"The mobile money landscape is becoming increasingly competitive, and this is especially true in Sub-Saharan Africa where mobile money is already available in 36 of 47 countries in the region. ... [For one example], Tanzania has witnessed unprecedented uptake of mobile financial services (MFS) in the span of five years.
After a humble beginning, when less than 1% of the adult population had access to mobile financial services in 2008, 90% had access by September 2013 - an exponential increase. Likewise, active usage has shown similar improvement, with 43% of the adult population actively using this service in September 2013." - GSM Association reports
Many AfricaFocus readers will be aware of the rapid expansion of mobile money payments in Kenya (M-Pesa). But the trend is not limited to Kenya, as documented by new reports by the GSMA, the worldwide association of mobile phone operators.
While expansion is uneven, mobile phone companies in other countries in Africa and on other continents as well are finding this a profitable and rapidly growing business. The expansion also indicates that more and more consumers are finding it a viable alternative to dealing with conventional banks.
This AfricaFocus Bulletin contains brief excerpts from the GSMA annual survey for 2013, as well as from a report focusing specifically on Tanzania, where the national bank has played a key role in working with mobile operators to expand mobile financial services.
For much additional data and analysis, visit the GSMA web page on these developments at http://www.gsma.com/mmu
A new feature that some operators are now introducing is mobile payments across borders, to date between only a few neighboring countries - see http://tinyurl.com/nbmjme3
For previous AfricaFocus Bulletins on information and communication technology, visit http://www.africafocus.org/ictexp.php
Mobile Financial Services For the Unbanked
State of the Industry 2013
Claire Pénicaud & Arunjay Katakam
http://www.gsma.com/mmu / direct URL: http://tinyurl.com/mtuz5uc
The GSMA Mobile Money for the Unbanked Programme (MMU) has been tracking the progress of the mobile money industry for the past few years. each year, MMU's State of the industry report contains key findings and insights on the growth of the sector.
This year, for the first time, the scope of the report has been extended to include not only mobile money, but also mobile insurance, mobile credit and mobile savings.
This report contains data from the MMU deployment tracker, which monitors the number of live and planned mobile money services for the unbanked across the globe. it also includes data from the MMU 2013 Global Adoption Survey of Mobile Financial Services (hereinafter the 2013 Global Survey), which had 110 participants from 56 countries.
For some metrics, such as mobile money revenues, the amount of data reported is not as high as for the core metrics. Where it is sensible, estimates are made to complete the data set; in this report, numbers of mobile money accounts (both registered and active) have been estimated. We believe the findings in this report are truly representative of the industry overall.
Mini case studies on mobile financial services as well as particular mobile money best practices have also been included in the report, where they help to support or deepen the insights from the survey.
Highlights from the report include:
The mobile money industry continues to grow and is now expanding across more regions. With 219 services in 84 countries at the end of 2013, mobile money is now available in most developing and emerging markets.
While the majority of services remain in Sub-Saharan Africa, mobile money has significantly expanded outside of the region in 2013. the question is no longer whether mobile money services are available, but how to ensure that the industry continues to grow sustainably.
Competition is increasing in many markets as mobile money is becoming a mainstream product for a growing number of operators. 52 markets have 2 or more mobile money services.
The number of active mobile money accounts is growing fast, and in June 2013, there were over 60 million active mobile money accounts globally. an increasing number of services are reaching scale and 13 have over 1 million active users.
For the majority of providers however, building the foundations of their mobile money services remains challenging. Globally, only 29.9% of registered mobile money accounts were active in June 2013. Similarly, ensuring adequate agent activity should be a priority in a number of markets.
Several mobile money services, particularly those that have already created solid foundations, have made progress in developing their product offering, extending the digital financial ecosystem and growing revenues.
Product offering: airtime top-up and P2P transfer remained the most adopted products, but in 2013, bulk payments was the fastest growing product with numbers of transactions increasing at an annualized growth rate of 617%. Rollouts of new products have been most successful where a solid distribution network and a large, active customer base have already been established.
Ecosystem development: With more mobile money services maturing, an increasing number of operators are recognising the ecosystem opportunity. in 2013, transactions involving external companies have been driving the growth in mobile money globally, representing 29% of the value transacted in June. These transactions are also growing much faster than airtime top-ups and on-net transfers.
Revenues: mobile money has been financial rewarding for deployments that have reached scale. Five operators within our sample reported that mobile money contributed to over 5% of their revenues.
Savings from airtime distribution can also represent an interesting indirect benefit for MNOs: 10 reported selling more than 10% of their airtime through mobile money.
