Small start-ups have already enabled mobile money to become a payments mean for online transactions and purchases in Kenya, Tanzania and Zimbabwe. Another good example is Kopo Kopo in Kenya, who are the service providers for retailers that we’ve talked about before.  Kopo Kopo is a small operation that aims to leverage the growth of mobile money to trigger mobile retail payments, and the number of start-ups is growing.

At the Mobile Money working group last year in Milan, we had the privilege to invite Paolo Baltao,  Omar Moeen Malik and Shaibu Haruna on stage to discuss their views on the role of external players in mobile money, how these can be leveraged to grow your business and what the barriers they have experienced so far in this pursuit.

In order to take advantage of innovation around them, operators need:

1. A deployment with a  strong foundation; active customers and efficient agent network needs to be in place in order to become attractive for innovation and external players
2. A strategy to overcome technical barriers; lack of standardised ways to integrate external players with the platforms, as well as the technical maturity of your partners, delays and increases the cost of connecting. Having useful APIs and being in control of these integrations (not your vendor) can be ways to mitigate the cost and delay.
3. A willingness to invest resources; many operators have strategic fears of losing control when increasing the presence of external parties on the platform. Therefore it is important to have dedicated staff to monitor, oversee and engage the ecosystem to increase traffic and ensure that the relationships are sustainable and improved if necessary.
4. A clear business case; as more companies with more business models are expected to show interest in connecting to your platform, the technical costs and integration time will hopefully go down with time to make the business case for integrating with them more attractive. Having flexible billing options increases the types of businesses that want to connect to your platform. Insurance subscription companies, retail payments companies or financial institutions are all likely to have different business models and charging/billing needs.

Having more products that are stable and brings value to your customers increases the relevance and strategic importance of your platform. In the closing remarks, Shaibu Haruna summarizes the discussion and concludes that if you want to be successful, deployments should be open – and perhaps more importantly – be ready to invest.

To hear these messages from our expert panellists, watch the highlights from the conversation below.

Here is the Prezi, which you can view online. (The presentation also includes data from a payments module we included on the Gallup World Poll in 11 African countries. Blog posts on that data can be found here, here, and here.)

FITS

The primary goal of the FITS surveys is to create a general purpose data set which would provide a “window” in to the market’s development for the field of financial inclusion as well as market participants, regulators, and other local stakeholders. The data also has the potential to capture the impact of mobile money on respondent households by using the roll out of mobile money agents as a “natural experiment.” The surveys will eventually have three waves per country, approximately one per year, where each wave can be sped up or slowed down in response to market events.

This project has as its predecessor and prototype the survey done by Tavneet Suri and Billy Jack in Kenya. Here is the paper describing the data from the project and the paper documenting the impact of M-PESA on risk sharing and related slides. They document significant welfare benefits to households who have mobile money in that they are better able to absorb serious economic shocks without reducing their consumption in critical areas like food, health care, and education. Tavneet Suri is collaborating with me the FITS project as well. 

The FITS data has already generated insights into the workings of the market in Tanzania and Uganda (Pakistan data is still preliminary and pending.)  Here is a sampling of results:

• Market penetration is significant and continues apace in Tanzania (35% of households have a mobile money user) and Uganda (21% of households), Pakistan is still getting started (~9%).

Evolving market structure from FITS data in Tanzania, Uganda, and Pakistan

• FITS data shows Tanzania and Uganda to be two very different markets. Uganda has many more unregistered users and transactions are often mediated through friend’s accounts or conducted by agents on behalf of clients. In Tazania, where there are competing mobile money deployments, clients are almost always registered and often have accounts with multiple brands.
• Women can be a major segment, if properly engaged. Women are active in Tanzania (47% of users) and Uganda (38%) but much less so in Pakistan (we estimate only 5% of users are women.)
• The data helps map adoption pathways. Most people (71% in TZ, 68% in UG) learn about MM through media such as radio, billboards, or TV but most adopt due to recommendations from friends or family (often those who they would send or receive from.)
• Agent issues are still rife, despite usage growth. 80% of users in TZ and UG report agents were not open or had no liquidity during a recent visit.
• Mobile money has made in-roads but many households still use informal options. Tanzania shows the most progress where 62% of money transfers go through mobile money as opposed to 20% hand delivery and 10% sent with bus drivers.) In Uganda, only 31% of transfers go through mobile money. The below figure summarizes the landscape of formal and informal money transfer options in Uganda.
• The data shows major potential to help families with economic shocks. 46% of households in TZ, 45% in UG, 28% in PK suffered one or more major shocks in preceding 6 months. Death and illness as well as crop and livestock loss are major concerns. Remittances are a common coping strategy.

