There's something happening in the world of Mobile Commerce. Something that the analysts are getting extremely excited about, the mobile operators are starting to act upon and the banks are getting nervous about... International Mobile Remittances. That is, the ability to transfer money from person to person across international boundaries. But why all the fuss?
In a recent survey, some 76% of respondents said they would consider using a mobile device to make a payment to a friend, relation or business partner living overseas. Of all the possible mobile commerce applications presented this was the top with making micro payments and reporting fraud the next most popular answers (with a paltry 46% each).
If you then consider that between the UK and India some £5bn is transmitted each year. Juniper Research think that mobile will cater for about $300bn per year (so they're not really thinking big in terms of take-up). Consider all the countries around the world where migrant workers have settled and wish to send money home each month. The potential value of the small, but high volume money transfer market is astounding and I believe far greater than Juniper's estimate. So let's say $500bn is a more optimistic guess. Now assume the transaction fees are just a paltry 1% of the value of the transaction (one advantage of mobile remittances is it is low cost compared to using a bank or remittance agent such as Western Union who can charge anything up to 17%). The opportunity for any telecoms, banks or even billing specialists is clear...
Let's drill down to one particular success story. Vodafone made friends with Safaricom of Kenya and together they developed M-Pesa. The M is for Mobile and Pesa is Swahili for Money - so M-Pesa means Mobile Money. M-Pesa allows individuals to transfer money from person to person using nothing but their mobile phone. The service quickly exceeded all expectations delivering 30,000 new subscribers within a month of launch, 5m subscribers within 15 months and £145m worth of transactions in the first year. Today, payments made using M-Pesa accounts for 10% of Kenya's entire GDP. M-Pesa is now being launched elsewhere and it clearly emphasises the great opportunity for mobile remittances.
There are drawbacks of course. Not everyone is convinced about the security of the service, but it isn't any more risky that say a credit card transaction. Agents, who replace the banks by providing a facility to buy credits (turn cash into virtual mobile money that can then be fired across the ether) and then turn those credits back into cash (or equivalent value goods) for the recipient complain that M-Pesa is killing their main business. These Kenyan agents were earning ROIs in excess of 300% on selling mobile pay-as-you-go credits. On M-Pesa it's still a reasonable ROI but around 90%, nowhere near as lucrative. The problem is, M-Pesa is so popular they have little time to sell airtime, or anything else for that matter.
Over demand is a nice problem to have though - providing the transaction fees don't have to increase to appease the agents and their precious ROI - remember, mobile remittances are supposed to be cheap...
So how does it work. There's a relatively simple process for the user, which masks a very complex set of processes and legal agreements between various interested parties (banks etc).
Basically you register to use the service and are given a secure access PIN. You change your cash into credits (or if you have a bank account transfer them to your virtual mobile account). You can then use SMS messaging or a browser to request that money of a specified value is transferred to a mobile phone number. If the owner is not registered with the service they will receive a text message asking them to subscribe. Once they're aboard they can receive the money transfer in the form of virtual credits. These can then be redeemed at ATMs, agents (grocery stores, post offices etc) or even in banks. The complexities come in managing the notifications across international mobile networks, protecting against fraud and money laundering, risk management (credit checking etc), forex etc. M-Pesa and other solutions clearly demonstrate that these issues can be overcome and with a market opportunity like this one, expect a myriad of new entrants...
In a recent survey, some 76% of respondents said they would consider using a mobile device to make a payment to a friend, relation or business partner living overseas. Of all the possible mobile commerce applications presented this was the top with making micro payments and reporting fraud the next most popular answers (with a paltry 46% each).
If you then consider that between the UK and India some £5bn is transmitted each year. Juniper Research think that mobile will cater for about $300bn per year (so they're not really thinking big in terms of take-up). Consider all the countries around the world where migrant workers have settled and wish to send money home each month. The potential value of the small, but high volume money transfer market is astounding and I believe far greater than Juniper's estimate. So let's say $500bn is a more optimistic guess. Now assume the transaction fees are just a paltry 1% of the value of the transaction (one advantage of mobile remittances is it is low cost compared to using a bank or remittance agent such as Western Union who can charge anything up to 17%). The opportunity for any telecoms, banks or even billing specialists is clear...
Let's drill down to one particular success story. Vodafone made friends with Safaricom of Kenya and together they developed M-Pesa. The M is for Mobile and Pesa is Swahili for Money - so M-Pesa means Mobile Money. M-Pesa allows individuals to transfer money from person to person using nothing but their mobile phone. The service quickly exceeded all expectations delivering 30,000 new subscribers within a month of launch, 5m subscribers within 15 months and £145m worth of transactions in the first year. Today, payments made using M-Pesa accounts for 10% of Kenya's entire GDP. M-Pesa is now being launched elsewhere and it clearly emphasises the great opportunity for mobile remittances.
There are drawbacks of course. Not everyone is convinced about the security of the service, but it isn't any more risky that say a credit card transaction. Agents, who replace the banks by providing a facility to buy credits (turn cash into virtual mobile money that can then be fired across the ether) and then turn those credits back into cash (or equivalent value goods) for the recipient complain that M-Pesa is killing their main business. These Kenyan agents were earning ROIs in excess of 300% on selling mobile pay-as-you-go credits. On M-Pesa it's still a reasonable ROI but around 90%, nowhere near as lucrative. The problem is, M-Pesa is so popular they have little time to sell airtime, or anything else for that matter.
Over demand is a nice problem to have though - providing the transaction fees don't have to increase to appease the agents and their precious ROI - remember, mobile remittances are supposed to be cheap...
So how does it work. There's a relatively simple process for the user, which masks a very complex set of processes and legal agreements between various interested parties (banks etc).
Basically you register to use the service and are given a secure access PIN. You change your cash into credits (or if you have a bank account transfer them to your virtual mobile account). You can then use SMS messaging or a browser to request that money of a specified value is transferred to a mobile phone number. If the owner is not registered with the service they will receive a text message asking them to subscribe. Once they're aboard they can receive the money transfer in the form of virtual credits. These can then be redeemed at ATMs, agents (grocery stores, post offices etc) or even in banks. The complexities come in managing the notifications across international mobile networks, protecting against fraud and money laundering, risk management (credit checking etc), forex etc. M-Pesa and other solutions clearly demonstrate that these issues can be overcome and with a market opportunity like this one, expect a myriad of new entrants...
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