In April 2023, the GSMA Mobile Money Programme hosted a workshop for several mobile money providers in London – as part of the launch of the 11th annual State of the Industry Report on Mobile Money (SOTIR). At the workshop, we discussed industry progress and concerns with several mobile money service leaders, one of whom was Ian Ferrao – the Group Head of Airtel Money, formerly of Vodacom. Despite realising that we supported different football teams, Ian was gracious with his time for a short and insightful exchange.
The flow of money between banks and mobile money wallets has grown significantly over the past few years. How do you expect interoperability in the industry to evolve in the future?
Interoperability is a must-have for any country to evolve and maximise the true potential of mobile money. First pioneered by Tanzania where mobile network operators came together to launch interoperability, we are now seeing many other countries adopt similar approaches and enforce interoperability among banks, mobile operators and wider fintech ecosystem players. The introduction of national switches has accelerated this process. However, some caution around the various pricing models is important, with national switch providers needing to understand the heavy commissions paid on mobile money cash-in transactions. These must be recovered for any transactions that are going ‘off network’.
Interoperability between African countries is next on the agenda, specifically on ensuring that pan-African transaction flows can be kept local, and with minimal margins to improve cross-border trade.
Over the past two years, which regulations have presented the most challenges to you? And how has regulation enabled Airtel Money’s growth too?
We have been extremely fortunate in Africa to have such supportive regulators. Without their focus on driving financial inclusion through mobile money, we would never have been able to reach such great heights. Regulation has been supportive [to Airtel Money] to date, enabling the mass creation of lower-tier wallets and the mass development of agent networks. Some concerns have arisen about the taxes on mobile money in certain countries. Taxes such as VAT and excise duties have typically applied to mobile money transactions revenue. However, a worrying trend of taxation on transaction values has had a material impact on mobile money growth. This effectively acts as a disincentive to the financial inclusion agenda, with customers being double taxed on their money.
In Nigeria, Airtel obtained a Payment Service Bank (PSB) license and a super-agent license. Has this new regulation enabled Airtel to grow its mobile money service in Nigeria?
It is great that PSB licenses have finally been issued to mobile network operators. While Nigeria is a complex financial services market, with many strong digital banks, fintechs, agent networks and switch providers, we believe that there is still opportunity in the market for mobile money to succeed. This is especially possible in the north, where many people remain financially excluded.
Our Airtel Smartcash PSB was launched in June 2022, and we have spent the last year building the technology foundations, product ecosystem and go-to-market strategy. We remain confident that Nigeria can become a strong contributor towards our overall Airtel Money business, given its sheer size and population, and the strength of our mobile network operator brand in the country.
In 2022, Airtel Kenya split its mobile money business into a separate entity which the Central Bank of Kenya regulates as a standalone business. What impact has this had on Airtel’s mobile money business in Kenya?
Initially, this split had a negative impact: the excise taxation on Airtel Money increased and led to an unlevel playing field, with our competitor keeping their mobile money business within their GSM business. This issue was corrected in the 2023 budget. Besides this, separation allows greater accountability and transparency, and a deeper focus on mobile money operations. I believe that Kenyan consumers require more choice and more competition in the mobile money industry. Unfortunately, there are still too many barriers to competing against the incumbents: person-to-person interoperability has not been working well, along with the setup of merchant interoperability. This has led to financial losses. We have several hurdles to overcome, but I am confident that Kenya will become an important market for Airtel Money in the future.
Several mobile money providers are facing competition from fintechs, many of whom are disrupting mobile. How should mobile money providers work with fintechs or how might they want to adapt their business models to deal with the competition from fintechs?
Competition is always welcome. It is what drives our industry forward and prompts everyone to innovate, adapt and focus on customers. Fintechs are an important part of the mobile money ecosystem – we partner with many to provide financial services and payment services, as well as to accelerate distribution. While some fintechs compete directly with mobile money providers, our investment in brand, distribution and technology continues to give us a strong advantage.
Mobile money providers are increasingly diversifying their sources of revenue with a trend away from solely person-to-person (P2P) and cash-in cash-out (CICO) fees toward incorporating other financial services and including new customer segments. What do you think will be the key drivers of revenue for you in the next five years?
Customers – simple as that. Mobile money is still massively under-penetrated and the opportunity to grow more customers, who continue to require cash-in and cash-out services, will deliver the most value. There will be revenue diversification, but I think the penetration of newer services will take time. I do see a shift where merchant payments, and international and online payments, along with financial services such as loans and savings will take a more central role in the portfolio.
Many mobile money providers are offering adjacent services such as savings, investments, credit (loans) and insurance products to their customers. What are some of the challenges you have faced in distributing adjacent services?
Airtel Money offers savings, credit and insurance in several countries. There are many challenges, but the biggest is customer education – how to explain to customers what these products are, why they are beneficial, how the fees work and how to use the mobile money platform to access these services. However, most of our customers still use a feature phone, making customer journeys on USSD harder to execute than on a smartphone app.
Find out more about how mobile money adoption has impacted economic growth in this report.