With an increasing number of services reaching scale, mobile money continues to be a driver of financial inclusion. Mobile money extends access to payments and financial services beyond the reach of traditional financial institutions in many developing countries.
At the end of 2013, nine markets already had more mobile money accounts than bank accounts, compared to just four last year. in these markets, the mobile money industry has made financial services accessible to more people than the traditional banking industry ever has.
The development of other mobile financial services including mobile insurance, mobile credit and savings will allow service providers to deepen financial inclusion by offering financial services beyond money transfer and payment.
123 mobile insurance, credit and savings services are live of which 27 were launched in 2013, highlighting that there is strong interest in leveraging mobile to deepen financial inclusion.
The mobile insurance industry is gaining traction with the help of specialist intermediaries creating commercial and partnership models that appear to be accelerating product launches (30 in the past two years).
The business case is challenging, particularly because providers must rely on a large sales force and adequate customer education to acquire new customers as customer acquisition is more sophisticated and mobile insurance credit and savings services are currently not sold through mobile money agents.
The Mobile Money Landscape in 2013
With 219 services in 84 countries at the end of 2013, mobile money is now available in most developing and emerging markets.
Competition is increasing globally and 52 markets have 2 or more mobile money services.
Mobile money is becoming a strategically important service for a growing number of providers, evidenced by the fact that 70% of providers plan to increase their investment in mobile money in 2014.
Number of Mobile Money Services
The mobile industry reached a milestone at the end of Q3, surpassing 200 mobile money deployments. at the end of 2013, there were 219 services live in 84 countries, compared to 179 services in 75 countries at the end of 2012. Our deployment tracker has also identified 113 mobile money services that are planning to launch.
In 2013, mobile money was rolled out in nine new markets: Bolivia, Brazil, Egypt, Ethiopia, Guyana, Jamaica, Tajikistan, Togo, and Vietnam. Regulatory reforms that are enabling mobile money services are contributing to the growth of the industry in terms of number of deployments.
With a year-on-year increase (YOY) of just 22%, the growth of mobile money services is now slowing down. this deceleration in the number of new launches between 2012 and 2013 is true across all regions although there are significant variations.
With a year-on-year increase of 53%, Latin America is showing the strongest growth in number of new mobile money services. This deceleration seems to be a natural consequence of the fact that mobile money is now available in most developing markets, rather than the result of mobile money services closing down.
In 2013, mobile money has significantly expanded outside of SubSaharan Africa, although the lion's share of live mobile money services remains in the region.
At the end of 2013, 52% of live services were in this region. this follows a decreasing trend (in 2012, Sub-Saharan Africa represented 56% and in 2011 it represented 58%). We expect this percentage to fall below 50% next year as the majority of planned deployments are outside the region.
With 19 planned mobile money launches, Latin America has the second largest number of planned deployments. For a long time, Sub-Saharan Africa led the industry, with the vast majority of deployments, success stories, and best practices coming from the region. today this is changing, and innovative regional models are beginning to emerge.
The mobile money landscape is becoming increasingly competitive, and this is especially true in Sub-Saharan Africa where mobile money is already available in 36 of 47 countries in the region.
The majority of deployments launched in 2013 were in markets where mobile money services were already available. There are now 52 markets with two or more mobile money services, compared to just 40 at the end of 2012 and 33 at the end of 2011.
Twenty-seven markets have three or more services. Stiffer competition means that consumers at the bottom of the pyramid (BOP) will have more options and mobile money providers will be forced to continuously improve their value proposition and the quality of their services if they want to retain customers.
The fact that a large number of markets now offer multiple mobile money services highlights the opportunity for interoperability. Today, most mobile money services are closed loop systems. With these services, electronic money has to be converted to cash if it is sent to someone on another mobile money service.
While this situation is not optimal from a customer experience perspective, it also reduces the opportunity for service providers to derive further transaction revenues from mobile money.
As competition increases and operators seek strategies to increase the total size of the pie, we expect to see more mobile money providers exploring the opportunity of interconnecting their mobile money schemes.
Mergers of mobile money services contributed to the emergence of larger mobile money services and intensified competition in some markets. In Uganda, the acquisition of Warid by Bharti Airtel allowed Airtel Money to consolidate its position in the mobile money market.
With more than 7.4 million GSM subscribers and 39% market share, Airtel has emerged as a serious competitor to MTN's mobile money services which counted over 3.5 million registered users at the end of 20125.
