It’s uncontroversial to note that mobile money in the developing world is having more of an impact than mobile money in the developed world.

While the UK may have an extremely effective online banking model, the Afghan necessity-is-the-mother-of-invention mobile banking model is certainly more interesting than the UK where banks have finally woken up to the fact that the occasional commercial and putting more five-pound notes in cash machines is not innovative enough for a supposedly technically developed country.

[From Afghanistan shows the UK how mobile banking should be done – Telegraph]

So if you’re going to start a cash-replacement technology it makes sense to start it in a place where the use of cash is disastrous as opposed to a place where it’s merely inconvenient and expensive. But is it just all about cost? I don’t think so, because mobile deliver additional functionality as well: it means new applications as well as lower-cost transactions. This is recognised at the highest levels.

One of the interesting things about new technology is because so many countries in Africa have come late to the development, they’ve actually leap-frogged and the applications that they’ve developed for mobile telephony, for one, are far more advanced than many of the things you’ll see in this country… We are interested in how we can, as the U.S. Government, tap into those mobile networks to provide information that people can use very directly on their phones, in their communities, whether it’s tele-medicine, tele-banking, all of that.

[From Diplomacy Briefing Series – Conference on Sub-Saharan Africa – Poten & Partners]

This is you would expect. In the development world, there is little retail financial services infrastructure so there is a great pull to use new technology to provide that infrastructure. This had led to innovation, and some of that innovation may drive new products in the developed world. But the extent to which the innovation in mobile money is developing has some interesting implications for society, and one of them is that this new infrastructure based on mobile provides a means to deliver social inclusion. Why? Ignacio Mas and Dan Ratcliffe from the Gates Foundation are concise and explicit.

Cash is the main barrier to financial inclusion.

[From Mobile Payments go Viral: M-PESA in Kenya –]

Cash isn’t just quaint, it’s a drag on development. Professor Njuguna Ndung’u, the gorvenor of the Central Bank of Kenya, speaking at a time when M-PESA volumes had already surpassed Ks 1 billion per day, pointed out that micro-banking, insurance services and mutual funds need low cost delivery channels and the mobile phone is the way to provide them. Quoted in SPEED magazine (Spring 2010), he said that

The Kenyan authorities are creating an enabling legal and regulatory environment comprising: The National Payment System Bill that will strengthen the oversight mandate of the central bank; The Proceeds of Crime and Anti-Money Laundering Bill; and an amendment to the Banking Act to enable banks to use non-bank agents to extend their reach (and these non-bank agents will use mobile technology to reach customers even if the banks do not).

In a relatively short time, M-PESA has become a standard and widely accepted mechanism for exchange and in some circumstances it is already preferred to cash.

I have personally witnessed this at 11:00pm at night when a colleague made a payment recently to a taxi-driver in Nairobi when such a message was received, and the taxi-driver’s response was that we did not have to wait 10 mins that we could go, M-Pesa was good for the payment. This is trust.

[From Details | LinkedIn]

I wonder if this was the same taxi driver mentioned in a post over at the GSMA.

A conversation I recently had with a taxi driver in Kenya illustrates why talk of the death of banks is unfounded. He explained that M-PESA is one of a portfolio of financial tools that he uses to manage his money, and that his bank is an indispensible part of that portfolio. In fact, I’ve come to believe that mobile money services can increase, rather than dampen, demand for traditional banking services

[From Mobile Money and the Demand for Banking | Mobile Money Exchange]

I’m sure that this is true, although it may not necessarily mean that traditional banking services should be delivered through traditional bank channels.

Equity Bank Ltd., Kenya’s largest provider of small loans, plans to more than double the number of accountholders this year after forming a partnership with Safaricom Ltd., East Africa’s biggest mobile-network operator… Safaricom and Equity Bank announced on May 18 an initiative where Kenyans will be able to open bank accounts through Safaricom’s mobile money-transfer service known as MPESA.

[From Equity Bank of Kenya Aims to More Than Double Accounts in 2010, CEO Says – Bloomberg]

This service has, at the time of writing, already led to something like 750,000 new accounts being opened, so it’s absolutely clear that mobile money provided by non-banks not only does not compete with banking services it can actually turbocharge them. But back to the streets of Nairobi

Last week as I was coming from the office @ about 5.30am (I work late sometime). I noted a group of not so sober men lined up in a M-Pesa retailer, the men had spent the whole night drinking and were making cash withdraws to clear the debt to the pub. The M-Pesa integration allow them to withdrawal from their Bank account. To me saved money should not be this liquid.

[From Details | LinkedIn]

This is a fabulous quote, on so many levels, and I will inevitably use it to make some convoluted “joke” about liquidty in the future. Nevertheless, it is worth using it to flag up the point that even for digital money fanboy such as yours truly, not all of the consequences of spending at the speed of light are positive. But there are other, wider consequences of M-PESA’s great success in Kenya.

I’d say that there is at least as much of a lack of innovation in mobile money because MNOs are simply trying to copy M-PESA.

[From Are banks the bad guys in the mobile money innovation debate?]

This is a perspective that I’ve heard expressed more and more in mobile money circles throughout the year. It has a negative effect, I think, because there were special circumstances and factors around M-PESA.

In any case, from a global perspective, the runaway success of M-PESA is likely to remain the exception, rather than the rule, for mobile money deployments. In most markets, one provider won’t be able to get a big enough head-start to generate the powerful network effects enjoyed by Safaricom and the net result will be several modestly-successful mobile money services in each country.

[From Don’t be Seduced by the Magic of M-Pesa | Mobile Money Exchange]

I’m sure it’s true that M-Pesa will remain the exception. It cannot be replicated in South Africa, because apart from anything else it would be illegal: the rules there require bank involvement so M-PESA there is a different kind of beast. But remember how Visa started as BankAmericard? In some countries this will be the more likely path surely: one provider will launch, get some traction and then competitors will join and compete no longer on the network but on products and services built on the network. Another impact will come in the retail value chain as M-PESA continues to grow at point-of-sale (I’m told on good authority that there are some bars in Nairobi that will only accept M-PESA). It has signed up Kenya’s second biggest supermarket chain already. What will happen?

Conrad Sheehan, founder and CEO of mPayy, tells Econsultancy: “If you’re going to introduce a mobile carrier into that value chain without raising the price, something’s gotta give. You have to lower the price to the merchant.”

[From In mobile payments, credit card companies might be a third wheel | Econsultancy]

That simply isn’t true, since the mobile carrier might have some alternative source of revenue. In a recent podcast in the Tomorrow’s Transactions series, Michael Joseph (CEO of Safaricom when they launched the highly successful M-PESA service) points out that he was interested in profitability through customer acquisition and reduced churn. As with the example of NTT DoCoMo in Japan, there is a suspicion that the carriers could give the payment system away for free if it generated enough other revenue for them and that they’ll keep this up their sleeve for when there’s is competition. So is M-PESA generating other revenue? Well…

according to Safaricom’s annual financial statements released just a few days ago accounted for 9 percent of company revenues in the last fiscal year, for a total contribution of USD 94.4 mil (Ksh 7.56 bil). M-PESA revenues grew 158% over last year’s figure of USD 36.6 bil (Ksh 2.93 bil).

[From Proof mobile money can make money? M-PESA earns serious shillings for Safaricom]

M-PESA accounts for almost half of all Safaricom’s data revenues.

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers

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