This data collection project is the first of its kind to collect rigorous, nationally representative data focused on understanding the workings of the mobile money markets in several countries. It will produce useful data that will push the field’s thinking going forward.

FITS data is updated regularly with new results from the in main survey waves as well as quarterly follow up phone based surveys. For reports, briefs, blog posts, and access to the data itself, check out the project webpage here: http://audiencescapes.com/fits

At NFC & Mobile Money Summit this debate was taken on by Annie Smith, Head of Mobile Financial Services and mCommerce for Digicel Pacific, Chidi Okpala, Director and Africa Head of Airtel Money at Bharti Airtel International and William Delylle, Director at Greenwich Consulting.  The three panelists highlighted opportunities and challenges they have faced in implementing merchant payments, highlighting these key points:

• Opportunity – Merchant payments can be a convenience factor, and expands the ecosystem options of what customers can do with their eWallet.  In giving the convenience, merchant payments adds a stickiness factor to the mobile money product.
• Stored value as a prerequisite to merchant payments – Customers cannot be expected to go to one shop, cash in and then go to another shop to pay for goods.  Customers need an easy way to fund a wallet; Salary payments can be one such option.
• Merchant acquisition – Merchant acquisition could be a significant challenge.  Some MNOs are using inhouse teams but there is a desire to outsource to dedicated merchant acquirers.  However, banks who are in the merchant acquiring business for the card industry have found merchant acquisition a loss making or low margin business; Even the card industry is looking for alternative low-cost distribution channels to acquire merchants rather than the direct sales model.
• Business model – pricing proposition for eWallet merchant payments is still under debate.
• Technology - NFC technology is optimal, but not all markets may be ready for this.  Companion cards are also being rolled out which can be paired with mPos devices

Video Discussion by Chapter

• Merchant payment overview: Digicel Pacific, Airtel Africa and non-MNO merchant payments
• Do eWallet linked merchant payments offer value to the customer? 09:13
• What approaches could exist for merchant acquisition? 14:52
• Business model for eWallet Merchant Payments 19:49
• Technology choice for eWallet Merchant Payments 21:15

Frederic describes how Orange’s approach to organisational structure has evolved through trial and error. What was once thought of as a VAS or supplemental product is now seen as a separate business entirely “much like [mobile] broadband.” This shift in mentality brought the following changes to Orange’s approach:

• The realization that (in Frederic’s words) “the key success factor is clearly not the product … that the key success factor is efficient processes, simplicity of the customer journey and distribution” led Orange to believe that mobile money probably does not belong in the product group but as a separate business unit reporting directly to the CEO.
• Ideally, mobile money should have a separate sales and distribution structure from the core GSM business. CEOs of individual operations need to be bought into the benefits of mobile money to make the requisite organisational investments.
• Existing telecom expertise may need to be supplemented with external skills in financial processes and security.
• The head of mobile money should be a “CEO profile” rather than a “product manager profile.”

At the end we heard of the interview some great additional insights from other members of the Working Group. Thanks to Frederic and the Working Group participants for deepening our understanding of organisational structure. Anyone interested in hearing more should read MMU’s research on the topic.

Tigo Cash recently launched in the DRC and as mobile money is only in its infancy in this country, Tigo could not rely on the market’s prior awareness or understanding [1]. Tigo needed to start from the beginning and to develop awareness and build understanding, they relied on an effective and localized Above-The-Line (ATL) strategy. It is important to remember that ATL communications is just one of many effective tools available to operators and this must be coupled with equally effective Below-The-Line campaigns

Developing Awareness

The target market was selected on the basis of being both early adopters and easily addressable – young urban students – and then the mobile money service was positioned accordingly. Tigo needed to drive the Tigo Cash message to their target population. To do this, they used a teaser advertisement to create a buzz and generate interest. The advertisement excited their target market by saying “It’s coming soon” and introducing the “Ca$h-Moi” or “Ca$h Me” tagline. The format used also provided an introduction to the colour, styling and branding to be used by the service. While this teaser strategy is often used for pre-product launches, what Tigo Cash DRC did next was more insightful from a market analysis and segmentation perspective.

