Friday 22 May 2009, 11:55 AM
MobileMoney Africa:Interview with Menekse Gencer of MpayConnect
Posted by Nigeriatelecoms
mPay Connect provides strategic, product planning, and business development consulting services to clients interested in offering mobile financial services to their customers. mPay Connect is experienced in serving clients with banked and unbanked customers world-wide.
MMA:Some Mobile Money players are actually managing their services like a Product.Is it really a product or services?
GENCER:I think the more important question is: Is a mobile financial offering a transformative new business or simply a new channel for distributing existing services/products? For instance, mobile banking may be viewed as a new channel to reach banked customers with their online banking services 24×7. New mobile payments offerings, like mPesa, are transformative businesses since they offer a new set of products and services to unbanked customers that have been unable to have access to financial services in the past. This means a lot more than just extending existing banking services to new customers. It implies a brand new infrastructure and way of reaching a very large set of people with a new business model (tailored for a wide-set of low-income individuals.) The level of complexity involved with setting up the business extends from regulatory considerations to new marketing and agent channel setup. The business model and strategic implications of offering such a business will impact the way non-financial institutions (like MNOs) will interact with their customers moving forward. I liken this to PayPal on steroids… because it involves regional payments offerings, with new regulatory considerations around electronic money as well as cash-in and cash-out, for a set of customers that have never been served previously.
MMA: Mobile payments is transforming the way people react with money in parts of Africa,do you think such successes can be replicated all over Africa?
GENCER: Anyone who has been in payments for any set of time will argue “the devil is in the details.” As such, every country, every market will need to be carefully scrutinized to see whether 1. there is a customer need for a mobile financial services offering, what the current behavior is , whether it can be modified over time, and what the offering will be; 2. the regulatory dynamics will allow for it; 3. the business case makes sense to pursue; and 4. there are a set of entities that will be able to successfully execute on a plan.
The rule of thumb is, if there is an existing way of making payments and it’s reasonably secure, convenient, cost-effective, and ubiquitous, that market may not be a market ripe for mobile financial services. However, in markets where there is a need to overcome a pain point around money movement/services (in one of those areas), those markets will be good targets.
MMA:Is Mobile money a hype?
GENCER:Yes, there is a lot of hype around Mobile Money. Is it justified? Mobile money can mean many things… mobile banking, mobile remittance, mobile payments (proximity and remote), or mobile microfinance. My strong view is: In the developed world where banked customers have excellent means for transacting today, I don’t see a strong customer value proposition beyond the “sexiness” of the concept. People will adopt, but not en masse. Nor will mobile financial services significantly impact their lives. There are a few exceptions to this rule in the developed world where mobile payments make sense: 1. Transit and micropayments based on cash (where cash has been predominately used and the payment method is painful today); and 2. To serve the unbanked who are predominantly cash-based customers and do not have effective payments instruments available to them.
In emerging markets, the hype is more justified where 4 billion people live on less than $8/day. Enabling electronic money movement by reaching these people through the most ubiquitous device in the world (mobile phones) has the ability to change the financial lives of these individuals while significantly impacting the economies of these markets by connecting them to financial assets globally for the first time in history.
MMA: MNO vs Bank Model,which is best for Africa?
GENCER: I don’t see that there is an “either/or” answer here regarding MNO vs. Bank. I will focus on emerging markets for this question. First of all, again, markets vary, but my general point is: MNOs and banks are working and will continue to work together because they need each other. MNOs are needed as the entities that will connect with the masses of unbanked customers directly (banks don’t have the financial motivation to serve these customers directly.) MNOs will provide the virtual bank accounts, the retail footprint, and the marketing/education for customers on the services. Their partner banks (or alternative financial institutions) will do all the money reconciliation and settlement, potentially holding the funds as an aggregated merchant account (similar to the PayPal model), as well as offer the compliance and regulatory support around mobile financial services.
Another question to consider is: To what extent will large, global banks WANT to get involved with the unbanked in their various markets? These entities may decide not to participate for fear of negative brand and business impacts associated with improper KYC and regulatory compliance issues while serving unbanked customers through MNOs. PayPal grew rapidly because they had no fear of getting it wrong 10 years ago. A similar mindset will be needed in this market by a financial institution who has less to lose and much to gain.
MMA: Africa is lagging behind in capacities to deploy Mobile Money,what options are open to players in Africa?
GENCER:I actually think Africa is in the perfect position for mobile money because the financial services industry is not as developed there as elsewhere. As such, similar to what happened with mobile telephony vs. fixed wire, Africa is in the perfect position to leapfrog traditional banking infrastructures with mobile financial services. I see this as an advantage since other developed markets have a “good enough” solution for consumers today which will prevent true consumer adoption of a new system (no need). This is why so much innovation is currently happening in Africa.
MMA:The MPESA Model seems to be a major attraction for Mobile Money players,are we seeing a one-size-fits all emerging?
GENCER: No. When it comes to payments, every market differs significantly because consumer behaviors around finances are considerably unique from one market to the next (as well as other factors including regulations, market dynamics around the ecosystem of players, etc.) From my experience at PayPal, every market was scrutinized carefully to understand how people interact with money, payments, etc. as well as the regulatory aspects of the country. How consumers paid for things even in Italy differed significantly from their habits in the US.
In Kenya, there are over 6.6 million consumers using the mPesa network. In Tanzania, the adoption rate is lagging significantly. There is no “one-size-fits-all” approach, but there are certain principals that are emerging that should not be overlooked. There will be methodologies employed and ways to scale mobile money services so that it can be cost-effective. Localization will always be critical, however.
MMA:What roles can firms like mpay connect play in the emerging ecosystem?
GENCER: We are just at the beginning of this very exciting industry. Innovations around mobile financial services are emerging worldwide on the disparate projects that are taking place. mPay Connect is a bridge for those ideas, people, and businesses. Every week, we reach out to mobile financial services colleagues world-wide to understand best practices and bring those important principals, ideas, and partners back to our clients seeking to enable mobile financial services.
MMA:Do you see Mobiles winning the cash King in Africa in coming years?
GENCER : Two things to keep in mind here: 1. Old habits die hard (especially when it comes to financial behavior); and 2. Cash can’t fight back. Old habits will die and cash won’t fight back when a significantly better alternative to existing financial services exists.
But, I think the real question here is “what does success look like in mobile financial services for Africa.” If, through mobile financial services, we can have a significant positive impact on the GDP of African countries and enhance the economic means of Africans through sustainable, replicable and profitable businesses, then we will have “won.”