Mobile money – What lurks behind all the numbers?

• by Nishant Kumar
• Apr 17, 2014
• 5 min

What are the reasons behind quick uptake and regular use versus general indifference to sending and receiving money by phone? MicroSave shares first-hand experiences from the field.

The recently released 2013 GSMA Mobile Money Unit (MMU) State of the Industry report and the  State of Mobile Money Usage are filled with encouraging statistics and upbeat projections for the existing and new services the GSMA supports worldwide.

On paper, the state of the industry and usage are splendid: 219 mobile money services in 84 countries, with more in the works for 2014, with 203 million registered users (as of o6/13), compared with 108 million a year earlier. Approximately 61 million were “active”, (one transaction in three months), 37 million were “more active” (at least once in a month).

The Global System for Mobile communications, an open, digital cellular technology used for transmitting mobile voice and data services, also enjoys 80 percent world dominance (or “market share “ if you prefer). Adoption and usage figures, in particular, are interpreted differently from what MicroSave sees in daily fieldwork and CGAP (the World Bank’s Consultative Group to Assist the Poor) discovered in an extensive follow-up several years ago.

Even the GSMA acknowledges that only 13, or a very small 6 percent, of their MMU services, have reached “scale” with at least one million users. MicroSave’s a recent blog on mobile bill payments and sustainability and an earlier one, Mobile Money–Rosy vs Real, point up the many unresolved security, fraud, interoperability issues and basic user problems like a widespread inability to remember passwords that tend to be glossed over in the blockbuster reports.

The interesting part of this problem, however, is not the figures or forecasts—glowing or glum—regarding relative rates of adoption, but WHY. What are the reasons behind quick uptake and regular use versus general indifference to sending and receiving money by phone?

Here is a brief list that may prove helpful from our own experience:

–          Mobile operators often play the most important role. Others–including Cash In/Cash Out (CICO) agents, employers, government welfare payments—are also key to customers successfully adopting a mobile money service, but it begins with the network operator. Unlike the banks, operators want these customers and most are only too happy to add payment services to airtime top-up and more phone sales whenever the law allows.

–          Providing a rationale. MNOs can also do mass marketing. The most famous is of course Safaricom’s “Send Money Home” slogan which resulted in 18 million active M-PESA users, but Eco-Cash from EcoNet In Zimbabwe (“I pay with Eco-Cash because I don’t like being short-changed”), Telenor’s EasyPaisa in Pakistan (“Changes my

life through convenience”) Telesom’s ZAAD (“Transfer, Save, Buy”) have all managed to convey simple, compelling propositions to an initially less than eager public.

–          Those paid by phone, especially those paid via a full-frills bank account, are much more likely to continue paying by phone. If everyone reading this were still remunerated in cash, most of us would not pay bills online or use debit/credit cards for daily purchases. The real problem, as discussed by James Militzer and Ignacio Mas in a recent blog, is where the money begins.

• For the non-salaried poor, it begins as wadded-up bills and coins. Which then require time, effort and, too often, a fee to convert to mobile money via a CICO agent.  Periodic withdrawals always involve fees and the same difficulties in reverse so, for most migrant and domestic workers, cash stays cash.
• G2P and remittance beneficiaries may receive electronically, but the urge is overwhelming—and common sense would certainly encourage most recipients—to pull the money out when it arrives. Periodic withdrawals are too expensive and without easy access to ATM cards and machines, too inconvenient. (Please see MicroSave’s two recent blogs on the specific logistics of  G2P payments in India for more details.)

–          Tempting though it is to blame the agents for everything wrong in financial services for the poor, and critical though their role is in selling mobile payments to customers, there are other key links in the chain that also need strengthening—specifically merchants, institutions, individuals willing to receive non-cash payments.

• No m-payees, no m-payment system. This is the tricky bit too many policymakers and planners gloss over. In the mid-1980s, no one—not even VISA and MasterCard—wanted to participate in online payments. And supermarkets emphatically didn’t want debit-card/PIN readers cluttering up the check-out counter and slowing traffic. Change is only easy and obvious in retrospect. (See below for why everyone ultimately came around. It wasn’t just because paychecks became virtual.)

–          Seeing is believing…sometimes. MicroSave recently observed a group of rural Indian women who, when offered the opportunity to repay their monthly microfinance loan by phone, all declined. With all the usual excuses. Their husbands had never heard of such a service. Nor had their far more tech-savvy children. Why would they trust something unknown no one else was using?

• Live demos helped. Targeted marketing and advertising with trusted, recognizable logos helped even more. One person in the group trying and succeeding was perhaps the most effective, but adoption remains cautious.
• Trust is hard to build and difficult to maintain. Introduce any extra fee, however small, during the transition from cash to mobile payments, or make PINs too hard to remember or recover, and no amount of marketing and hands-on help will bring your users back to the phone.

We also have a fundamental disconnect in transferring the idea of digital payments—be they by phone or point-of-sale cards—from industrialized Western economies to developing parts of the world where most people still don’t have bank accounts

In the West, the rationale was uncomfortable but simple: sales clerks, ticket sellers, cashiers, tellers, accounts payable & receivable departments are all too expensive; machines, even the ones that need 24/7 maintenance, are cheap and incur no extra cost when they break or become obsolete. Sold to customers as faster, more convenient, and always available, these never were and still aren’t the real reasons banks, mobile operators, utilities, and merchants tirelessly promote and improve electronic funds transfers, online banking, ticket machines, bar-code scanning, and all other, ever-expanding New Ways to Pay.

The real reasons change in places where human labor is as cheap if not cheaper, and often more reliable, than technology. Most banks and mobile operators, not to mention the m-payees (see above), need a stronger impetus than increased mobile use and financial inclusion to invest in the significant demands digital payments will impose. Fraud and authentication, already a ~$3.5 billion cost for U.S. mobile payments, will be argument enough for many to pause and reconsider.

We should do it anyway. Even though users don’t really want mobile payments yet. (They aren’t faster, more convenient, more available, and probably won’t be for a good long while.) Even though most mobile operators and others won’t enjoy much, if any, return on their investments for the same longish, discouraging time periods.

The GSMA MMU and Safaricom are, maybe, just this once, right to over-hype their successes. Mobile money and a mobile account are still a better, more secure alternative than cash. And until we come up with a more viable idea, they will only become more so.