Mobile money accelerates financial inclusion

Mobile phone based payment services are increasingly becoming a gateway to the digital economy and a supporter of global development goals

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Mobile money accelerates financial inclusion Mobile money is a major enabler of UN SDGs, says Granryd.
By  Soumya Smita Prajna Published  June 7, 2018

With more than 690 million registered accounts in over 90 countries, mobile money has evolved into the leading payment platform for the digital economy in many emerging markets, according to the GSMA’s seventh annual ‘State of the Industry Report on Mobile Money’. The report shows that, in 2017, the mobile money industry processed transactions worth a billion dollars a day, generating direct revenues of over $2.4 billion.

“As the Sustainable Development Goals (SDGs) enter their third year, mobile technology is proving to be an essential tool for delivering these global goals with increased connectivity and innovative services enabling more inclusive communities,” said Mats Granryd, director general, GSMA. “Mobile money remains a central part of this story, contributing to 13 of the 17 SDGs, enabling access to essential services like health and education, empowering women with employment opportunities and reducing poverty by offering life-enhancing financial services, often for the first time.”

The report shows a number of new trends in mobile money in 2017, including the accelerated growth of bank-to-wallet interoperability, the growing adoption of smartphones, the proliferation of fintech companies, the digitisation of new sectors of the economy, and renewed efforts by companies and governments to reach the most vulnerable and underserved.

Sub-Saharan Africa has long been the epicentre of mobile money and growth in this region shows no sign of slowing, but as the industry has matured, mobile money has also gained traction in other parts of the world. In 2017, South Asia was the fastest-growing region in terms of registered accounts and now represents 34% of registered accounts globally.

The Middle East now comprises just 6.8% of all mobile money users, but that still represents a market of 400 million users, growing 21.5% from 2016 to 2017.

With mobile money now available in over 90 countries, including three-quarters of low- and lower-middle-income countries, it has become the leading payment platform for a digital economy in many emerging markets.

The research further shows that more funds are entering and leaving the mobile money ecosystem in digital form; bulk disbursements, bill payments and bank-to-wallet transactions have been the main drivers. In 2017, nearly 25 % of incoming funds were digital, compared to nearly 12 % in 2012.

The persistence of the cash economy in emerging markets means that complex distribution networks will continue to be crucial for digital services to interface with physical lives. As regulators confront questions around data protection, business models, and more, the policy end game of greater inclusion must remain at the fore. Providers able to effectively inform and support this process will be more likely to thrive.

Granryd added: “In an increasingly turbulent world, mobile money is also providing a lifeline, with digital humanitarian cash transfers and affordable international remittances giving refugees safe and convenient ways to meet pressing needs. We are also continuing to focus on narrowing the gender gap in access to financial services through programmes such as the Connected Women Commitment initiative.”

Mobile money is also playing an important role in helping to open up financial services to underserved members of society. Humanitarian organisations are using bulk mobile money transfers instead of cash for payments to their beneficiaries. Mobile payments are cheaper, faster, more secure and transparent alternative to cash, and payment through mobile can provide access to beneficiaries in hard to reach locations.

Twenty percent of mobile money projects now also offer savings, investment or pension services, helping users to build financial security for themselves and increase financial inclusion.

Mobile money is also becoming increasingly important to international remittances, helping to achieve another of the sustainable development goals of cutting the cost of remittances, which are general used by low paid expatriate workers to send money to their families at home.

Research by the GSMA in 2016 showed that it was, on average, 50% cheaper to send remittances using mobile money than using global money transfer operators (MTOs). New data on the cost of remittances collected in August 2017 indicates that the cost of sending $200 via mobile money has continued to decline, to 1.7% on average where customers opt to keep their funds in digital form.

There is growing evidence of the many benefits of mobile money international remittances: Mobile money can serve as a gateway to financial inclusion, enhancing the impact of international remittances on development. For example, in Kenya, people receiving remittances on their mobile money account can buy government bonds through M-Akiba, enabling the investment of remittances in the local economy.

The characteristics of mobile money — convenience, privacy and reach — make it a particularly attractive remittance channel for women and rural households.

Mobile money can also play a critical role in formalising international remittances. While formal remittance flows to developing countries have reached $450 billion in 2017, the true size of remittances is believed to be significantly higher, with large flows going through unregulated informal channels.

One of the most important ingredients in the success of mobile money has been trust. In April 2018, the industry will announce the GSMA mobile money certification — a new initiative to further enhance customer protection and transparency.

The certification scheme follows a three-year consultative process led by the GSMA, which worked together with providers in Africa, Asia and Latin America to understand the challenges of their business and assemble best practices from these markets.

Certification is open to all mobile money providers, whether they are a mobile operator, a bank or other type of payment service provider.

Orange Côte d’Ivoire, Safaricom (Kenya), Telenor Microfinance Bank Ltd. (Easypaisa Pakistan), Tigo Tanzania (Millicom Group) and Vodacom Tanzania are the first to be certified, covering 98 million accounts in four markets.

The certification promotes the application of consistent risk mitigation and consumer protection practices across key areas of business. The requirements include a set of eight high-level principles and 300 detailed criteria covering issues such as security, consumer rights and the prevention of money laundering, financing of terrorism and fraud. The certification criteria complements providers’ compliance efforts, but goes beyond regulation in its detail and scope, defining and promoting industry best practices in detail. Responsible business practices are essential to help regulators achieve their goals around financial inclusion, stability, integrity and consumer protection.

The operational management of the certification is contracted to an independent scheme operator, Alliances Management, which has responsibility for training and overseeing independent assessors to ensure all assessments are consistent and objective.

By Soumaya Smita Prajna, editor of CommsMEA.

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