This post is written by Ryan Falvey and Shital Shah from the SBI ADC Strategy & Execution team.
In 2011, the field of mobile money and branchless banking saw many exciting developments. According to the GSMA Mobile Money deployment tracker, there are now 124 live deployments and 92 in the works – an increase from earlier this year, when there were 83 live deployments. SBI is fortunate to be involved in several of these initiatives and we have witnessed first-hand the significant growth in both the number of users and activity per user for those deployments where management has made a targeted effort to focus on consumer adoption among the unbanked and, specifically, at the base of the pyramid.
This growth has not been lost on the larger players. As Killian Clifford discusses on Finextra, both MasterCard and Visa have placed increasing focus on this market, albeit in different ways:
MasterCard has been busy setting up bilateral partnerships and joint ventures (JV) in different markets, such as The Philippines (Smart Hub) and Latin America (Telefónica/ Movistar)… It has also launched a virtual debit card linked to a mobile wallet in Kenya (Airtel)… Visa has gone a different route in purchasing Fundamo outright.
In addition, Visa recently announced the deployment of a mobile prepaid product through MTN in several African countries and an exciting initiative to develop a mobile enabled Visa Net solution in Rwanda. However, while large players started making their entrance into emerging markets, smaller initiatives continued to spring up across the globe as both regulations and economic conditions become more permissive. Although very few of these initiatives have yet to achieve scale in 2011 and even fewer have been able to turn over a profit; it is clear that entrepreneurs, incumbents, investors, donors and regulators are focused on developing mobile enabled solutions to payments and banking as we transition into 2012.
This dynamic got us thinking – and predicting – what 2012 may have in store. So after a bit of deliberation, below is our list of trends and predictions which we expect to see in the coming year:
- Big names go down market. The larger players will continue to increase their foothold on emerging markets through strategic acquisition of mobile money companies and partnerships with telcos. What we’re seeing happening in Africa and Latin America may well extend to South and South East Asia.
- Building the full suite of services. Existing platforms will become more robust through value added services and integration of service providers. We expect we will see microfinance institutions, utility companies, and m-services use the transaction platforms to link their services to customers. The most interesting of these will be the inclusion of merchants onto new transaction platforms. This development has the potential to dramatically change the entire ecosystem in a market.
- Smart phones continue to act as a game changer. The economics of agent banking will continue to shift. Although we call it mobile banking, the focus in many markets has been on developing agents and the agent networks necessary to support mobile payments. In 2012, as affordable smart phones continue to penetrate into emerging markets, we will begin to see more activities happen on phones themselves with significant impact on existing agent networks.
- A solution for the world’s largest democracy. A solution will arise which will successfully navigate India’s labyrinth of banking and payments regulation to successfully offer mobile-enabled banking to the massive population of unbanked consumers in the country.
- Smaller players get big. One or two more M-PESA type success stories will start to emerge, possibly from one of the hybrid telco-bank models.
- Moving beyond a single market. A new transnational or regional mobile-enabled payment solution will be launched.
While we have not gone quite as far as predicting a cashless future, we do expect that we will likely be wrong about several of these predictions. That being said, we are confident that at this time next year, we will have a lot more clarity on some of the issues that we have spent much of 2011 working to help our clients resolve. These include determining optimal pricing and commission structures, best practices in agent selection and management, and developing a better understanding of how the agent network, the mobile user interface, and marketing campaigns can shift consumer behavior to move banking beyond branches. As always, we are interested in hearing your thoughts and predictions for 2012.