Soon after Airtel Money and Warid Pesa merged at the end of Q2, Airtel announced reduced mobile money rates, sparking a price war with MTN, intensifying competition in the market, and accelerating subscriber growth. Mobile money services were also merged in Haiti7 and in Cambodia.
... and increased investments
Mobile money is clearly becoming a strategically important service for a growing number of providers.
This is evidenced by the fact that almost three-quarters of survey respondents plan to increase their investment in mobile money next year, while only 7% intend to make reductions. As mobile money is now becoming a mainstream service for MNOs, providers will need to find new ways to differentiate their services to stay relevant.
Mobile Money in Côte d'Ivoire: a Turnaround Story
After a challenging start, mobile money is taking off in Côte d'ivoire. In June 2013, CelPaid, Moov, MTN, Orange, and Qash Services together registered close to 5 million mobile money accounts, 35% of which are active.
It is quite an impressive number considering there are only 9.6m unique mobile subscribers in Côte d'Ivoire (the mobile market has 20.1m GSM connections and a high degree of multi-SIMing). However, it is only recently that Ivoirians have started to adopt mobile money. In December 2011, three years after the launch of the country's first mobile money service, there were just over 2 million registered accounts and 22% were active.
What external factors have driven the adoption of mobile money in Côte d'Ivoire? What tactics have mobile money operators employed to increase usage?
The story of mobile money in Côte d'Ivoire demonstrates that mobile money can be successful even in markets where it struggled initially, and that it is possible for a slow-growing mobile money service to become a sprinter.
Enabling mobile money policies in Tanzania
A "test and learn" approach to enabling market-led digital financial services
Simone di Castri & Lara Gidvani
GSMA Mobile Money for the Unbanked
http://www.gsma.com/mmu / direct URL: http://tinyurl.com/qao5a43
Tanzania has witnessed unprecedented uptake of mobile financial services (MFS) in the span of five years. After a humble beginning, when less than 1% of the adult population had access to mobile financial services in 2008, 90% had access by September 2013 - an exponential increase.
Likewise, active usage has shown similar improvement, with 43% of the adult population actively using this service in September 2013. These encouraging results have emerged from a conducive regulatory environment, which we envisioned in the early days of mobile money services.
Our approach was to test the deployment of the service and monitor its developments, known as the "test and learn" approach. To facilitate this, we amended the Bank of Tanzania Act in 2006 to give the Central Bank powers to oversee and regulate non-bank entities in offering payment services. In 2007 we operationalized this by issuing Guidelines for Electronic Payment Schemes, which we used to allow Mobile Network Operators (MNOs) to offer payment services.
MFS in Tanzania has subsequently become a household name and supported the Bank of Tanzania's objective of financial inclusion. The service has enabled the unbanked population to have convenient access to payment services.
In this regard, the recently launched National Financial Inclusion Framework (NFIF) recognise MFS as one of the key technologies for facilitating financial inclusion.
The Bank's regulatory journey has not been a solo trip; we received a great deal of cooperation from the Tanzania Communications Regulatory Authority (TCRA) as the regulatory counterpart of the MNOs that are providing MFS. The positive relationship with the TCRA has enabled MFS to thrive in the country. The Central Bank and the TCRA cooperate on the oversight of the MFS regulatory framework.
It is also worth noting that the private sector has had a significant role in facilitating the growth of MFS. From the beginning, MNOs were required to partner with banks to receive a "letter of no objection", which enabled the Central Bank to ensure that consumer funds are protected in the banking system backed with a 100% liquidity requirement. Commercial banks have since enhanced their partnerships with the MNOs and we are seeing inroads being made with second generation MFS in Tanzania.
We have learned that new technologies that augur well with the Central Bank's objective need to be nurtured and monitored closely to ensure they do not cause any financial instability or reputational risk that may affect the country's payment systems.
This approach has made MFS in Tanzania a success story. With the increased uptake of the services and based on the dynamics that we see in the market, we are currently shifting the regulatory approach to a "mandate and monitor" approach, whereby mobile payments regulations will be issued to guide the market without stifling innovation or disrupting the success we have witnessed. Rather, the regulations will ensure that we balance financial stability and financial inclusion objectives. In doing so, we will also continue to ensure that proportionate regulation is applied to the services deployed in the market.
I thank GSMA for compiling this study, which offers us the opportunity to share our experiences with MFS with the rest of the globe.