Building Understanding

The communication strategy to build understanding of the service involved recruiting JB Mpiana, one of the DRC’s best-selling artists. JB and Tigo created a new song and video explaining the Tigo Cash Service and how it operates. JB delivers a catchy tune and sings about tapping the USSD string used to access the service, *123#, and the simplicity, speed and security of the service. The backing vocalists sing a harmony slogan of “Tigo Cash” and the lyrics explains some situations where Tigo Cash can be used.  In this way, the main objectives of an ATL campaign are met; the service is introduced, explained and the primary benefits are presented.

JB then performed a free concert in Kinshasa at the launch of the Tigo Cash Service. Jonathan Johannesen from Tigo Cash, DRC saw the numbers of registered users rise by 50% in the week following the release of the song and the free concert. Heavy daily circulation on the national radio channels has also helped to build awareness.

Customer Journey Remains Incomplete

As an example of market analysis and marketing communications, the start exhibited by Tigo DRC has been very encouraging. They used simple messaging and a popular cultural icon to develop awareness and build understanding. While Tigo Cash in the DRC is a young service, there is huge potential in the market and Jonathan has exciting plans – which I hope to revisit – to continue to bring his subscribers through the customer journey.

Looking closer at the credit side of M-Shwari, this is not the first telco-bank partnership to offer short term credit. Airtel teamed up with Faulu Microfinance in May to offer Kopa Chapaa, a 10 day loan up to 10,000 Kenya Shillings. And previously, there was of course M-Kesho from Safaricom and Equity Bank.

We wrote about airtime based credit scoring in March and had contributing posts from Experian MicroAnalytics and Cignifi who both work in this area. With the vast majority of mobile subscribers in emerging markets using pre-paid SIMs, there is incredibly rich data available on airtime purchase and usage behaviours. Couple that with the poor quality of information available at credit bureaus, and airtime based credit scoring is an attractive approach to targeting and risk profiling for credit products.

What does the launch of M-Shwari mean for mobile money? A few thoughts:

• The design of this product suggests telcos may be waking up to the value of their data. Telcos frequently monetise their own data for internal use to design smarter talk time promotions or offer better segmented VAS.  But M-Shwari shows how telco data can be leveraged as an asset to generate external sources of revenues.
• This credit and savings product is being offered through a telco- bank partnership rather than by the telco alone. Telcos don’t engage in direct lending or financial intermediation; rather they are focused on the high volume transaction-fee part of mobile financial services.
• Finally, it is encouraging to see mobile money customers can now earn interest; this benefit has been withheld for too long. Safaricom says 70,000 accounts were opened on the first day alone. But will this vanilla savings offering hold enough appeal to mobilise savings deposits?  One can envision mobile money savings products which better leverage the power of mobile i.e. programmed savings, innovative mobile savings reminders, progress trackers, rewards, etc.

What’s your take on M-Shwari?  What does the launch of this new product mean to you?  Is this a game changer for financial inclusion?  What do you expect the uptake to be of M-Shwari? Share your thoughts with the MMU readers.

For most mobile money operators, internal fraud is one of the biggest risks to worry about. It might be unlikely, but the potential consequences are devastating in terms of financial loss, customer trust and regulatory implications.   While internal fraud does carry high consequences, the simple fact is that mobile money managers should also be concerned with internal operational errors, which might expose operators to unnecessary risks. These operational errors could come from systems failures, accounting failures, data input problems, and so on. It’s easy to think of all these as “human errors”, but the reality is that most of them can be prevented with well designed and implemented internal processes. These same internal processes should prevent both errors and frauds through careful consideration of risks and necessary controls in the processes.

