that delivery of financial services through mobile telephony is where the real innovation and development is taking place in the retail market," said David Kezio-Musoke, the MTN head of public relations.

"Also MTN Mobile Money is one of the fastest and convenient ways of sending money from one person to another. There are no queues or delays. Mobile money replaces cash transaction and it is also easier and safer," he added.

Khalid Mikkawi, the MTN chief executive officer, was last year quoted as saying that the mobile money service should not be looked at as a competitor to banks, but instead as a catalyst to services offered by banks, a move that would benefit consumers.

"Rwandans can only benefit from greater convergence between conventional banking services and the mobility that mobile telephony offers," he said.

Analysts are optimistic that mobile money can leverage the banking sector's extensive branch network to increase penetration as the banks try to capitilise on this to bring the unbanked population into formal banking sector.

Also, the use of mobile phone is the most ubiquitous distribution channel in Africa today, with hopes that the delivery of financial services through mobile telephony is where the real innovation and development is taking place in the retail market.

Accordingly, experts predict the partnership between banks and telecoms would be harnessed further with the launch of Airtel Money next month, which will provide inter-switch systems that make it possible for a mobile phone owner to access his or her bank accounts around the clock.

Inter-switch is an integrated mobile platform, which gives real time and online transaction switching, helping the mobile phone holder to access his or her bank account on their mobile phone.

In countries like Zimbabwe whose banking sector has been greatly affected by mobile money services, they have proposed partnerships, where telecom operators can provide mobile money services via banks.

According to Rwanda Utilities Regulatory Authority (RURA) October report, there are over five million subscribers in Rwanda. MTN Mobile Money boasts close to half a million subscribers and has transacted volumes of over Rwf90b as of last year. Tigo Cash subscribers could not be established.

The recent household living conditions survey estimated that about 45 per cent of the households have access to mobile phone. This will enhance penetration of the mobile money services mainly in rural areas.

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