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MOBILE MONEY FOR THE UNBANKED SMARTPHONES & MOBILE MONEY: THE NEXT GENERATION OF DIGITAL FINANCIAL INCLUSION
Scenarios for
Smartphone-based
Mobile Money
T he implications discussed here point to a more complex mobile money value chain with a greater diversity of players and more
interesting products for customers. Yet the evolution of mobile money in a digital era may well be path-dependent in some mar-
kets, or completely disrupted and transformed in others. We can conceive of various scenarios for the future of mobile money,
not mutually exclusively or collectively exhaustive:
1. Dominant mobile money provider grows market share. Mobile money providers that have aggressively invested in customer acquisi-
tion and agent networks may find a greater penetration of smartphones to be a significant opportunity to expand and enhance their
services. If a mobile money provider has managed to position itself at the center of the ecosystem in a low-tech world, it can theoreti-
cally capitalise on the mobile data opportunity early and retain an advantage. The mobile data opportunity may be especially attractive
for mobile operators that would like to reach customers outside of their GSM customer base through mobile money apps. Mobile opera-
tors can choose to allow non-GSM customers to register for their mobile money service, thus expanding the size of the pie.
2. Traditional financial service providers make a comeback. Financial institutions that are serious about reaching unbanked segments
eagerly await a mass adoption of smartphones. In the meantime, we see the likes of Equity Bank in Kenya and Bancolombia in
Colombia acquire mobile virtual network operator (MVNO) licenses to circumvent costly and heated commercial partnerships with
mobile operators in their respective markets. We will likely see players such as these reinvigorated when the communications chan-
nel is democratised.
3. Over-the-top (OTT) players provide global payments platforms. Global OTT players (e.g., Facebook, Google) are making headlines
with announcements and speculation on their plans in the payments space. Such players could dis-intermediate existing mobile
money providers, diminishing their role to a discrete and limited part of the value chain. With their international reach, OTT players
could be particularly effective for cross-border remittances. However, to reach unbanked segments, these players will need to part-
ner with existing physical distribution networks for cash-in and out, at least initially. PayPal, for example, allows unbanked custom-
ers in the U.S. to load their accounts through Green Dot’s MoneyPak at large retailers. We could potentially see similar partnership
models emerge in developing markets between OTT players and retail networks.
4. Complete disruption with new virtual currencies, outside of the formal financial system. Over the next several years, entirely dif-
ferent models currently difficult to imagine could emerge and transform digital financial services. Decentralised currencies such as
Bitcoin, while markedly different from mobile money, can provide a means of financial exchange through necessary digital connec-
tions to the internet. Regardless of Bitcoin’s prospects as an alternative to national currencies, experts suggest that “its key engi-
13
neering elements offer us the possibility of imagining a radically different approach for architecting electronic payment systems.” 14
As of today, no single group of stakeholders in developing countries has the assets required to offer an end-to-end proposition within
a digital financial services ecosystem. Well-structured partnerships could allow players to leverage their strategic advantages more ef-
ficiently in meeting customer needs.
13. CGAP Brief: Bitcoin Versus Electronic Money, January 2014: http://www.cgap.org/sites/default/files/Brief-Bitcoin-versus-Electronic-Money-Jan-2014.pdf
14. Mas, Ignacio, “Why you Should Care about Bitcoin—Even if you don’t Believe in it,” April 2014: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1769124
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Scenarios for
Smartphone-based
Mobile Money
T he implications discussed here point to a more complex mobile money value chain with a greater diversity of players and more
interesting products for customers. Yet the evolution of mobile money in a digital era may well be path-dependent in some mar-
kets, or completely disrupted and transformed in others. We can conceive of various scenarios for the future of mobile money,
not mutually exclusively or collectively exhaustive:
1. Dominant mobile money provider grows market share. Mobile money providers that have aggressively invested in customer acquisi-
tion and agent networks may find a greater penetration of smartphones to be a significant opportunity to expand and enhance their
services. If a mobile money provider has managed to position itself at the center of the ecosystem in a low-tech world, it can theoreti-
cally capitalise on the mobile data opportunity early and retain an advantage. The mobile data opportunity may be especially attractive
for mobile operators that would like to reach customers outside of their GSM customer base through mobile money apps. Mobile opera-
tors can choose to allow non-GSM customers to register for their mobile money service, thus expanding the size of the pie.
2. Traditional financial service providers make a comeback. Financial institutions that are serious about reaching unbanked segments
eagerly await a mass adoption of smartphones. In the meantime, we see the likes of Equity Bank in Kenya and Bancolombia in
Colombia acquire mobile virtual network operator (MVNO) licenses to circumvent costly and heated commercial partnerships with
mobile operators in their respective markets. We will likely see players such as these reinvigorated when the communications chan-
nel is democratised.
3. Over-the-top (OTT) players provide global payments platforms. Global OTT players (e.g., Facebook, Google) are making headlines
with announcements and speculation on their plans in the payments space. Such players could dis-intermediate existing mobile
money providers, diminishing their role to a discrete and limited part of the value chain. With their international reach, OTT players
could be particularly effective for cross-border remittances. However, to reach unbanked segments, these players will need to part-
ner with existing physical distribution networks for cash-in and out, at least initially. PayPal, for example, allows unbanked custom-
ers in the U.S. to load their accounts through Green Dot’s MoneyPak at large retailers. We could potentially see similar partnership
models emerge in developing markets between OTT players and retail networks.
4. Complete disruption with new virtual currencies, outside of the formal financial system. Over the next several years, entirely dif-
ferent models currently difficult to imagine could emerge and transform digital financial services. Decentralised currencies such as
Bitcoin, while markedly different from mobile money, can provide a means of financial exchange through necessary digital connec-
tions to the internet. Regardless of Bitcoin’s prospects as an alternative to national currencies, experts suggest that “its key engi-
13
neering elements offer us the possibility of imagining a radically different approach for architecting electronic payment systems.” 14
As of today, no single group of stakeholders in developing countries has the assets required to offer an end-to-end proposition within
a digital financial services ecosystem. Well-structured partnerships could allow players to leverage their strategic advantages more ef-
ficiently in meeting customer needs.
13. CGAP Brief: Bitcoin Versus Electronic Money, January 2014: http://www.cgap.org/sites/default/files/Brief-Bitcoin-versus-Electronic-Money-Jan-2014.pdf
14. Mas, Ignacio, “Why you Should Care about Bitcoin—Even if you don’t Believe in it,” April 2014: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1769124
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