Co-authored by Francesco Pasti.
Mobile money needs to diversify beyond individual customers
With 690 million registered accounts worldwide, mobile money has evolved into a leading payment platform for an emerging digital economy. However, as a service that was born primarily to meet individual customers’ needs, trends suggest that mobile money remains largely focused on that segment despite its tremendous growth. Of the total number of registered mobile money accounts, we estimate that the vast majority – 99.8 per cent – are still owned by individual customers.
These figures point towards a significant missed opportunity: Enterprise solutions. According to the IFC, small and medium enterprises (SMEs) play a major role in most economies, particularly in developing countries. Formal SMEs contribute up to 45 per cent of total employment and up to 33 per cent of national income in emerging economies, and these numbers are significantly higher when informal SMEs are included.
Payments are the gateway to the digital economy for the underserved, and mobile money providers have the opportunity to provide a platform that opens access to a much broader array of services for a variety of customer segments. Tech giants in Asia have been particularly successful at doing this. Players like Alibaba, Tencent and Grab have grown their customer base exponentially by developing a strong core use case and expanding to a broader suite of services. Alibaba is not just an enormous e-commerce company, but also a large asset manager, lender, payments company, B2B service and ride-hailing provider.
As mobile money evolves into a payment platform1 for a large number of third parties, it will be important to build enterprise solutions. Trends show that operators already perceive this as a strong opportunity: 49 per cent of mobile money providers participating in our Global Adoption Survey cited enterprise solutions as one of their top three strategic priorities for 2018.
A merchant-centric approach can be the key to unlocking enterprise solutions
The spread of merchant payment solutions represents an opportunity for providers, SMEs, banks and customers alike, because it is a daily use case. Merchant payments were rated the highest product priority for 2018 by 60 per cent of mobile money providers participating in our Global Adoption Survey.
The number of merchants and enterprises connected to mobile money providers continues to rise, from 549,000 in September 2016 to over 618,000 in June 2017. However, the low activity rates of these merchants underscores the need for an enhanced value proposition.
Currently, whilst setting up an account as an individual mobile money customer is easy, doing the same as a merchant is not as straightforward in the case of many mobile money providers. A set of functionalities for collections, salary payments and the ability to send money to and from a bank account – all of which are growing exponentially – could boost merchant activity by directly serving the financial needs of small businesses.
The GSMA’s deep-dive toolkit on merchant payments highlights the opportunity provided by this use case and the need for operators to collaborate in order to capture it.
Best practices from leading operators in this space show that opening a merchant account should be effortless, and the account should include functionalities such as merchant ID; a paybill number; salary payments; bank transfers; and the ability to initiate payments and refunds.
Beyond these basic functionalities, access to credit is a key selling point for many merchants. Data collected from merchants that open these accounts can, over time, help to provide credit scores for them, enabling them to be considered for valuable working capital loans.
When cross-referencing the latest data from our adoption survey, two interesting trends emerge from salary payments and wallet-to-bank transfers initiated by merchants.
1. Salary payments
Business-to-person transfers have continued to increase and now represent 56 per cent of all bulk disbursements. As operators are increasing the number of integrations to businesses, the reported number of customers regularly receiving their salaries through mobile money has increased 121 per cent from September 2016 to June 2017, and successful mobile money providers in this area are seeing 25-50 percent of their active customer base receiving salaries through mobile money. As this enables mobile money providers to have funds enter the ecosystem digitally, this can help to reduce their costs and also drive customer activity rates.
2. Mobile to bank transfers
Mobile wallet-to-bank transfers are key not only to enabling customers to transact, but also to enabling merchants and small businesses to interact with the broader financial system and digitise their respective value-chains by paying suppliers.
Between September 2016 and June 2017, bank-to-wallet transfers performed by merchants or SMEs were the fastest growing transactions at a rate of 3x. These transactions have an average value of over $1,000 and for operators tracking such transactions, they make up close to 60 per cent of all wallet-to-bank interactions.
While not all providers are capable of tracking this data and therefore insights may not be representative of the industry as a whole, they illustrate a strong trend and highlight the important role that mobile money providers have in digitising the economy.
Enterprise solutions beyond merchant payments
Payments are obviously one of the key needs of enterprises that mobile money providers can meet, and all the ideas suggested above are linked to that broad category.
However, mobile money providers have many other assets that could be valuable for enterprise customers.
The distribution footprint of mobile operators is one such asset. In particular, as e-commerce picks up and small businesses look to set up shop online, it may be especially valuable for them to be able to leverage the distribution footprint of operators to serve their customers.
Another strong asset that operators enjoy is their brand. We see today a range of enterprise start-ups in the tech space that wish to attach themselves to an operator to launch their business (see the report from the GSMA Ecosystem Accelerator team on ‘Start-ups and Mobile in Emerging Markets’). Mobile money providers could take advantage of this trend and help to incubate and launch businesses that are aligned with their core strategy.
As mobile money providers shift towards a platform model, there is a need to define a proposition to cater for the needs of merchants and SMEs. And the answer will lie not just in enhanced payments-related services for enterprise customers, but extending beyond that as well.
 Dietz, M, Lamerle, M. Mehta, A. Sengupta, J. Zhou, N. (2017). Remaking the bank for an ecosystem world. McKinsey Company.