Easy money

With people in various developing countries now using their mobile phones to access money and make transfers and payments, mobile operators are waking up to the untapped potential of a service that has the potential to revive ARPUs, reduce churn, and help people with limited access to financial services. Gavin Krugel, a director at the GSMA, tells CommsMEA about the organisation's efforts to promote mobile money transfer and the benefits for operators.

Tell us about the GSMA's mobile money transfer initiative. What is its purpose?

The mobile money transfer initiative at the GSMA was started about 18 months ago with the view to introduce network operators into the value chain for money transfers. It has grown quite substantially; we currently have 40 network operators that are now actively deploying the mobile financial service infrastructure.

The objective is to drastically reduce the cost of international money transfer to enable more people to have access to money transfer. We're hoping to use the ubiquity of mobile and the reach that mobile has to achieve the target of reducing those costs and providing more services.

How is awareness of mobile money transfers among operators? What we see is that more and more mobile operators are getting into this space and partnering with financial institutions and connecting to international remittance hubs and the like in order to deliver these services.

At the moment mobile operators are deploying domestic services mobile money transfer services and they are moving aggressively to international services, so within the next quarter, we could see the first commercial international mobile money transfers launched.

Domestically, mobile money transfers are big in Kenya, the Philippines, India, South Africa and the rest of the markets are under deployment or in the early stages of launch.

How do mobile money transfers work?

The mobile phone acts as the transactional device, so you can draw a comparison between a phone and your usual ATM or Mastercard. The phone is connected to a financial institution or payment mechanism through something we call a mobile wallet.

This is a piece of technology that facilitates an instruction from a consumer's handset and to something that the financial institution understands.

How do you view the potential for mobile money transfers in emerging markets?

It is spreading to developing countries. Financial institutions are using mobiles as a transactional channel to access their bank accounts.

From a transaction perspective, we are hoping to tag the consumer with money transfer and give them a reason to get the application or get a bank account in order to receive money, and then start escalating them up the financial services value chain by giving them electronic recharge, access to bill payments etc.

How can operators generate revenue from it?

There is a value chain that the network operator sits on in financial services and they could be anything from the bearer only which is giving the financial institution access to their network channel, all the way to becoming a bank.

The network operators are typically sitting between those, so they are looking at joint ventures with financial institutions and they are looking at more aggressive financial institution strategy, but not all the way to actually becoming a bank.

M-Pesa's [a service launched by Safaricom and Vodafone] success in Kenya definitely shows that there is a requirement from consumers in developing markets to receive money.

What aspects can operators adapt to grow in the mobile money transfer business?

The retail distribution channels of a network operator in developing market are immense. They have some of the largest retail distribution channels in the world, and what they are saying is: "If the banks aren't where the people are, we are. If we can distribute financial services through that distribution network we will provide access to financial services to people that have never had access to it before."

Also the network providers are aware that they have been able to make money out of the bottom of the pyramid. They have been able to make money out of the small cents denominations out of consumers that are really using access to communication as a life tool rather than a luxury. If they apply this same level of thinking in financial services I think they will gain a lot of value.