Update from the frontline

[Dave Birch] I’m at Mobile Payments World Asia, where I’ve been hearing some interesting projections about what might happen in the future. Everyone is fairly bullish, as they have every right to be given the very positive consumer research on the topic. According to the GSMA, who conducted a 17 country market research survey of 2500 consumers, something like three-quarters of consumers would be happy to use their mobile to buy train tickets as well as pay for their shopping at a supermarket. The excellent case study of the Philippines apart, though, a lot of people were still talking about pilots and trials. It’s a little disappointing, I think, that the convoluted dance between banks and operators is taking so long to deliver useful services to customers.

Meanwhile, the latest figures from my favourite mobile payments scheme, M-PESA in Kenya, continue to amaze. Safaricom added 870,000 new mobile subscribers in the first quarter of the fiscal year to reach 11.1 million by the end of June (a considerable increase in the subscriber base since the introduction of M-PESA). M-PESA itself is still growing and the registered user base increased 50 percent over the quarter from 2 million at 31 March. New registrations continue to exceed an average of 10,000 per day and by the end of July the total registered user base exceeded 3.3 million. Total person-to-person transfers reached KES 6.88 billion in July (about $100 million), representing a growth rate of 220 percent over the March figure. The total value of all transactions during July exceeded KES 21 billion (about $300 million), and the average transaction per user has continued to increase over the last 6 month.

Wow. I guess that the increase in average transaction size has two obvious drivers. First of all, when people come to a new payment system they may initially be uncomfortable with committing large amounts of money to it. So they being by making small payments, but send large payments through existing systems that they know work, even if they are much more expensive (eg, interpersonal money transfer via physical offices. In time, their confidence grows and the larger payments move to the new system as well. The more important driver, though, might be the adoption of new systems by business. Just as PayPal “proved” itself to consumers sending each other the occasional few bucks and then they began to use it for person-to-business payments (through eBay as first), so mobile payments systems that have proved themselves easy, reliable and cost-effective for interpersonal payments (and microfinance payments in the M-PESA case) will soon be adopted by businesses. With more than three million M-PESA users out there, what Kenyan business wouldn’t want to accept mobile payments?

Out of Africa

[Dave Birch] The news that M-PESA in Kenya now has more than 2.7 million users — with 50,000 more joining every week — reminds me that sometimes new technology can not only make payment systems more efficient, more effective or more profitable, but also genuinely life-changing. But with ATMs getting more expensive, bank branches thinning out, petrol prices making it expensive to get to towns, Post Offices closing left and right… how long will it be before the successful non-bank mobile-based transaction-oriented pre-paid services being launched in developing countries find their way back to the U.K.? After all,

Any new rival to Visa and Mastercard should seriously consider ditching the card concept altogether and utilising customer’s mobile phones.

[From Rival to Visa and Mastercard without cards? – Mobilisation]

Now, it may seem far-fetched to imagine that G-Cash, M-PESA, Cellpay and others might have Europe in their sites, but it must be surely be a line of thinking that as SEPA has failed to deliver the (Commission’s) desired result — in that it has led to low-cost national debit schemes being abandoned and replaced by international schemes — perhaps another approach might be considered? What if the so-called “third scheme” were not some boring old-fashioned hello-1949 thing with accounts, cards, statements and the like but M-PESA? Any financial institution could provide the line of credit used to fund the pre-paid account at the heart of the scheme. Now, obviously I’m not the only person to be thinking this way…

A new dedicated mCommerce account may be the way to go. Remember that when credit cards (a new payment system) were launched in the 1970’s, it came with its own dedicated account management system. Why should that not be the case for mobile payments?

[From Mobile Banking: Where is the money?]

I wonder if we aren’t heading for more change than the Commission and the banking industry could possibly have imagined when setting off on the SEPA path. Anyway, let’s stop for a moment and celebrate M-PESA’s achievement: a win-win-win for consumers, Safaricom and microfinance. Payments really can change peoples’ lives.


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