|Issue:||Africa and the Middle East 2015|
|Topic:||Mobile Money: Africa’s smart revenue sharing opportunity|
|Organisation:||Formula Telecom Solutions (FTS)|
Nir Asulin, CEO, Formula Telecom Solutions (FTS).
With more than 15 years experience in the telecom and software industries, Nir directs FTS’ operations including the development and delivery of FTS’ Leap suite of real-time charging, billing, customer management and policy control solutions and professional services.
Nir joined FTS in 2003 and moved from managing the Quality Assurance group to leading the Professional Services and Projects Delivery groups, eventually becoming the VP of Global Operations within FTS in 2009. Nir has both technology and management experience in billing & customer care, CRM and policy control software, having previously spent several years at Amdocs’ Professional Services group, holding several positions at large European and American telecom operators. His expertise spans system analysis, project management and implementation, as well as QA and customer satisfaction for large systems’ implementations. Nir holds a Software Engineering Diploma from the Israel College of Management.
When mobile money in the African subcontinent is talked about, it is generally in the context of the potential it holds for an unbanked population with advanced mobile penetration. But the applications for mobile money could go far beyond this. For African telco operators, operating here requires greater flexibility than anywhere else in the world. How can they maximise the opportunities for mobile money beyond the person-to-person transaction and translate the potential that it offers into a reality?
Mobile money in Africa
There’s no denying that sub-Saharan Africa leads the rest of the world when it comes to mobile money and adopting financial services on the mobile platform. There are a number of reasons for this. Firstly, mobile phone penetration rates are high: most Africans own a mobile device. In 2014, Swedish telecom company Ericsson forecast that mobile subscriptions in sub-Saharan Africa would be more than 635 million by the end of the year and predicted that this figure would rise to around 930 million by the end of 2019 .
Secondly, Africa is known for its unbanked population. The World Bank has calculated that in sub-Saharan Africa less than 29 percent of people aged 15 and over have a traditional bank account but around ten percent have an alternative that they can access on their mobile. In countries such as Gabon, Kenya and Sudan, this figure rises to more than 50 percent. More people have mobile money accounts than bank accounts in at least nine African countries and overall, 16 percent of sub-Saharan Africans have used their mobile phones for banking – more than any other region globally and with the potential for exponential expansion.
Thirdly, considerable sums are transferred by expatriates to people on the continent every year (around US$67 billion in 2014 alone, according to the African Development Bank), presenting a great growth opportunity for financial phone applications because fees charged by mobile banking companies are generally lower than traditional intermediaries such as Western Union or banks.
Not only this, but mobile phones also a greater way to access services such as paying utility bills. Because they are limited by the local telecoms operators, these services are still relatively basic but very handy for users. Indeed, the Boston Consulting Group has estimated that the development of mobile payment applications could bring in as much as US$1.5 billion in revenue by 2019, when it believes that the number of Africans possessing a mobile phone should increase by another 25 percent.
Despite Africa’s position as the leader in mobile money, there are challenges. There needs to be an attitudinal shift in how users think of their money (as a digital currency, rather than cash) and there also needs to be supportive regulation in place that ensures prices remain affordable in order to encourage widespread use amongst a low income population. Whilst on the one hand, a lack of education about the technology is holding back a huge percentage of the population from going beyond simple sending and receiving of funds, especially in countries outside Kenya, on the other there are users in neighbouring countries who are fully aware that their mobile money services are nowhere near as sophisticated as those offered by Kenya’s Safaricom, for example. However all signs point to the fact that there is no reason why all of these things cannot – and indeed are starting to – change.
Beyond person-to-person transactions, mobile money has the potential to translate to a commercial environment. Banks have made big gains introducing virtual accounts that combine mobile money accounts with banking services, so that users are able to deposit and withdraw cash using mobile wallets. The success of their adoption – one million accounts were opened with Kenya Commercial Bank and M-Pesa within a month – suggests that mobile money payments have the potential to be offered by many industries.
