 | Issue: | Asia-Pacific II 2010 |
| Article no.: | 6 | |
| Topic: | Mobile finance – a service revolution | |
| Author: | Justin Ho | |
| Title: | Co-CEO | |
| Organisation: | Utiba Pte Ltd, Singapore | |
| PDF size: | 256KB |
About author
Justin Ho is the Co-CEO of Singapore-based Utiba Pte Ltd, a pioneer in the field of mobile-based transaction systems. Mr Ho has more than two decades of experience in the technology and finance sectors. Before founding Utiba, Mr Ho worked with NCR and Compaq Computers in a variety of various senior positions in the security and electronic commerce sectors. Mr Ho also founded Emerge Asia wand was its Managing Director. Justin Ho earned an Engineering degree from the University of Melbourne.
Article abstract
In the coming years mobile industry growth will come from subscribers in rural areas and developing economies where access to conventional financial systems and services is lacking. Mobile financial services will be an important driver of mobile use; they let subscribers perform a wide variety of secure transactions – banking, payments, international remittances, loan operations – without needing a bank account. A recent study revealed that customers using electronic bill payment were almost twice as profitable and much more loyal.
Full Article
The mobile communications industry across the world has entered a very interesting stage in its lifecycle. Over the last couple of years we have been witness to unprecedented growth of the mobile network in terms of geographic coverage and number of subscribers. We have seen consolidation at a global scale, and the rise of inter-continental telecom giants. Today the mobile phone has become the common thread that unites all of humanity around the globe, be it a stockbroker in New York or a farmer in rural India. Their mobile phones have become their connection to the rest of the world providing them with the power to connect with anyone, at anytime from anywhere. These are also very challenging times for the service providers, and over the last couple of years we have seen a transformation of the mobile services business model. Rapid growth has led to a commoditization of the voice services and caused an erosion of ARPU (average revenue per user) that has forced all service providers to reconsider the very essentials of their business strategies. The graph shows the trend of the ARPU and MOU for the Indian mobility market over a span of seven years. These seven years are also when the industry saw strong growth in their subscriber base. As can be seen, while the ARPU lines maintains a steady downward course, the MOU, in spite of falling tariffs, has a comparatively sluggish growth pattern. Still, a shrinking ARPU is not the only concern for the telcos; the costs associated with creating and operating networks as well as the human resource requirements have added to the challenge of sustaining previous growth levels and maintaining profitability. Commoditization has also made customer churn a major cause of concern for the operators. Today mobile number portability and handset interoperability have reduced the costs associated with shifting from one operator to another. Creating and protecting customer loyalty has become more important than it ever was. This is where we believe mobile payments, or mCommerce, will play a key role in the time to come. What a well thought out mobile commerce service does is elevate mobile phone service from a communication channel to a life tool. Consider the case of Akilli, a young engineer from Mombasa Kenya, working in London. He had given his family, back at home, their first mobile handset and was very happy that he could now call them whenever he missed them. Then he discovered mobile remittances; he could not only talk to his family but also help them out by being able to send them money whenever it was required. That is the impact of mobile commerce. There are many such cases where mobile commerce has added a completely new dimension to the usability of the mobile phone by ensuring secure, low-cost and instantaneous financial services. In the coming years the main engine for growth in the mobile industry will be the subscribers from rural areas and from under-developed economies. These markets have shown an exceptional appetite for mobile payment services. This primarily stems from the lack of any conventional access to financial systems and services. The manner in which conventional financial organizations operate makes it prohibitive for them to provide most people in developing regions with financial services. They need to create branch offices or ATM networks that rely on Internet penetration to provide service access. The capital expenditure and operational costs associated with a brick-and-mortar network and a poor Internet penetration make it highly costly to support the inclusion of masses that would majorly constitute of people under the poverty line. This is where the mobile operators score over banks and other institutions. The mobile handset has become the new access channel for financial services. Advancements in technology have not only made the handset very affordable, but also equipped it with all necessary tools to connect it to any financial system and be able to perform a very wide variety of secure and safe transactions. Branchless banking, international remittances, microfinance loan disbursement and collection, utility bill payment, shopping, travel ticketing, content purchasing, donations, pay-roll operations are few of the many applications that have been enabled over mobile finance platforms and have enhanced the level of engagement between the subscriber and the service provider. We believe that the way ahead for operators is to focus on creating a service bouquet that adds unique value for their customers. This not only strengthens the subscriber-operator bond but also creates additional and unique revenue sources for the operator. A recent study conducted by Microsoft and their partners revealed that customers who started using electronic bill payment not only became more profitable (US$102.17 versus US$54.87) but also more loyal with a drastic reduction in the churn rate in this segment. Mobile payments have come a long way in the last ten years and have established that they are here to stay. Everyday new mCommerce initiatives are launched around the world and each one comes with a new and unique value proposition, but at the heart of it all the main objective is to create value for the masses. We live in interesting times indeed.
