This blog post was co-written by Nika Naghavi, Shawn Cole and Jake Kendall.
The rapid, early success of M-PESA in Kenya led some to predict that low-cost, digital financial services would quickly spread throughout the developed and developing world. M-PESA reached one million active mobile money accounts in 2008, just after a year of launching their service, however it took a further three years for a second service to reach the one million active accounts mark. The initially slow rate of growth has increased, starting in about 2012. By the end of 2015, 17 services had surpassed one million active accounts on a 30-day basis. On a 90-day basis, 30 services had passed one million active accounts, and five services had more than five million active accounts.
This growth suggests that the industry may be getting smarter about how to succeed in the business. The GSMA, along with other stakeholders and scholars, have published a number of research papers on determinants of success for mobile financial services, highlighting the role of adequate investment, operational best practices, organisational design, and enabling regulation to drive uptake and usage. However, the industry lacks a comprehensive, cross-country analysis which evaluates the relative importance of firm and market-level factors in a rigorous manner.
To better understand the success factors for mobile money, the GSMA partnered with Shawn Cole, a professor at Harvard Business School, and Jake Kendall, the Director of DFS Lab at Caribou Digital, to examine the relative importance of key business and market characteristics on the growth of active mobile money accounts, as well as on mobile money transaction volumes and values through multi-variable regression analyses.
Today, we are publishing highlights of this research that we believe is the first-ever large-sample quantitative analysis of the expansion of digital financial services. Some of the key findings from the analysis include:
- MNO-led mobile money deployments have been much more successful in developing and delivering digital financial services with broad outreach than have non MNO-led mobile money deployments.
- Enabling regulation is shown to be an important predictor of success in mobile money services.
- Providers whose operations span multiple countries capture greater market share than single-service providers.
- The existing market share of GSM mobile network operators predicts greater success in mobile money operations.
- Mobile money services grow more quickly in countries with low GDP per capita, medium levels of formal financial account ownership, and a greater Ease of Doing Business Index.
These facts are remarkable and suggest that an enabling regulatory framework can promote the growth of the digital financial services industry, that MNO-led services may be better suited to offer widely adopted digital financial services. Indeed, by allowing additional number of countries adopting an enabling regulatory frameworks, the mobile money industry can further extend the reach of financial inclusion, with services achieving greater scale and improving the lives of low-income population.
We hope this quantitative assessment complements existing research on market- and firm-level characteristics behind the success of mobile money services.
 GSMA. (2016). 2015 State of the Industry Report on Mobile Money. Available at: http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2016/04/SOTIR_2015.pdf
 It is impossible for a mobile network operator to offer mobile money without a bank. Banks and MNOs always need to work together to offer mobile money services, and there are a wide variety of partnership opportunities. MNO vs. non MNO-led dichotomy is not entirely representative of the range of partnership models and is a practical construct for ease of analysis.
 The GSMA defines an “enabling regulatory approach”  for mobile money as one in which the rules established by the regulator:
- Permit non-banks to issue electronic money (or equivalent) by allowing them to:
- be licensed directly, OR
- set up a subsidiary for this business, OR
- apply for a payments bank (or equivalent) license, OR
- provide the mobile money service under a letter of no-objection to the non-bank or its partner bank, pending the approval of a specific regulation,
- Imposes initial and ongoing capital requirements that are proportional to the risks of the e-money business,
- Permits them to use agents for cash-in and cash-out Operations,
- Does not prescribe the implementation of specific interoperability models without allowing for a market-led approach.
- See Simone di Castri (2013), “Mobile Money: Enabling Regulatory solutions”, GSMA Mobile Money for the Unbanked.