Within the region, operators are working hard to move mobile money technology beyond the provision of simple services such as the sending and receiving of funds towards merchant services. Safaricom launched a new “pay with M-Pesa service” in 2013 to enable Kenyans to pay for services like electricity, water and pay TV using their mobile phones. Despite the fact that adoption of the service has been slow, Safaricom is still busily acquiring merchants for the platform because the potential is huge once the challenges at user level start to be overcome. And of course, whilst Safaricom leads the way, the service is still only available in Kenya and other countries are yet to enjoy the same sophistication of services.
For telecom operators, effective operations in Africa requires greater flexibility than anywhere else in the world but it has never been a better moment for new players to enter the solution space, with cellular technology leading the way.
Making the most of mobile money
The mobile money innovations currently on offer – from withdrawing cash from accounts without a bank card, paying for goods without cash, receiving money from abroad and serving micro loans and insurance products – suggests that the commercial landscape is ripe for disruption. Whilst it’s easy to stay focused on mobile money and personal-to-personal transactions, the potential is much bigger.
The trends are not limited just to customers: solutions for traders and merchants converting to a cashless future are also emerging. These, however, will require support for the complex revenue sharing and commissioning business models that will encourage the growth and adoption of mobile money. Operators need to put in place a comprehensive set of tools that can support any payment or banking process over the mobile network in real time, at any time.
Money transfer (both local and international), bill payments, salary transfers, mobile banking, micro loans, mobile payments and more involve a considerable number of partners in complex ecosystems. The key for operators is to have in place a flexible and agile payments enabling solution that can support, change and personalise existing partners and onboard new partners easily, whilst also supporting revenue sharing in the entire value chain that encompasses multiple partners.
Payment processing and commissioning are tricky and often sensitive procedures. With a smart, flexible and scalable payments enabling software solution in place, operators can not only ensure that payment processing can be scaled as a company’s business processes and complexity grow, but that intricate upgrades and expansions can be implemented to deal with rapid growth.
With such a solution in place, the rating, billing and settlement functionality of commissioning and payment systems can be automated and payment service providers are provided with the tools to focus on the m-commerce arena too.
Smart revenue applications
A mobile money solution should provide a comprehensive set of tools that can support any payment or banking process over the mobile network in real time, at any time. It should be able to support a broad range of different business models and settlements, such as that between the mobile money provider and utilities companies, for paying bills for example. But it should also be agile enough to support a whole range of completely different business models, pricing plans and settlements, such as those between the mobile money provider and its micro payments partners, which might provide applications and services such as vending machine sales, online content or parking fees. As for the end-customer, mobile money should always provide a simple and effective user experience in which they are able to conclude a purchase, make payments, or transfer funds through their mobile device with a few simple steps.
With a smart revenue sharing solution in place, service providers will have full support for the complex revenue sharing schemes that mobile money requires. More complex value chains are also supported. Revenue sharing, commissioning and settlements between a mobile money provider, a chain of gas stations and a local, specific gas station, for example, with a driver paying using his mobile device/account: every part of the chain has to receive a part of the financial transaction. This transaction may involve several partners: the mobile operator, the mobile money platform provider, the chain of stations and the specific station owners. A key feature for a mobile money software solution is to enable the rapid creation of new or modification of existing contracts easily and independently.
The personalised ecosystem
With a smart revenue sharing solution at their disposal, sub-Saharan Africa’s telecom operators have the means to implement personalized contracts and relationships with every partner in their ecosystem, resulting in increased attractiveness and improved business relationships; reduced total cost of ownership; a remarkably fast time-to-market and ultimately, increased revenues.
For the mobile money industry in Africa it will mean greater innovation, faster time-to-market and ultimately, improved adoption of financial services on mobile platforms. And for the sub-Saharan African population, this means financial flexibility and a greater range of services: a means to manage their money in the present and plan for the future and a better chance to find financial stability with their fingertips.