Mapping and documenting internal processes should be one of the very first steps in any risk management plan for a mobile money operator. If processes are vague, ad hoc, or are known only to a few select people, the following risks emerge:

• Processing errors due to shortcuts being taken
• Inefficiencies due to unnecessary steps
• Opportunities for internal fraud
• Inability to spot fraudulent transactions
• Inability to restore after an outage
• Inability to expand or scale services
• Key person risk
• Business continuity failures
• Failed audit results (including regulatory audits)

If you start a risk management plan without having your internal processes documented, you may identify some useful controls to prevent risks, but it will be extremely difficult to enforce these controls or to monitor that they are working effectively. In order for a control to be truly effective, it must be monitored or tested by an independent party, and this is simply not possible unless the rules for the control are written down.

One example is an operator who had a poorly documented e-money process. The process for creating e-money had evolved over time and was only written down in a series of e-mails between the relevant team members. The team had considered segregation of duties for the creation and approval of new e-money, but the process was informal and not readily accessible.  During a detailed risk assessment, the operator documented the process and found weaknesses in the approval process.  As they discovered, the approver had no way to independently verify the creation of e-money. Under these circumstances, it would have been possible for the creator of the e-money to manipulate the transactions without being detected; the approver could do no more than effectively “rubber-stamp” the process.  By documenting their process, the operator saw this was a weakness and developed a new system report that would allow the approver to independently verify the transactions, thus reducing the risk.

Mobile money is a fast-moving business, and many operators are still working in a “start-up” mode, relying on a small team of dedicated and highly professional staff to undertake critical functions. It might seem like a difficult and costly exercise to document the internal processes needed to run the mobile money operation, but it is an essential step if the business is to scale up in an efficient and low risk manner. 

This blog post is part of this week’s series aimed at providing operators greater insight on the tools to implement an effective risk management strategy. For further information on risk management, see our publication “Managing the risk of fraud in mobile money.”

• relevant data and dashboards,
• defined internal procedures, and
• clear communication.

For this blog post, I’m focusing on the last of these tools: communication, particularly as a way of educating and protecting customers. I’ll describe why communication is so important to risk management and discuss some guiding principles that operators can use when developing an effective communication campaign.

Customer communication is important to risk management because uninformed customers are more susceptible to fraudsters.

Often, when we talk about communication, we’re talking about marketing. Campaigns, direct marketing and other promotions typically focus on driving customer adoption. However, communication is also a powerful tool to inform and educate customers on protecting themselves against fraudsters.

Vishing/Smishing scams illustrate the need for communication beyond marketing. Vshing/Smishing scammers rely on either voice or SMS channels to trick customers into sharing personal information such as a PIN. These scams are effective because scammers can capitalize on the reality that for many mobile money customers, the concept of a PIN is new and therefore customers may not be aware of how valuable it is. We’ve seen evidence of this in even the more advanced mobile money markets.  According to the Tanzania Mobile Money Tracker conducted by Intermedia and The Bill & Melinda Gates Foundation, 29% of registered active mobile money users in Tanzania have shared their PIN in order to access a mobile money service.

This is a concerning statistic for operators because customers who are defrauded will not only lose their savings but will also lose trust in the service. Technologically, there is no way for an operator to block a customer from freely sharing his or her PIN. Therefore, one of the best controls to mitigate this type of risk is to build customer awareness through education. The best means to educate customers is through an effective communication strategy.

Effective customer communication is relevant, simple and supported by the channel.

For customer awareness campaigns, operators have massive advantage (compared to a typical marketing campaign) because they know where their customers are and where they go to transact.  The challenge is therefore creating and reinforcing a message that is actionable and understandable to the customer. Here are three guiding principles to get the messaging right:

1.)    The message should be relevant and specific, but not scary. A good customer awareness campaign will address a risk without causing customers to be concerned when interacting with the service. In our publication, we highlight Safaricom’s Know Your PIN campaign as an effective and relevant customer awareness campaign. This campaign does not mention the risks around Vishing/Smishing scams, but it does provide customers with the information they need to guard against such scams.

2.)    The message should be simple and easy to understand. Operators need to think creatively about constructing and disseminating the right message effectively. While operators are only targeting customers (and therefore have the luxury of knowing how to find them), there still may be other barriers to consider including language and literacy. Therefore, risk managers, marketers and, where necessary, advertising agencies will need to work closely to create an effective message that will resonate with the broadest possible customer base.

