With the pervasive power of mobile technology, continuous rollout of solutions and undeniable influence of broadband connectivity in commerce, it is unsurprising that the finance sector has emerged as a strong example of just how far technology has transformed traditional processes and procedures. Today, the convergence of mobile technology and personal finance has resulted in the high-growth industry that is mobile money service – and Africa, it seems, has taken to the technology and concept rather well.
According to industry analyst and MD, World Wide Worx, Arthur Goldstuck, there are three mobile money ecosystems evolving across the continent: mobile payments, mobile banking and retail money transfer.
As he explains, there are specific conditions under which each ecosystem grows. Mobile payments escalate where banking penetration is low, mobile banking increases in activity where there is a high banked population but limited access to physical branch banking, and retail money transfer grows where there is a well-developed retail infrastructure.
If one considers the various dynamics within the environments across Africa, it is understandable that these services would suit market conditions.
Organisers behind the Mobile Money Africa 2013 conference say the continent accounts for 15 of the top 20 countries globally in terms of mobile money usage.
“With an estimated 80% of adults still un-banked, the potential for growth is enormous. Combined with new developments in commercial payments and a youth market with strong loyalty to mobile channels, the size of the opportunity becomes clear,” say the organisers online.
It is an ultra-competitive space with numerous offerings launched in key regions where there is a high rate of adoption of mobile technology, such as Kenya, Nigeria, Uganda and South Africa. Offerings launched include M-Pesa and yuCash – and the recently launched BepaPay cashless bus ticketing system.
Financial sectors within these regions have responded in turn with offerings to retain the custom of consumers. As an example, in the first quarter of 2013, MasterCard and Equity Bank united to launch Mobile Point of Sale (MPOS) technology.
Perhaps one of the most well known and extensively covered money transfer services in Africa is M-Pesa, established by mobile telecommunication services company, Safaricom, launched in 2007.
This offering, perhaps more than most, has undergone continuous development. In February of this year Safaricom confirmed a partnership agreement with KCB Group that allowed M-Pesa agents to deliver loans. There has also been a concerted effort by the services provider to encourage more users to transact via the money transfer service.
Consumers in Kenya and Tanzania can now use M-Pesa to pay for a range of online goods and services including airline tickets.
However, as Goldstuck explains, this model, while successful, is not applicable to all countries. “It has worked especially well in Kenya and Tanzania, the two countries where the Swahili word “Pesa” is instantly associated with money. It has not worked in South Africa, where the brand still has to be explained, and where there is not as desperate a need for a mobile money transfer service,” says Goldstuck.
He points to South Africa’s strength in cellphone banking as the country’s critical differentiator within the mobile money space.
Meeting the consumer challenge
The fact is that mobile services providers have been forced to recognise the undeniable influence of mobile money and have adapted their offerings accordingly.
As an example, the MTN Group has explained how mobile money forms a key component of its value customer value proposition.
The company states, “Mobile network operators have a widespread and well-developed distribution network, both from a retail and infrastructure perspective. And due to the nature of our business, we are also able to enhance financial inclusion as mobile financial services are offered even on the most basic handset. During the last 17 years, customers have keenly adopted our technology and trust our “money keeping” (i.e. mobile wallet) capabilities. They are now able to effect person-to-person payments and bill payments, among other services.”
The company also believes the industry is set to grow substantially, with the role of financial institutions central to the growth strategy.
“Mobile financial services provide the added benefit to transact beyond normal airtime, as customers have the ability to transfer money to loved ones through Mobile Money, for example. As our industry evolves, mobile financial services will allow for a wider transaction base, including cross border money transfers and microfinance through specialist partners, as the biggest risk our customers face is carrying cash. With a mobile phone, SIM and authentication built into our solutions, customers can rest assured that their money is safe, even if they lose their mobile handset. Partnerships with banks have led to an even better mobile financial services eco-system, and one such example is the successful integration with banks to optimise their ATM network to allow for card-less transactions,” claims MTN Group.
Whilst role players focus on preparing their offerings and creating awareness of their value propositions, the consumer’s position is always foremost on the minds of service providers.
At the top of the list of considerations for consumers is that of security and the ‘safety’ of money within the mobile money system.
Jeremy Matthews, Country Manager, Panda Security, believes that as the adoption of mobile money increases, so will the likelihood of malicious attacks. To this end he says it is important for consumers to take into account the security of the device being used.
The company offers some user advice when it comes to mobile devices and how to avoid threats.
“There are two distinct aspects to the devices’ security; User behaviour and technological safe guards. Simple checks such as ensuring you trust the provider of the mobile application and that the application is being downloaded from a trusted store will help you avoid most of the current malware in circulation. Rooting or “jailbreaking” the device can also compromise it’s security by allowing outside, unverified, applications to be installed. The security of the physical device is also important as mobile devices are often stolen, lock screen codes or application specific passcodes should be set to keep access to the device restricted. Technological safe guards can be employed by installing a trusted mobile security application but this should be looked at as a last line of defence,” says Matthews.
“Telecom security, both cyber and conventional, was not set up with financial transactions in mind and because of this mobile money suffers somewhat from the vulnerabilities of the telecoms themselves. Techniques such as SIM cloning, Physical datacentre breaches and even more conventional attacks involving telecom employees working with outside elements highlight the gap in security that needs to be addressed,” he continues.
Whilst various stakeholders have differing objectives and requirements in terms of mobile money, there is consensus that the trend will grow and grow quickly – particularly in Africa.
* Image via Shutterstock
Chris Tredger, Online Editor