Prof. Benno Ndulu, Governor, Bank of Tanzania
The National Payment System Directorate (NPSD) at the Bank of Tanzania (BOT ) began its mobile money regulatory journey in 2008, when a visit from one of the country's mobile network operators (MNOs) introduced the idea that a simple mobile handset could do much more than make calls. From this first meeting, the BOT was keen to engage with the mobile industry to learn more about the potential of digital financial inclusion - a new and unfamiliar topic to the Bank.
Seeking to enable digital financial inclusion, but lacking national payment systems legislation to issue regulations, the BOT elected to take an interim step. It issued 'letters of no objection' to the partner banks of Vodacom's M-PESA and Zantel's Z-Pesa (relaunched in 2012 as "Ezy Pesa"), allowing them to launch in 2008.
Two more deployments followed: Zain's Zap in 2009 and Tigo Pesa in 2010. As the market has continued to develop, the BOT has made concerted efforts to find a legal and regulatory framework that would provide sufficient legal certainty and consistency to support a stable mobile money market, promote financial inclusion, and protect customers.
A draft regulation that allows both banks and non-banks to provide mobile payment services has gone through two iterations and will soon be adopted. Meanwhile, the BOT has taken the lead in developing a National Financial Inclusion Framework (NFIF) that articulates the role of mobile money as a key enabler of financial inclusion (see Box 1).
Today, Tanzania is a mobile money and digital financial inclusion success story:
In December 2013 there were more than 11 million active mobile money accounts and approximately 153,369 agents in Tanzania across four deployments.
In the same month, mobile money deployments performed transactions worth more than TZS 3 trillion (US$1.8 billion). The number and value of transactions is growing very fast, and today the Tanzania market is performing close to Kenya.
35% of households in Tanzania have at least one mobile money user; 33% of households have at least one registered mobile money user. The market for mobile money in Tanzania is dynamic and the four providers are highly competitive. The BOT remains actively involved in shaping the market through prospective regulation and guidance on emerging issues, such as interoperability and cross-border payments. This journey has produced a number of lessons for policymaking and regulatory authorities, as well as the industry.
Lessons for regulators
Anticipate that a developing market will require a corresponding evolution of industry engagement and regulation.
'Test and learn' safely and efficiently:
It is possible to safely provide space for the industry to launch mobile money services under the oversight of the central bank by establishing provisional prudential and market conduct standards, while moving towards new and more comprehensive regulations.
Engage with providers to discuss the lessons of implementing deployments and regulatory oversight activity.
Moral suasion is effective in the relationship between the regulator and the service providers.
Request feedback from service providers on draft regulations and anticipate the need to make changes through market and outside consultation.
Establish a direct dialogue with both the banks and the MNOs that are providing the service to share your concerns, explain your objectives, and identify cost-effective ways to implement monitoring and reporting processes.
Recognise that the market is dynamic, and strive to keep up-to-date with new developments through dialogue with the industry.
Lessons for the industry
Seek to establish a direct relationship with the regulator, engaging proactively to understand its perspective and concerns.
Keep the regulator informed of the progresses made in the provision of the services and the lessons of implementing deployments.
Identify the regulator's objectives and the role of the industry in supporting the regulatory journey over time.
Expect that the nature and scope of engagement with the regulator will change over time based on the maturity of the market and the provider.
[Graph in original shows dramatic growth of mobile money payments in Kenya and Tanzania, beginning in 2007 in Kenya and 2008 in Tanzania. In 2013, the yearly transaction value of mobile money in Kenya amounted to US$21.9 billion, and US$17.7 billion in Tanzania]
The BOT's commitment to financial inclusion as a public policy objective
The BOT has embraced financial inclusion as a public policy objective, using the legal and regulatory framework for mobile payments to address the issue.
BOT launched their National Financial Inclusion Framework (NFIF) in December 2013, setting the objective of 50% financial inclusion by 2016 with clear targets for a range of indicators (e.g., 25% of people will live within 5 km of a financial access point; 25% of Tanzanians will have at least two weeks of household income in their electronic account).
The definition of financial inclusion includes mobile money services. The NFIF recognises the role of mobile money in "revolutionising the landscape of financial services" over the last five years. Furthermore, the NFIF identifies four core enablers of financial inclusion, each closely associated with the characteristics of mobile money: proximity, payments, and the storage of value and information.
Building on these core enablers, the NFIF has set priority areas for action from 2014-16 to achieve the above targets:
increasing the proximity of financial access points to where people live and transact;
enabling robust payment platforms;
supporting robust electronic information infrastructure for individual and business profiles, credit history, and collateral by establishing an effective know your customer (KYC) process, increasing the engagement of the credit reference bureau, and establishing and using a central collateral database;
and ensuring that customers are informed and protected.