3.)    The message should be reinforced during customer interactions. This third point is the most important element to building customer education. The above two points discuss the strategy for messaging, but good messaging will only work if it is properly reinforced.  Reinforcing the message is the responsibility of the agents, the customer care centre and any other stakeholders who work with customers on a regular basis. Operators need to invest in training these stakeholders to ensure they are aware of messaging and follow standard procedures to reinforce customer education during practical situations. Agents can often be fraudsters themselves, making agent training and monitoring critical for customers protection and risk management. For more insight on constructing an effective training curriculum, see MMU’s publication on agent training.

This post is part of a series that provides operators with greater insight on the tools to manage risk in mobile money. The next post will focus on creating clearly defined internal procedures. For more information about how to think about risk management in mobile money, see our article “Managing the risk of fraud in mobile money.”

In this booming yet fragmented market, a company called Selcom has found a way to serve clients of all mobile money deployments. Selcom started as a VAS provider that won a national lottery license to sell digital lottery tickets using SMS. After the lottery business stopped, they integrated with the state-owned electricity company in Tanzania, Tanesco, to enable electronic prepaid electricity vending for them. Selcom realised that they couldn’t serve all customers in the country themselves, so they encouraged mobile money deployments to integrate with Selcom to allow mobile money customers to buy prepaid electricity using their phones, and they all did. For operators, connecting to Selcom for bill payments made strategic sense since they could get bill payments to market quickly and with lower development costs than if they would develop the integration with the utility company themselves.

Since then Selcom have increased their billing portfolio to include most utility companies in the country and they are also integrated with the ATM networks as well as many banks, including Barclays, Standard Chartered Bank, NMB and NBC to name a few. They are currently rolling out their own POS network and expect to have 4,000 agents active before the end of 2012. From these devices, customers can pay their bills directly and customers of mobile money can cash-out regardless which deployment they are customers of.

Selcom have created probably the first cash-out solution for mobile money that works for all deployments in a market, and it is initiated from one single device. It will be interesting to follow how customers and market players will react to this novel value proposition and what role the company will have in further connecting the financial landscape in Tanzania.

Photo: Flickr User – emilsjoblom

M-PESA contributes more revenue to Safaricom than data and SMS combined

M-PESA now comprises 18% of Safaricom revenue, more than SMS (8%) and data (7%) combined. Its 32% revenue growth rate exceeds that of voice, mobile data, and SMS.

Registered user growth has plateaued: Safaricom must deepen usage within a largely static base

One drawback of success is that user growth can be difficult to maintain. Safaricom has already registered 79% of its GSM base onto M-PESA, so finding new subscribers can be difficult. M-PESA yearly user growth has flattened to just 2.4% over the past year versus 69% just two years ago.

The focus has turned to driving activity within the existing base – activating customers and deepening usage for those customers.  Safaricom claims that 30-day active customers have increased 14% to 9.7 million. Activating the remaining 5.5 million inactive subscribers, and driving transactions within the active base will be a focus. Industry watchers will be curious to see what role new products and partnerships have to play in deepening usage.

B2C and C2B transactions are emerging as contributors

The H1 results reveal that M-PESA is more than a P2P story.  While P2P (C2C) transactions still account for a majority of volume, efforts to connect to formal businesses appear to be yielding results. C2B transactions now accounts for 7.4% of value transferred and B2C contributes 5.5% [1].

More cash is being converted into digital form and living within the M-PESA ecosystem

Safaricom’s H1 F13 results reveal that in September 2012 Ksh. 69 bn was deposited into M-PESA accounts while only Ksh. 62 bn was withdrawn back into cash. This implies that Ksh. 7 billion (US$82 million) of cash was converted to digital form in September alone and now lives inside the electronic M-PESA ecosystem.

For those that believe in the importance of digital currency for financial inclusion, the net absorption of cash (US$8.45 per active user in September 2012) should be seen as an important trend.

What do the M-PESA results mean for the mobile money industry? We welcome comments from practitioners and industry observers below or you can email us at mmu@gsm.org.