Mobile wallet

Mobile payment services offer an additional revenue stream for telecom operators to increase their ARPUs.

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Mobile wallet Rensburg says that African people embrace mobile payments.
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By  Nithyasree Trivikram Published  February 13, 2011

The fast paced growth of the telecoms sector in the Middle East and Africa region holds huge potential for mobile operators to gain additional revenues through mobile payment services.

While conditions seem to be right for significant growth in mPayments throughout the region, all the mobile payment value chain players such as banks, device manufacturers, regulators, credit card companies along with mobile operators should work together in a collaborative approach to make mobile payment services a success in the region.

Paul Allen, senior legal consultant of DLA Piper says that a collaborative approach is needed in the Middle East, especially between banks and operators to enable mobile payments or mPayments to go mainstream. He adds that the need is for banks and operators to take the lead together. “I see that they have already started to do it, but it needs to grow rapidly,” he adds.

Mobile payments

Hannes Van Rensburg, CEO of mobile financial services platform provider, Fundamo, describes the Middle East and Africa region as a huge market for  mobile payments. “The countries are all cash-priced economies, so people have to live with the inconvenience and the complexity of organising their cash. By providing electronic payments we solve a lot of their problems including security, convenience and location.

“We have seen spectacular successes in Uganda, Kenya, Rwanda and Somalia. And now we are to see some of the big countries coming on-stream such as South Africa, Sudan and Nigeria,” says Rensburg. “In fact, the Nigerian government has just issued licenses for electronic payments,” he adds.

Allen states that different markets call for different models in mobile payments. “In Japan, NTT DoCoMo very much led as the mobile operator of choice as they had market dominance. In Kenya, Safaricom has taken the lead in mPayments because it had covered a huge chunk of the market with its services, and there was also low telecom regulation in the country then.

“Considering the mobile penetration level is more than 100% in countries like the UAE, it is all the more conducive to introduce mobile payments in the Middle East market, but both banks and operators are needed to make it work.”

mPayment challenges

Trust seems to be one of the major concerns that can work against the adoption of mobile payments. “The big question over mPayments is whether the population in the UAE, and the Middle East as a whole, will embrace this mode of payment,” says Allen. “People like tangibles. They want to know that it is my cash and that it is protected. When it is on the phone, you can’t see it.”

Another challenge that Rensburg points to is the complexity of technology behind mPayments. “There is the need to connect different technology components such as banks and third party systems. Also, you need to cater to extremely high throughputs, thus ensuring that the system confirms with the design objectives.”

Allen thinks that the main concern for mobile users to go for mPayment is the security aspect. “As it is technology-based, securing financial data is a concern as there is the possibility that someone might be able to hack into mobile phones,” he says.

“The way to build trust and confidence among mobile users is by promoting the laws that are in place to give a sense of protection to them,” he says.

MEA trends

A research study states that the MEA mPayment transaction value is expected to grow at 66% annually over the next few years, reaching $28.1 billion or 11.3% of the global value by 2012. The key segments of the mPayment market are mobile remittances, which account for 84% of the expected transaction value by 2012; and mobile money services that include retail purchases, airtime top-ups, and bill payments via mobile phones.

Rensburg says that in Africa, people embrace mobile payment and mobile transfer services. “It is absolutely natural for them to use it as it is a necessity. In a country where one mobile operator launches mobile money services, the other operators also have to follow it to keep pace with competition.

In the Middle East, telcos seem to be embracing mPayment services quite slowly, according to Rensburg. “Indeed, there does appear to be some traction in the Middle East. Last November, Vodafone Qatar launched an international money remittance service called Vodafone Money Transfer, which enables instant remittances via mobile-to-mobile money transfers between Qatar and the Philippines. The operator has plans to expand this service to include the rest of Asia, Africa and the Middle East.

New revenue streams

Mobile payment can play an important role in driving telecom operators’ revenues. Rensburg says: “Mobile operators, for sure, can increase their ARPUs by providing mobile payments as a value-added service. Operators can get significant benefits by reducing the margin that they pay on the distribution of airtime. Earlier, I had to buy scratch cards. Now, with mobile payments, I can use my ‘mobile wallet’.

“Operators can make huge money out of mobile payments,” says Rensburg. “Safaricom is a very good example. The benefits went to double digit percentages with about 30% of their revenue coming from mobile money services.

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