November 3, 2009
I just returned from the Dubai Mobile Money Transfer conference which was another excellent event not only for networking, but for content. For any of you thinking of attending the next few conferences, don’t miss the workshops in the beginning and end. The nuggets of info that you will get there are invaluable.
Couple of thoughts as I reflect on the conference:
1. The international knowledge-sharing and insight that I witnessed at this event was both impressive and inspiring. This industry has no borders when it comes to people’s desire to push the industry forward. I feel privileged to be part of this group of passionate, intelligent, and interesting people.
2. This is a global phenomenon. Having finished work with various clients in North America seeking to offer mobile financial services to low-income and unbanked individuals, I can now say that the trends we see in emerging markets regarding financial service needs and behavior are universal in many respects. Of course, every market has its own market dynamics and customer needs, but I can see many of the same needs of the North American unbanked customers in other markets abroad. If you think about it, North America is the “first mile” of remittances and emerging markets are the “last mile.” They’re the same people sending as receiving, just with more income. Now, that is obviously a huge oversimplification as every migrant community is quite different. In fact, I will say that it is critical to look at corridors when designing mobile money remittances, but there are definitely similarities. Incidentally, I am not at all suggesting that the financial service infrastructures and dynamics of the local markets are similar. Not at all. The more the developed market, the more likely there will need to be partnerships rather than home grown mobile payments offerings by the MNOs.
3. Secondary effects. While this subject was not discussed in the conference, it occurred to me afterhours as I was speaking with others that the secondary effects of this industry will have profound development impacts. What do I mean by this? Whether or not mobile money picks up in every country in Africa, the fact of the matter is that we have an entire global community of new professionals seeking to understand and influence the regulatory environments of countries which have been overlooked for decades. In addition, the identity requirements of these electronic systems are enabling some of these countries to begin to have national identity systems for the first time. These types of secondary effects will have profound impacts on the future of the economic development of these countries in ways we may not even yet predict.
4. Interoperability. Kenya and the Philippines are cited as success examples for mobile money transfer systems. The MNOs, still unsure of the business model, claim that churn reduction is their #1 business case. In order to make that case, many have chosen closed systems within their networks. What happens in fragmented markets, however? It strikes me as odd that the MNOs understand that interoperability is critical for communications, but not for payments. If anyone should understand how important network effect is, it should be the MNOs. Perhaps they do understand that, but haven’t figured out the business model to make it work, however. There needs to be an interoperable system that arises in these markets.
5. Agent channel conflict. In the last day of the workshops, one of the speakers discussed the future of agent channel conflict which is very insightful. The MNOs are utilizing their agents for cash in and cash out. These agents’ core business has been topup for the MNO customers. Now, with the mobile money system, topup can be done over the mobile phone. As the system continues to become more electronic and less cash-dependent, what happens to the agent network business? There is an inherent conflict here which will begin to gain further traction in years to come. It will be critical to understand this for future rollouts to mitigate this future conflict.
6. Interchange. The interchange setups in some of these emerging countries are completely opposite of the setups in developed world for payments. It’s important to look at mobile money transfer industry not as its own industry, but as a piece of the payment industry since it will be a launching point for future mobile payments as consumer to business and other payments begin to gain traction. With that, it’s critical to understand the implications of who you’re charging for future revenues. If the system isn’t set up properly from the start, there will never be a business case for the (mobile) payments system. Some mobile money transfer businesses that are now set up with their pricing schemes will pay this price later.
7. Last but not least, I head to PayPal’s API kickoff conference today. With the opening of their APIs, I believe PayPal’s global system has the ability to have an impact in mobile that they may not yet even see. Stay tuned for the future of this…